True, a stream of new ventures was launched, promising electronic marketplaces for everything from tendering and costing to purchasing and project collaboration. So we had, in rapid succession, Arrideo, Mercadium, PropCom and thebuilding-site.com, all put together in a hurry by big companies, independent start-ups or technology providers. So far, little has been delivered. Many companies are tentatively trying out project collaboration over the web, or buying some materials or products online from the limited number of suppliers offering them. All now admit that this shift will take a matter of years rather than months.
Don't believe the hype
It seems that construction has suffered the same troubles that have befallen e-business as a whole in the past year. First there was the hype and the wodges of venture capital thrown at start-ups, especially in the burgeoning business-to-consumer sector. Then reality kicked in as the new economy's losses went into free-fall, with no guarantee that the parachute would ever open. Finally, fashion e-tailer Boo.com started another accelerating trend: for closures and cut-backs. The result is that e-commerce take-up in construction has slowed to a trickle.
On the plus side, the industry now has the advantage of learning from the companies in sectors that crashed and burned. The latest crop of start-ups know all too well that success will have to be worked for. However, although none of them has as yet gone the way of Boo and Clickmango, there are predictions of just such a shake-up in the near future. "The next few months are going to be critical for a lot of these ventures," admits Jerome Losson, managing director of Alfred McAlpine-backed Mercadium.
Everyone got overexcited. A lot of heat has come out of it now
Martin Taylor, business systems director, Westbury
Given the volatility of the market after last year's events and uncertainty over economic prospects in the USA, e-business capital of the world, these are unpredictable times. This leaves managers of start-up ventures hoping that industry backers will keep faith – and cash – in their ventures. "It doesn't depend on things that are predictable," says Losson. "It's impossible to read the minds of people in boardrooms." The mood now seems more subdued. "Everyone got overexcited. A lot of heat has come out of it now," reckons Martin Taylor, business systems director at top 10 housebuilder Westbury. Technology companies are knuckling down to the task of creating practical systems that work, rather than the massive omnipurpose industry-wide sites first promised. "You've got to walk before you run," says one provider.
The lowering of expectations is also a result of the fragmented nature of the industry. This has restricted the amount of money individual firms can pump into ventures, compared with sectors dominated by a few big players, such as the car industry, banking and telecommunications. And so many small players and such a complex supply chain means that there is a fair way to go before everyone communicates and works electronically.
Geoff Harwood, group operations director at architect Aukett Europe, gives an example of how far he thinks the industry has progressed towards paperless trading. He assigned a member of staff recently to find an M&E firm that could supply drawings of basic M&E components electronically. "We got nowhere," he recounts. "There's a huge gap between us and the rest of the supply chain. The supply chain is pretty grim." Then there is the confidence problem, again. "There is still a lot of scepticism out there," says Graham Cunningham-Walker, marketing vice-president of software house Causeway Technologies. "People may be confident that a site can handle a couple of hundred purchase orders, but what about 100 000 transactions?" This has led to a set of clubs being created on private networks, rather than the open collaboration hubs hoped for.
The time they have taken says more about the complexities of getting this done than their capacity to do it
a rival on the Arrideo portal
Who's first?
One sector seen as having the potential to explode out of the blocks faster than the rest is housing. The process is simpler, with housebuilders having more control over a slimmer supply chain. There are also plenty of opportunities to cross-sell insurance, mortgages and furniture online. One of the new set-ups, thebuilding-site, which already has Linden and Fairview signed up, has pretty much targeted the sector exclusively. Jonathan Esfandi, co-founder of parent firm BuildEurope, thinks that setting realistic objectives is the key at this stage in the development of e-commerce technology. "A lot of people are grappling around. You have to have focus right now," he says.
The rewards for success may be mouthwatering: one housing analyst believes that a digitally mobilised industry would be rerated by the stock exchange by up to 50%. He adds that it would also push up bottom-line margins 5%.
Attempts at creating massive sites to service the whole housebuilding sector have so far stalled. Last spring there were signs that major housebuilders, including Westbury, Redrow and Berkeley Group, were looking at creating a portal to buy materials jointly, but this has not yet happened. Discussions are understood to be continuing, but the delay has led to some frustration in the City. "It's bloody slow," one analyst complains. He attributes this to a reluctance among housebuilders to collaborate and share commercially sensitive information E E – which he thinks is myopic. "They have got to think that while it may slightly damage their business, at the same time it creates more opportunities, efficiencies and shareholder value." The main UK construction portal, Arrideo, has achieved a similar snail's pace. Announced with a triumphant fanfare of publicity last summer, the joint venture between Skanska, Laing, Bovis Lend Lease, Balfour Beatty and Amec has been notable for its silence ever since. Insiders have pointed to the difficulties of building a hub that is compatible with all the members' computer systems. One source said that the portal was deciding whether to merge with a competitor to hasten roll-out. "We are talking to two potential partners," the source says. "We are re-evaluating where we are at present." Competitors point to the difficulty of getting such a venture off the ground, but have by no means dismissed Arrideo's potential. "The time they have taken says more about the complexities of getting this done than their capacity to do it. The ability to deliver on this technologically is a lot harder than anyone anticipated," says one rival.
Arrideo's willingness to look for partners is indicative of how the market is maturing. Not only are technology providers teaming up with industry players but so too are banks, such as Lloyds TSB, which has allied itself with Mercadium, and media companies, which offer news services and electronic directories. Mercadium's Losson also predicts that telecoms will get in on the act. In this way costs can be shared and more parts of the supply chain can be catered for.
