The end of SaaS for construction?

Software is still trying to take a bite of construction... and will AI help devour it?

View of the new Ritz Carlton under construction from The Leela Palace in Udaipur (India). November 2024.

Marc Andreessen famously stated that “Software is eating the world” in August 2011. We’ve seen our fair share of software winners in AEC (architecture, engineering, construction) tech over the last decade or so, but our fragmented industry still feels like it’s in the early innings of digital transformation — especially given a big part of our industry is physical, not digital. It feels as if software is still nibbling at the construction industry. AI will help software devour it. Digitally, then physically.

I’m not talking about the many AI copilots for construction. I’m talking about how AI will make building custom software easier for construction.

Will AI make custom software the new standard for construction? And will this be the end of traditional B2B SaaS for construction?

Last November, I got a one week crash course in all things startups, venture capital, construction, cultures, business models, and markets of India. I really could (and should) have spent months there given how exciting the startup ecosystem in Bangalore felt.. and how much I enjoyed mysore masala dosa. The proptech and construction tech startup ecosystem in India felt like how it felt here in San Francisco about 6 years ago. The energy was so reinvigorating and really got me thinking about what it takes for a construction tech startup to win in India.

In India, businesses don’t buy software. They build their own. The cost of custom development is so low and the talent is so abundant that it just makes more sense for businesses to build their own tools tailored to their custom needs.

This really got me thinking: what if advances in generative AI make custom software just as accessible in the U.S.? Could the construction industry, with all its unique workflows, see a shift toward building its own tools instead of buying them?

The State of Software in Construction Today

Let’s be honest—construction’s relationship with software is messy. Most ERP systems used in construction weren’t even designed for the industry. They’re generalized tools that have been bent and twisted to (kind of) fit how contractors work. Then, there are project management platforms like Procore and Autodesk Construction Cloud. While they’re powerful, contractors often find them restrictive, especially if their processes don’t fit neatly into a predefined box. This demand for flexibility is why we see so many plugins for tools like Revit and why marketplaces like Procore’s are filled with niche point solutions.

The result? Fragmentation. Every company has its own patchwork of point solutions, which makes integration and data consistency a nightmare. This is a headache for IT and technology teams to maintain software licenses and training for staff across a company. Some construction companies report having licenses for 150-200 different softwares.

So many of these softwares are old, outdated, and have a steep learning curve. And so many of my contractor friends are extremely frustrated by software today.

AI: The Game Changer for Custom Software

Generative AI has the potential to upend this entire dynamic. Here’s why:

1. Faster, Cheaper Development
   Building custom software has always been expensive and time-consuming, but AI is changing that. Generative AI can help companies quickly create Revit plugins, Excel macros, extensions, and even entire applications tailored to their workflows (imagine a fully customizable project management solution spun up per project and tailored to exactly how each stakeholder wants to interact with and see data). What used to take months and a team of developers could now be done in weeks—or even days.

2. Data-Driven Customization
   Construction companies sit on a goldmine of data, but most of it goes untapped (sadly many in physical filing cabinets). AI can help them unlock the value of this data, building tools that are not only custom but also predictive. Imagine a design tool that learns from your past projects to suggest how to lay out a floor? (Not so shameless plug for Hypar). This can be applied to scheduling, planning, drawing reviews, etc.

3. Seamless Integration
   Today, almost every ERP system is customized to the company, this integrations are all custom. AI simplifies the process of connecting siloed tools. By automating API creation and data mapping, it can make integrations easier.

What This Means for the Construction Tech Market

This shift toward custom, AI-built software could have some big implications:

1. More In-House Software and Product Talent
   We are already seeing contractors with in-house software development and data science teams building custom AI tools to avoid sharing their data with software startups and companies. We will see more construction companies hiring software engineers, data scientists and product managers to build proprietary tools.

2. A Flood of Smaller Players
   With AI lowering the barriers to entry, we are seeing an explosion of smaller, more specialized software companies. These startups are overwhelming contractors with too many choices and some false marketing in an already crowded space. Will this lead to a retreat from testing out new software?

3. The Changing Role of Investors
   For those of us in venture capital, this raises questions about the future of construction tech investments. Will we see fewer big winners and more niche players? Or will the focus shift to enabling technologies, like platforms for integration and data cleaning?

   My bet is that companies who already have access to data and customers will win.

4. Death to traditional B2B SaaS for Construction?

   If construction companies build their own software, what software will they buy? Construction still needs software. Will AI help software devour construction? Is this a matter of a unique AI-based GTM or will delightful, customized product powered by AI win? (This is making me rethink my stance on GTM winning over product!)

A Future Built with AI

AI has the potential to reshape how construction companies think about software. Instead of trying to make off-the-shelf tools fit their needs, they could build their own—with less cost and effort than ever before. But this transformation comes with challenges. To make the most of this opportunity, contractors will need to invest in talent, clean up their data, and rethink their software strategies.

As someone who’s spent years in construction and now invests in construction tech, I’m watching this space closely. Will we see the rise of in-house development teams in construction companies? Will custom AI tools finally bridge the gap between what contractors want and what software can do? I don’t have all the answers, but I do know this: the next few years are going to be an exciting time for our industry… especially as we watch Physical AI too.

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If you are interested in learning more about construction tech and India, please feel free to reach out to myself or Brick & Mortar Ventures’ India based venture partner, Aditya Thakur. Brick & Mortar Ventures’ first startup investment in India is Sonar Labs through our Formwork Labs accelerator program.

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