How Procore brought the cloud to the $10 trillion construction industry

When the history of cloud software is written its beginnings will be traced to 1998 and the founding of NetLedger (Now Oracle-owned NetSuite) an accounting app. Over the course of two decades companies like Salesforce.com, Workday and Concur would follow, upending old assumptions about business applications, and creating a marketplace where the public companies alone are worth a combined $175 billion.

Today pretty much any new business app runs in the cloud because it’s what the marketplace has come to expect. And for the most part, these apps have have been successful because theyre horizontal: They solve universal problems that every business must cope with. They track sales leads and deals, streamline human resource processes, or ease the annoyance of submitting expense reports.

But when those cloud historians of the future look back on 2017, they may call it the year of the industry cloud. Cloud applications are turning to solving the unique and specialized problems that vex vertical industries like healthcare and field services.

Here’s another vertical to watch: Construction. Depending on who you ask the business of putting up buildings will generate about $10 trillion worth of economic activity by 2020. And yet a broad portion of the construction business has resisted the sort of tech-based disruptions that have so roiled other lines of business.

The company that has gone the farthest in bringing construction into the cloud is Procore Technologies, based in Carpenteria, Calif. Founded in 2002, it has built what is effectively the only cloud platform worth mentioning in the context of construction. Its 3,000-odd customers use its applications to manage projects worth about $130 billion every year. They manage drawings and blueprints, track the work — and the workers —  on a job site, and ensure that everyone involved with a project is getting paid.

This week it launched Construction OS, an open cloud platform, comparable to Salesforce’s AppExchange, or Apple’s App Store in that allows third-party developers to build their own custom apps that link to data in Procore. Construction OS builds on an early effort by Procore to open its API to developers in 2015. Last year it opened an App store and soon there were 25 third-party apps in it. This week that number rose to 100, and is likely to grow further as the year progresses.

The organizational complexities involved with turning a hole in the ground into a finished, functioning building, are legion. Bassem Hamdy, Procore’s EVP for Enterprise Strategy summed it up this way: “Buildings are put up by people who don’t know each other, and who may never work together again, and yet have to trust each other, even though there’s no contract saying that they must.”

Construction is also a risky business where mistakes that are virtually guaranteed to happen and get expensive quickly. Incorrectly installed steel rebar on 10 floors of a 47-story hotel project in Las Vegas ultimately cost casino giant MGM Grand $173 million to settle resulting lawsuits, and the unfinished building was torn down, floor-by-floor.

Stories like that breed a lot of anxiety about risk. MGM and its general contractor Tutor Perini were on different systems and each was interpreting information in design drawings differently.

“It’s a business where there tends to be a lot of inherent angst and blame and finger-pointing,” Hamdy says. “When things go wrong on a construction site, it’s nothing less than an existential crisis for everyone concerned.” On the average construction project, as much as 7 percent of the overall budget — and often more — will be set aside for “rework” or fixing mistakes. 

It’s within that potential for costly chaos that Procore, founded in 2002, exploited the opportunity to bring order by creating a cloud platform that all the parties to a project can use on their desktops and mobile devices. Over 15 years it has done for the business of building what Salesforce did for selling.

Procore’s approach is simple to understand: Get everyone on a project working from what Hamdy calls “the same sheet of music,” eliminating costly mistakes, and speeding up workflows. Procore’s 3,000-odd customers use its applications to track construction projects including drawings and blueprints, logging who works on the site and what they do, managing the details related to safety and regulation, and perhaps most important, the flow of money.

“Construction wasn’t slow to pick up technology. Rather technology was slow to understand the needs of the construction industry,” Hamdy says. It’s biggest competitors are some legacy client-server apps, but also just plain old pens and paper.

What kind of apps are in the store? Some sound like grad student research projects straight out of Stanford or MIT and yet are real businesses: Botlink uses flying drones to shoot aerial pictures of a construction site and combine it with Procore data.

The pictures those drones take from the air might be combined with yet another app called Smartvid.io, which uses artificial intelligence to detect and flag unsafe conditions at a work site. “If you’re walking around the jobsite without a hard hat on, you’ll appear in a picture with a big red circle around you,” Hamdy says.

Other apps address the more basic, but essential meat-and-potatoes aspects of construction work, like bidding on open jobs. ISqFt (pronounced “I Square Foot”) is used by 800,000 construction pros to keep track of open jobs and bid on them, and even find sub-contractors and links directly into Procore.

And like any good cloud platform, Procore links to other widely-used cloud services an apps: It supports integrations with Box, the cloud-storage and collaboration platform, Microsoft Azure and mainstream business suites from Oracle and SAP.

Procore is a lesser-known member of the Unicorn Club, the class of tech startups whose investments have led to valuations of $1 billion or more. Procore has raised a combined $143 million, including a $50 million investment round led by Iconiq Capital late last year. Other investors include Bessemer Venture Partners, a VC firm that has made a big bet on the cloud.

Hamdy says Procore’s approach has challenged the established players supplying software to construction companies who tend to sell their products via older licensing models. “Our competitors say you can buy all the software you’ll ever need from them, forever, and we think that’s just insanity.”

The App Store has also challenged some outdated notions about exclusivity. One partner who built an app for Procore’s store was surprised and a bit troubled at first to learn that a rival had also earned a slot. Hamdy put it this way: “Our App Store is going to let the marketplace decide which apps are best.”