Can Autodesk Be the Microsoft of Construction?

With Procore Technologies’ recent S-1 filing, competition for construction management software seems to be heating up. With large general contractors looking for efficient ways to collaborate, construction software today bears a passing resemblance to the file-sharing industry over the recent decade.

Though there have been many winners in the file-sharing industry such as Alphabet and Dropbox, Microsoft is widely regarded as a leader. Let’s see whether or not Autodesk (NASDAQ:ADSK) can wear that same crown for this specific sector of the economy. 

Why is Autodesk going after construction?

Before we dive into the similarities between Autodesk and Microsoft, it’s probably best to lay the groundwork — no pun intended. The construction industry is enormous. According to Procore’s S-1, construction is responsible for 13% of global gross domestic product and 7% of global employment. While the bulk of that spending isn’t focused on software, such technology is playing an increasingly important role. 

Since construction work is fragmented between the office and the job site, a lack of communication has previously contributed to project delays. But since internet-connected devices like iPhones, tablets, and computers have grown in popularity, communication has been streamlined, giving rise to various workflow platforms. 

Recognizing this trend, Autodesk pounced on the opportunity. The company is most well known for providing design tools to the architecture, engineering, and construction (AEC) industry, and it has now spent north of $3 billion acquiring software for the later stages of the project lifecycle. 

How are Microsoft and Autodesk similar?

Autodesk provides blueprints for construction work, so even as files are sent or uploaded onto other platforms, many of them were created using some version of Autodesk’s software. Building information modeling (BIM) or computer-aided design (CAD) files power the industry in the same way Microsoft Office products power traditional businesses. Though files are shared on a range of platforms, the actual file types are often native to Microsoft or Autodesk. 

In 2011, after seeing the rise of file-sharing platforms like Box and Dropbox, Microsoft rolled out its own service called Office 365. With now more than 200 million users around the globe, Microsoft has already cornered a sizable share of the market. In 2019, Autodesk took a page out of that playbook by rolling out the Autodesk Construction Cloud.

Construction Cloud, like Office 365, allows its users to keep everything on one platform. Previously Autodesk helped its customers simply design the build, but now, users can plan and coordinate resources, select subcontractors, manage costs, communicate during the building process, and plenty more.

Advantages versus Procore

Though Autodesk leads in the design industry, Procore still boasts the largest market share during the build phase. Since the latter has more than 10,000 customers and 1.6 million users, Autodesk has some catching up to do.

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But there are a few factors that come out in Autodesk’s favor. For starters, the company already has more than five million subscribers among all of its services. Being able to pull from that existing user base should make acquiring customers easier. Autodesk could also have an edge in pricing since it’ll be able to bundle some of its existing services.  

With Autodesk’s notoriety and well-capitalized position in the industry, it’s easy to draw comparisons to Microsoft. However, while such comparisons can be interesting, few situations are truly apples-to-apples, and Autodesk still has some work to do within the construction space. 

All in all, the transition to digital services is still young for the industry, and as it builds momentum, both Autodesk and Procore are in prime positions to benefit.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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