SITS Opportunity in Construction Highlighted By Accenture Deal

Accenture’s announcement of the acquisition of Bilbao-based project management specialist BOSLAN, has shone a light on the growing overlap between the worlds of engineering and IT services.

BOSLAN has some 1,000 specialists that provide services including feasibility studies, project planning and contract negotiation to clients in sectors including renewable energy, oil and gas, infrastructure, data centers and utilities.

Accenture talked up the takeover as a way to help these customers better harness technology such as artificial intelligence and intelligent asset management. And this chimes with PAC’s current view on the construction and engineering sector as it enters a new phase. Over the coming years, it will be those companies that take a more data-centric approach to improving both performance and sustainability that will emerge as the winners.

Project Delivery Challenges

It is a sector that has long suffered with operational challenges. A PAC study, undertaken in conjunction with Unit4, found that 42% of companies operating in this sector failed to deliver more than three quarters of their projects on-time. This is a huge challenge as clients increasingly push for their delivery partners to commit to fixed terms and pricing.

It is also an industry that is tasked with playing a key role in supporting the sustainability agenda across multiple areas of the economy, from transport infrastructure to housing and office buildings. The Global Alliance for Buildings and Construction claims that the sector accounts for almost 40% of global CO2 emissions.

And businesses in this sector are also facing a completely new set of business challenges in terms of scale and cost management than compared to just five years ago. Leo Quinn, the CEO at Balfour Beatty, highlighted some of the bigger issues on the horizon for his company at this week’s investor call. As the UK’s largest installer of electricity transmission networks, the company is looking to support a huge increase in workloads. The National Grid plans to roll out five times the volume of networks in the next ten years than it has in the last 30 years, in order to facilitate to the connection of new offshore generation and other renewable energy sources. Quinn stated: “There is so much work out there that the industry doesn’t have the capacity to deliver it.”

Balfour Beatty is also supporting highly complex critical national infrastructure build-outs in sectors such as nuclear energy generation, which are prone to course corrections, overruns and funding challenges. Quinn said this week that the industry still has huge potential to improve on its track record in delivering major infrastructure programmes with a “shift-left” approach. He said that if companies plan properly and identify errors in the design phase, it is a “rubber and pencil” job to change tack that costs $100 per hour. If you wait to identify and tackle issues on-site with 2,000 people mobilized and all the equipment in place, it can end up at billions of dollars. As a result, project, supply chain and resource management are all areas where firms are looking to sharpen their edge, and technology will play a vital enabling role.

The pace of digital transformation has been relatively slow in the construction and engineering space, but there is growing expectation from clients that their partners should help them harness technology as part of any major engagement. One good example is Costain, which is working with Heathrow Airport as an “integrator” to lead the upgrade of terminal and baggage handling facilities. Part of its role will be to use digital rehearsals and building information modelling software, to drive cost and carbon savings.

SITS Deal Flow Increases

As a result, there has been an increasingly steady flow of new software and IT services (SITS) contracts in the construction and engineering space in 2024. This has ranged from broad-scope outsourcing deals to more focused investment in cloud infrastructure and applications. In the Nordic region, YIT Corp outsourced a large part of its IT services to Tech Mahindra, while NCC is implementing IFS Cloud to align its central contract, finance and project accounting processes to optimize project control.

Artificial intelligence is also a growing area of focus, although the sector remains at an earlier stage than many other industries in exploring its potential. Earlier this month, French firm Eiffage announced a tie-up with Google as it develops and implements an AI strategy designed to improve the efficiency of tasks and processes across the organization. Spain’s Ferrovial became one of the first companies in the sector to provide its employees with a GenAI intelligence tool based on Azure OpenAI to support their day-to-day work.

PAC expects a growing number of SITS vendors to put a growing focus on the construction and engineering sector in the coming quarters. This will require the addition of experienced sales and delivery teams (highlighted by the Accenture acquisition) that are able to provide the level of industry expertise and client intimacy that customers in this sector demand. They will also adapt their partner ecosystems in order to develop the types of propositions that can be harnessed and replicated across different teams and projects.

Our latest outlook shows that in most major economies, SITS investment in the construction and engineering space to increase by between 3%-5% over the next five years. Accenture will not be the last vendor to ramp up its investment in targeting this growing opportunity.