# Are legacy IT systems holding the construction industry back?
Author:  Pal Sinha, Barnali 
Author URL: https://financedigest.com/author/pal-sinha-barnali
Published: 2016-05-04
Category: TECHNOLOGY
Category URL: https://financedigest.com/category/technology
Meta Title: How Consolidating Operational and Financial Processes
Meta Description: Learn how integrating financial and operational processes can boost efficiency, reduce complexity, and drive innovation in the construction sector.
URL: https://financedigest.com/are-legacy-it-systems-holding-the-construction-industry-backhtml

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**_How consolidating operational and financial processes reduces complexity and gives a strategic advantage_**

_By **Nick Nesbitt** is Consulting Services Director at_ [_Tagetik UK_](http://www.tagetik.com/home#.Vx4o6CzQDIU)

 Nick Nesbitt

Construction companies were badly affected by the 2008 financial crisis. A steady pace of change is still affecting supply chains, business models and cost structures and those focused on innovation-led growth are increasing their investment into Research & Development and capitalising on new construction technologies to drive innovation and greater efficiency.

The construction industry is also currently facing many short-term challenges, from increased demand [leading to workforce growth in size](https://www.financedigest.com/covid-19-is-impacting-the-variable-speed-drive-market-size-business-revenue-forecast-leading-competitors-and-growth-trends-2028.html "COVID-19 Is Impacting The Variable Speed Drive Market | Size, Business Revenue Forecast, Leading Competitors And Growth Trends 2028") to shifts in the competitive landscape, from volatile energy and input costs to supply chain visibility to new technologies such as the industrial internet, from the skills needed to manage embedded technology and analytics to new customer requirements.

But change can be good, because it creates both challenges and opportunities.

**Making finance a value-added partner**

Having gone through a period of enormous uncertainty and change, the industry is now showing signs of recovery. It had however to radically adjust it operates.

And, to be fully effective, [operational](https://www.financedigest.com/stellantis-reshuffles-european-financing-operations-through-new-jvs-with-banks.html "Stellantis reshuffles European financing operations through new JVs with banks") change needs to be accompanied by seamless financial processes. Shrewd [players in construction should take advantage of new technology capabilities that enable cost reduction and efficiency increase and that drive operating](https://www.financedigest.com/skull-deformity-implants-market-share-top-operating-players-recent-enhancements-and-regional-analysis-2028.html "Skull Deformity Implants Market Share, Top Operating Players, Recent Enhancements and Regional Analysis 2028") margin improvement.

In construction, margins are squeezed, [processes](https://www.financedigest.com/gary-mcgaghey-explains-how-cfos-can-strengthen-decision-making-processes-and-reimagine-the-finance-model.html "Gary McGaghey Explains How CFOs Can Strengthen Decision-Making Processes and Reimagine the Finance Model") are complex and isolated and operational plans are disconnected from financial plans and performance. In addition, having significant financial impact, [supply and demand](https://www.financedigest.com/rare-neurodegenerative-disease-treatment-market-value-share-supply-demand-share-and-value-chain-2021-2031.html "Rare Neurodegenerative Disease Treatment Market Value Share, Supply Demand, share and Value Chain 2021-2031") decisions need to be optimised. It is key that construction executives know the impact of these changes on working capital, cash position, revenue and profitability of operational decisions – before those decisions are made.

But how can this be achieved?

Most construction [companies struggle to reach the level of integration between financial and operational processes and data needed](https://www.financedigest.com/italys-windfall-tax-on-energy-companies-needs-to-be-rewritten-pm.html "Italy’s windfall tax on energy companies needs to be rewritten – PM") to achieve dynamic scenario planning capabilities, the desired level of forecasting accuracy and the strategic analytics required to deliver sustainable growth.

Firms in the [industry need](https://www.financedigest.com/global-crises-that-need-the-finance-industry.html "Global Crises That Need The Finance Industry") to step back now and re-consider their financial processes to be able to overcome challenges, gain competitive advantage and transform finance into a value-added partner.

**What are the challenges?**

Legacy systems can drain resources as ongoing effort is needed to maintain the software. Over time, maintenance costs rise and organisations grapple with complex [upgrades and customisation while at the same time trying to keep systems](https://www.financedigest.com/sweden-to-upgrade-berzelius-supercomputer-with-nvidia-ai-systems.html "Sweden to upgrade Berzelius supercomputer with Nvidia AI systems") aligned with current business requirements.

There is also the added problem of duplicate [data entry coming from multiple](https://www.financedigest.com/how-to-navigate-multiple-data-privacy-regulatory-frameworks.html "How to navigate multiple data privacy regulatory frameworks") sources. One particular challenge is the ability to summarise transactions and flow them directly into consolidated financial [statements](https://www.financedigest.com/uk-finance-minister-hunt-to-make-statement-at-1000-gmt-source.html "UK finance minister Hunt to make statement at 1000 GMT – source").

It is increasingly important to capture and store a wide range of information on material, quality, financial and [supply chain](https://www.financedigest.com/mercedes-benz-and-microsoft-collaborate-on-supply-chain-data-platform.html "Mercedes-Benz and Microsoft collaborate on supply chain data platform") activity. Construction systems should easily generate timely and accurate data so users take the [needed action](https://www.financedigest.com/rpa-talk-is-cheap-and-cfos-need-action.html "RPA: Talk is cheap and CFOs need action.") to improve business processes.  Emphasis should also be given to [business intelligence](https://www.financedigest.com/social-business-intelligence-market-to-reach-a-valuation-of-us29-bn.html "Social Business Intelligence Market to reach a valuation of US Bn"), making data easily collectable, accessible and actionable.

**How to stop legacy systems holding you back**

CIOs are then faced with a dilemma: pay for expensive re-coding of existing [systems](https://www.financedigest.com/the-role-embedded-finance-systems-will-play-as-commerce-goes-increasingly-digital.html "The Role Embedded Finance Systems Will Play as Commerce Goes Increasingly Digital") to match operational and financial needs or replace them with more modern alternatives. The rising cost of [supporting legacy](https://www.financedigest.com/holcim-supports-resolution-with-u-s-regarding-legacy-operations-in-syria.html "Holcim supports resolution with U.S. regarding legacy operations in Syria") systems should, when understood, make that decision a lot easier.

Building your own home-grown system as a stop-gap could also be an option but has its limitations. The optimal choice is a robust and automated single Corporate Performance Management (CPM) system that [incorporates](https://www.financedigest.com/is-2022-the-year-green-finance-incorporates-climate-risk.html "Is 2022 the year green finance incorporates climate risk?") operational driver-based planning and production planning with financial plans, cash flow, modelling and forecasting, project planning and sales and operations planning.

Excel spreadsheets require manual intervention that consumes loads of staff resource and this means that future-proofing will always be required of the software. And still with no guarantee that the data will be error free.

A unified CPM solution makes the most [business sense because it has many benefits:](https://www.financedigest.com/top-benefits-of-invoice-discounting-for-small-businesses.html "Top Benefits of Invoice Discounting for Small Businesses")

- It modernises legacy toolsets and [automates manual processes](https://www.financedigest.com/the-aquaculture-feed-and-pharmaceutical-market-to-move-ahead-on-rpa-robotic-process-automation.html "The Aquaculture Feed And Pharmaceutical Market to move ahead on RPA (Robotic Process Automation)") to save time and reduce human errors
- It simplifies the planning process by allowing all [users to employ a single solution](https://www.financedigest.com/industrial-cyber-security-solutions-and-services-strong-increase-in-user-base-pans-out-for-north-america-to-lead-market.html "Industrial Cyber Security Solutions and Services – Strong Increase in User Base Pans Out for North America to Lead Market") for corporate, financial and operational planning
- It contains costs by analysing indirect costs and the impact of different [business scenarios](https://www.financedigest.com/semiconductor-assembly-and-testing-services-market-top-scenario-swot-analysis-business-overview-forecast-2027.html "Semiconductor Assembly And Testing Services Market Top Scenario, SWOT Analysis, Business Overview, Forecast 2027")
- It [instills confidence](https://www.financedigest.com/instilling-customer-confidence-in-the-pandemic-era.html "Instilling customer confidence in the pandemic era") in financial data and information by using a trusting data source for financial reporting
- It gains insights from interactive dashboards, management cockpits and visualisations that impact strategic decision-making
- It leverages existing technology investments without the need to ‘ _rip and replace_’ existing IT assets
- It reduces financial risk by [improving](https://www.financedigest.com/how-finance-firms-can-unify-two-data-approaches-to-improve-both-compliance-and-security.html "How finance firms can unify two data approaches to improve both compliance and security") forecast accuracy and achieving greater yield on cash

Through [automated financial processes](https://www.financedigest.com/the-implantable-biomaterials-market-to-move-ahead-on-rpa-robotic-process-automation.html "The Implantable Biomaterials Market to move ahead on RPA (Robotic Process Automation)") construction companies can achieve process, technology and finance costs reduction; a more effective finance function that drives value; fast processes that enable agility; analytics that provide superior insight and foresight.

Construction firms need to prepare for long-term [growth and competitive](https://www.financedigest.com/industrial-gauges-market-competitive-growth-strategies-based-on-type-applications-end-user-and-region.html "Industrial Gauges Market Competitive Growth Strategies Based on Type, Applications, End User and Region") advantage and this is easier to accomplish if empowered with the right technology, allowing time and cost spent on financial processes to be reduced so that focus can be on delivery and business priorities.


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