In the rapidly evolving construction industry, a notable trend is emerging: an increasing number of architecture, engineering, and construction firms are establishing technology-based subsidiaries or divisions. This shift extends beyond the conventional use of tools like 3D modeling and computer-aided design, venturing into the realm of proprietary technology processes and products used in project delivery. This strategic move presents both opportunities and challenges, as exemplified by the experiences of industry leaders Environmental Science Associates (ESA) and Moffatt & Nichol.
For ESA, a 700-employee environmental consulting firm, the acquisition of Sitka Technology Group in late 2021 marked a pivotal step towards becoming a more technology-focused organization. ESA President and CEO Leslie Moulton-Post explained, “We’re an environmental science company at our core. We do a lot of field collection, and we’ve advanced from paper forms to tablets and drones. With new technology tools, you can collect data faster, put it on the cloud, and get it back in real time.” The integration of Sitka, a 36-person firm specializing in data management for conservation and sustainable development, has enabled ESA to enhance its data management, analytics, and visualization capabilities. Moulton-Post emphasized the strategic advantage, stating, “When we decided to see if we could bring Sitka in-house, we knew that they would make us a stronger tech-enabled firm and get us to where we wanted to be faster.”
Similarly, Moffatt & Nichol, a 1,500-person design, consulting engineering, and infrastructure advisory firm, recognized the need to develop technology solutions tailored to their clients’ needs. President and CEO Eric Nichol noted, “Our clients had problems that couldn’t be solved in the engineering domain. The solutions they needed required technology that we didn’t have. So we made the decision 12 years ago to buy source code and create a development team.” This proactive approach led to the development of FlexTerm, a simulation and emulation software product that has since evolved into a valuable tool for digital twinning in maritime and port facilities.
The benefits of integrating technology into AEC firms are manifold. Differentiation is a key advantage, as most firms remain focused solely on professional services. By offering proprietary technology, firms can position themselves as market leaders and extend their client relationships beyond traditional design services. Additionally, technology products can drive revenue growth and diversification, create valuable intellectual property, and future-proof the firm against commoditization. Moulton-Post highlighted the strategic importance, stating, “In our strategic plan, we recognize that being a tech-enabled firm is our future. This includes establishing a culture and mindset around technology and innovation, in addition to providing a specific technology product.”
However, the path to technological integration is not without challenges. Nichol pointed out the accounting complexities, noting, “Our biggest challenge has actually been our accounting system. Software sales and subscription revenue, coupled with 100% overhead development time, does not play well with how professional services think about business.” Furthermore, developing technology requires a dedicated effort. Nichol advised against treating it as a part-time endeavor, emphasizing the need for a committed development team.
As the construction industry continues to evolve, the integration of technology into AEC firms is poised to redefine the sector. The experiences of ESA and Moffatt & Nichol offer valuable insights into the opportunities and challenges of this strategic shift. By embracing technology, firms can enhance their service offerings, drive innovation, and position themselves for long-term success in an increasingly digital world.