History tells us that Ford’s setback at that time wasn’t due to a lack of quality or because of an inferior product; it was caused by a lack of flexibility and a failure to adapt to an evolving market place. I’ve spoken with many General Contractors recently and it is clear that even now, nearly a century later, we still see some of the same rigidness embedded within our business frameworks. This is particularly true with regards to technology. Technology is evolving at such a rapid pace, that top of the line systems today will be next year’s standard and a year later, will be surpassed by something vastly superior and less costly.
I’ve experienced this first hand. A few years ago we invested nearly one million dollars on the IBM AS400 between the box, the software, implementation, training, integration etc. A few years later it was replaced with hardware that was 10 times faster at one-tenth the price! It was a tough pill to swallow, but it taught me a very keen lesson; avoid large capital investments in systems that lack the dynamic capacity to evolve with the market.
This brings us to the landscape of today’s project management software. Many large construction organizations are heavily invested in legacy systems, often premise client server based, that were top of the line systems a few years ago, but have recently been matched and even surpassed by more dynamic cloud-based systems. These new systems cost much less, provide the same and more functionality, can be upgraded overnight, and offer mobile compatibility that is unattainable using fixed enterprise systems.
I believe much of the hesitancy to switch to these more dynamic, cost effective systems is born from the sunk cost fallacy. A sunk cost occurs when an investment of time, money, or resources is made and cannot be unmade. The fallacy occurs when further investments are made simply because you’ve invested so much already, even though return would be maximized by allocating those investments elsewhere. This can happen when you eschew new, adaptable cost-effective technology, for static enterprise systems.
Another pitfall that occurs when using legacy systems occurs when trying to tie-in with your accounting system. If your enterprise system is client server based, you would need to hard code an integration that would fail every time a change or upgrade was made. Certainly some systems won’t even allow for a tie-in, but this is changing. Product developers are realizing that organizations, even in the same vertical, can be very different in terms of business processes and that they will need to offer customizable products that are conducive to API’s and SDKs so that businesses can merge their systems together effortlessly. This is best achieved using cloud-based software that allow for seamless upgrades.