By Kenny Ingram, VP, Construction & Engineering, IFS and Chris Knight, Global Industry Director, Constructing & Engineering, IFS
The construction and engineering industry is poised for transformative changes unfolding fully over the next 2-3 years.
As the industry grapples with longstanding challenges like profitability, inefficiencies, productivity and the need for modernization, the adoption of Industrial AI, digital transformation, and innovative practices to drive improved control of projects will play pivotal roles. This article explores five major predictions shaping the industry’s trajectory, supported by insights from our recent global research study.
Prediction 1) Accelerating Digital Maturity with Industrial AI
By 2025, construction and engineering firms will increasingly adopt advanced digital systems to address fragmentation in their operations. Approximately 63% of companies say that they are planning to adopt new enterprise resource planning (ERP) platforms, serving as digital backbones to integrate operations and IT system landscapes, and lay the foundation to enable Industrial AI. Historically, the sector has lagged in digital adoption, relying heavily on disjointed business systems and manual processes, such as spreadsheets, which compromise data accuracy and decision-making.
The implementation of Industrial AI will revolutionize project management by transforming how data is captured, analyzed, and utilized. AI will enable smarter and more accurate forecasting, risk mitigation, and predictive maintenance for companies that own their own equipment, providing deeper insights into operations and optimizing project outcomes. However, successful AI adoption hinges on establishing accurate and consistent data structures – something a robust and modern ERP system can provide.
With digital maturity, firms can improve productivity, standardize operations, and ensure better project control. The shift from fragmented to integrated systems will also reduce inefficiencies, enabling repeatable best practice project and business processes. And most importantly, it will empower organizations to deliver better project financial control with improved project margins. Since the IFS global research study revealed that 71% of companies routinely overrun on their projects’ budgets and timelines, this level of control, which is enabled by integrated technology, is necessary for financial viability.
Prediction 2) Business Diversification for Sustainable Growth
Diversification will be a central strategy for 60% of construction and engineering companies over the next three years. Moving beyond traditional project-centric models, firms will accelerate their focus on exploring new revenue streams like facilities, service, and maintenance management; modular and prefabricated construction; and rental models. This diversification reduces the reliance on low volume, lumpy and volatile project revenue streams and supplements it with stable, recurring revenue from additional business activities. This increases the resilience and overall value of the business.
Clients are increasingly demanding full lifecycle support for assets—from design and construction to operation and maintenance. This shift not only aligns with customer expectations, but it also elevates the market value of construction and engineering firms. For example, expanding into prefabrication, offsite manufacturing or setting up offsite assembly hubs, enables firms to meet market demands for cost-effective and sustainable industrialized construction solutions.
However, achieving diversification demands robust digital infrastructure to manage new business models effectively. For many companies this is a challenge because their existing business systems are designed to handle traditional project-centric processes only.
To enable this business diversification, the next generation construction company will need a solution that can handle traditional construction processes and also support new industrialized construction methods as well as service, facilities, maintenance management and rental models. With a digital ERP backbone solution that is designed for this new world, a company can then seamlessly expand into new markets, ensure compliance with local regulations, and maintain operational control.
Prediction 3) Standardization to Boost Efficiency and Control
According to our construction industry research, standardization of processes, data structures, and materials will become a priority for 80% of firms in 2025. This approach enables repeatable, efficient operations across projects and geographies. By adopting standardized workflows and templates, companies can achieve consistency, which is critical for improving project performance and profitability.
Centralized, digital systems will underpin this standardization, facilitating the transition from document-driven to data-driven operations. Accurate data allows firms to analyze past performance, identify areas for improvement, and implement continuous improvements.
Industrialized construction—emphasizing modular and prefabricated components and and a platform approach—are key drivers of this trend. Borrowing from manufacturing principles, the onsite construction processes are trending towards more of an assembly process. This change in approach allows firms to reduce costs, improve quality, and speed up project timelines by as much as 30 – 50% according to industry experts. Governments are also incentivizing this shift by mandating sustainable and reusable designs. For instance, the United Kingdom has set a target of building 300,000 new homes per year by 2025 using modular construction methods.
Prediction 4) Sustainability as a Core Focus
Sustainability will increasingly dictate how projects are planned and executed. By the end of 2025, over 60% of companies will embed sustainability into their digital transformation strategies, driven by regulatory requirements like the Corporate Sustainability Reporting Directive (CSRD) in Europe and the Leadership in Energy and Environmental Design (LEED) standards in North America.
The growth in Industrialized Construction is changing the way assets are being built and emphasizing standardized materials and platforms. Meeting sustainability targets is also driving companies to perform more work in offsite assembly hubs or manufacturing plants.
Moreover, the demand for green buildings and infrastructure is growing rapidly. Firms that incorporate sustainability into their operations gain a competitive edge by attracting eco-conscious clients and investors.
Digital platforms will play a critical role in managing sustainability initiatives. Modern, cloud-based systems allow firms to track and report metrics like carbon footprints, energy efficiency, and waste reduction in real-time. Advanced analytics and AI can further help optimize resource usage, ensuring projects meet stringent environmental standards.
Prediction 5) Industrial AI and Data-Driven Operations
Industrial AI adoption will accelerate, with 55% of construction and engineering firms looking to infuse intelligence into their operations in 2025 and beyond. Again, the transition from document-based to data-driven management will be vital for unlocking AI’s full potential.
AI applications in the construction and engineering industry range from predictive analytics to automated scheduling, project anomaly detection, and risk assessment. For example, AI can forecast supply chain disruptions or simulate project scenarios, helping firms make proactive decisions. Digital twins—the top-ranking technology on companies’ wish lists according to IFS’s industry research—will also gain traction, allowing real-time monitoring and management of assets across their lifecycle.
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.
Looking Ahead
The construction and engineering industry stands at a crossroads. The challenges of inefficiency, low productivity, fragmented systems, sustainability, and poor project performance are pushing these firms toward digital transformation initiatives. By embracing Industrial AI, diversifying business models, and standardizing processes, companies can achieve greater control, profitability, and resilience.
The next few years will see a profound shift as firms move from traditional methods to innovative, technology-driven solutions. Companies that act swiftly to modernize their operations will not only navigate current challenges but also emerge as leaders in a rapidly evolving industry.
