Over the past three decades, the cost of software has plummeted dramatically. Caused by several factors, but primarily driven by advancements in cloud computing, open-source tools, automation, and most recently, artificial intelligence (AI)-powered development.
From 1997 to 2017, software prices fell by approximately 67%, according to U.S. Bureau of Labor Statistics data adjusted for the Consumer Price Index. Extending this trend to 2026, estimates suggest an even steeper cumulative decline—potentially exceeding 90% in effective development costs—thanks to AI agents and coding tools that automate much of the labor-intensive process. Yet, in the construction industry, these savings have largely bypassed builders, general contractors, and specialty contractors. Instead, intermediaries such as software vendors, suppliers, and even governments have captured much of the value through regulation, pricing models, or usage limits that are not aligned with the customer.
This whitepaper examines this disconnect, drawing parallels to the supply chain shocks experienced during the COVID-19 pandemic. Between 2020 and 2022, global disruptions led to sharp price increases in materials like steel, lumber, and concrete, with suppliers and logistics providers retaining profits while builders and end-consumers absorbed the hikes.
A similar dynamic persists in construction software: despite lower underlying costs, SaaS (Software as a Service) providers often charge premiums that do not reflect the efficiencies gained from standardization and commoditization. By focusing on the application layer—where custom tools for project management, financial tracking, and collaboration reside—this paper argues for strategic shifts toward bimodal IT approaches, platform-based solutions, and data-driven standardization to reclaim these savings.
Ultimately, this paper provides a roadmap for construction leaders to capitalize on software's deflationary trajectory, fostering profitability amid rising material costs, labor shortages, and regulatory pressures.
The construction sector, valued at over $10 trillion globally in 2025 and projected to reach $27 trillion by 2035 at a 6.5% CAGR, remains one of the least digitized industries. While sectors like finance and retail have harnessed software to drive efficiencies, construction grapples with fragmented supply chains, manual processes, and siloed data. This inefficiency is stark against the backdrop of software's historic price deflation.
Since 1997, the real cost of software has declined sharply due to several factors: the proliferation of open-source libraries, the shift to cloud-based deployment, and economies of scale in data centers. Fast-forward to 2026, and AI-driven tools have accelerated this trend. Custom software projects that once cost hundreds of thousands now range from $30,000 to $200,000, with AI acting as both a cost reducer and enhancer for complex features.
However, these savings are not uniformly realized in construction. Builders often pay for SaaS tools via per-seat licensing or revenue-based fees, which can amount to 0-2% of project value—a substantial sum on multimillion-dollar builds. By standardizing processes and adopting agile strategies, firms can recognize software savings directly, which will improve margins; critical for any industry where average profits average 10% or less.
To understand the opportunity, we must trace hardware / software's cost evolution dating back to Intel Co-founder Gordon Moore’s observation in 1965. At the time, Moore observed “that the number of transistors on a microchip doubles approximately every two years, accompanied by a reduction in cost.” Moore initially predicted this doubling rate in 1965 for the following decade, later revising it to every two years in 1975.
As this has roughly played out, the cost of compute has dropped dramatically. Booth hardware & software costs followed suit.
The 2000s brought open-source (e.g., Linux, Apache) and cloud pioneers like AWS (launched 2006), slashing infrastructure expenses. By 2017, BLS data showed a 67% CPI-adjusted price drop. This period also saw the rise of SaaS, with models like Salesforce demonstrating scalable, subscription-based delivery.
From 2017 to 2026, the decline intensified. Cloud adoption reduced capex by 30-50%, while DevOps tools automated deployment, cutting time-to-market by half. The COVID-19 pandemic accelerated this: remote work necessitated digital tools, boosting construction software spending from $2.62 per employee in 2019 to $3.13 projected for 2026. AI's emergence in 2023-2025, with tools like GitHub Copilot and agentic systems, has driven further reductions. Analyses indicate a 90% drop in effective costs for code generation, shifting the premium to integration and customization.
The COVID-19 pandemic, peaking in 2020-2022, exposed construction's vulnerabilities. Global lockdowns halted manufacturing, causing shortages in steel (prices up 200%), lumber (up 300%), and semiconductors for equipment. Supply chains, reliant on just-in-time models, fractured: delays averaged 6-12 months, with costs passed to builders via force majeure clauses.
Stakeholder constraints were unprecedented: governments imposed quarantines, suppliers hoarded inventory, and logistics firms raised fees amid port backlogs. In developing economies, this led to 15-20% project cancellations. U.S. construction saw unemployment spike to 16.6%, with new home sales down 15.4%.
Software adoption surged as a countermeasure. Firms turned to digital tools for remote monitoring, virtual collaboration, and supply tracking. The construction management software market grew 8.9% YoY from 2025 to 2026.
Despite these changing dynamics, few software pricing innovations emerged: vendors capitalized on demand, maintaining high fees despite lower costs.
Cloud computing comprises three primary layers, each offering cost efficiencies for construction.
Depending on your organization's size, the technical capabilities of your personnel and the complexity of your projects, likely savings exist at each layer.
Despite deflation, construction software costs per project remain high. Several factors contribute to this, but a few key reasons are:
Standardization leverages software's low marginal costs. In construction, standardizing submittals, RFIs, and splitting / labeling plans can reduce manual effort by 80%. For example, OCR for drawing management automates labeling, saving hours per project. Incorporating intuitive email response / replies to audit logs makes tracking a breeze.
Platforms with intuitive visualizations and open APIs provide single records of truth, eliminating silos. Benefits:
Our philosophy with AI is that it is a tool that needs to be used with appropriate care. Without excellent engineering / context, most AI lacks the situational awareness to discern the path forward. For now, we recommend leveraging it for tried and true summarizing back-and-forth communication, labeling documents, and creating visualizations on permitted datasets. We do not recommend allowing your data to commingle with other tenant data for AI-insights.
For multi-generational firms with good record keeping or documented Standard Operating Procedures (SOPs), we have fine-tuned model(s) so that users may ask ‘What is the SOP for taking drone photos?’ and the helper-agent will quickly summarize the Drone SOP.
Top Use Cases:
Evaluating construction technology is challenging due to numerous vendors. Here are some common things to consider when evaluating solutions.
Consider platforms tailored for construction, such as those offering full-lifecycle tools. The best platforms reduce duplicate entry, foster collaboration, and ensure data export to avoid lock-in.
By 2030, estimates for construction software exceed $15B. Additional trends will emerge, but the industry will likely see AI for predictive analytics and cloud-first (80% adoption). Challenges like the potential labor gap ($124B lost output), could be addressed by leading edge humanoid robots (Optimus & others). Upskilling of younger workforce or alternative solutions are needed.
We will continue to monitor the autonomous space and report on it as appropriate.
The significant drop in software costs represents a transformative opportunity for the construction industry. By periodically evaluating emerging technologies, considering different strategies, and focusing on ROI driven investments—builders can reclaim savings, and enhance resilience. As we enter 2026, the firms that act decisively will not only survive but thrive in a digitized future.