Industrial AI can help rebuild construction and engineering, with the right digital building blocks 

Construction and engineering organizations are optimistic despite the persistent economic uncertainty but increasing demand for infrastructure, housing, and municipal business projects. There is significant market potential, with McKinsey estimating that the industry could grow to $22 trillion by 2040, a massive increase from the $13 trillion gross annual output from global construction projects as of 2023. 

The industry is challenged to find a way to improve project performance by delivering projects in shorter timescales, on time and on budget with minimal defects and rework while also meeting growing ESG requirements.  

This is increasingly difficult, as companies face fierce competition and low project margins, sometimes as narrow as one-to-two percent. To keep projects profitable, businesses need to accurately estimate projects and manage costs (labor, equipment rental, materials, sub-contract package costs and overheads), cash flow, and contract and project change, while monitoring actual and committed costs and tracking project progress. 

The use of industrial artificial intelligence (AI) holds great promise for construction and engineering industry breakthroughs. According to the Deloitte 2025 Engineering & Construction Outlook: “Companies in this industry will need to leverage digital tools and AI to increase their capacity and capabilities.” In fact, 79 percent of construction and engineering companies expect AI to deliver tangible benefits within one-to-three years. 

Vast AI potential in construction and engineering 

AI trends in the construction and engineering industry include automated and autonomous equipment and robotics, smart design, BIM tools and virtual reality, asset performance management, and predictive maintenance using smart sensors and IoT. Other case examples are drones to measure project progress and smart cameras and wearables to improve health and safety on the construction site. These are all very exciting and valid examples of where the latest technology and AI will drive major business performance improvements.

In addition, there are major AI improvement opportunities that will be realized in the core project and asset lifecycle processes. These have the potential to dramatically enhance productivity and efficiencies across all business functions, with support of AI agents. 

This will also drive major improvements to project and asset performance by delivering consistent and repeatable project processes. The term industrial AI is now being used to describe these AI use cases.  

Organizations early along the adoption pathway 

However, the majority of organizations are still at the beginning of their digital transformation journeys, and there is work to be done before organizations experience the real business benefits. Historically, the sector has lagged in digital adoption, relying on disjointed business systems and manual processes, such as spreadsheets, which compromise data accuracy and decision-making. Moving forward, industrial AI technology, coupled with the right digital backbone, can play a pivotal role in how data is captured, analyzed, and used to optimize project outcomes.  

A strong digital foundation for AI success 

Recent IFS research finds that there is an increasing appetite from construction and engineering organizations to adopt enterprise-wide digital platforms. This may be a critical moment, with approximately 63 percent of companies saying that they are planning to implement new enterprise resource planning (ERP) platforms by the end of this year. These platforms are essential to integrate operations and IT system landscapes, and ultimately lay the foundation that will enable industrial AI. 

For construction and engineering organizations to reap the full value of AI, a reliable digital foundation is required to ensure strong systems and quality data. A house cannot be built without a foundation, the same as an AI system will not be effective without a digital backbone. This is where that comprehensive ERP solution comes in.  

Stats show industrial AI holds significant potential  

IFS predicts 55 percent of construction and engineering firms will be looking to infuse intelligence into their operations in 2025 and beyond, and the transition to data-driven management will be vital for unlocking AI’s full potential. Data centralization and standardization are prerequisites for AI deployment. Firms must integrate and systematize data from disparate sources to ensure consistency and accuracy. This transformation reduces risks, improves resource utilization, and enhances financial and project outcomes.  

When it comes to data and data analytics,  AI has the potential to collect, process, and analyze large amounts of data from various sources, including  ERP systems, to provide insights and predictions for construction projects, such as site conditions, project risks, forecast future project costs and margins, and performance indicators. All of this is a great leap forward from the traditional use of spreadsheets. 

More and more construction and engineering organizations are realizing the business benefits industrial AI can bring to an asset- and project-centric industry.  

Examples of industrial AI improvement opportunities are: 

• Project financial control: improved project financial control processes include project estimating, project budgeting, and project forecasting. Automation and intelligent forecasting have great potential. Today, most companies manage these processes using non-integrated processes and with the use of many manual Excel spreadsheets.
• Project anomalies: if we have high-quality consistent data, AI can help identify project and business process anomalies and, with the use of AI agents, automate the required actions. This will allow management to focus on other tasks instead of spending too much time collecting data and documents and writing reports.
• Document management: AI can use intelligent character recognition to scan and interpret documents, reducing manual data entry and improving accuracy. This is particularly valuable for handling large volumes of documents such as goods received notes (GRNs) on construction sites or perhaps reconciling bids.
• Risk and opportunity management: AI can be used to improve risk management by identifying and evaluating risks and opportunities, helping managers take corrective actions promptly. This enhances the overall control and management of projects.
• Contract and project change management: AI agents can analyze contract and project changes providing recommendations to mitigate potential issues and improve project outcomes. This helps in managing the financial and operational aspects of projects more effectively. AI agents can also analyze effects on the project margin and timeline based on the changes.
• Operational efficiency: by automating repetitive and time-consuming tasks, AI agents can improve operational efficiency, reduce costs, and enhance the overall productivity of construction and engineering companies.
• Non-project-related business processes: construction and engineering companies often have diverse businesses that do more than deliver design and construct projects. For example, their services may include manufacturing, asset management, and rental of equipment and service or facilities management. There are also many AI opportunities that can be implemented for all functional areas of the business: asset management, service management, finance, inventory management and supply chain, human capital management, manufacturing, purchasing, health and safety, and ESG. 

Industrial AI and ERP: a platform for construction and engineering success 

For construction and engineering organizations, AI will increase overall efficiencies, standardize processes, enable greater project and business control, and build resilience to optimize processes and improve decision-making. Ultimately, for industrial AI to deliver real value, it needs the support of comprehensive ERP that will allow construction and engineering organizations to safely take the first steps on their transformation journey.   

www.ifs.com  

Kenny Ingram is VP, Construction & Engineering at IFS. IFS is the world’s leading provider of industrial AI and enterprise software for hardcore businesses that service, power and protect our planet. IFS.ai is enabling the world’s most progressive industrial companies to orchestrate complexity and automate workflows with agentic AI so they can deliver when it really matters to their customers – at the Moment of Service.