The importance of technology in infrastructure

Investors are increasingly likely to commit to infrastructure projects that contain an in- built technology component, new research has found, and this applies to both greenfield projects being built from scratch and the develop - ment of existing assets on brownfield sites.

The Evolution of Infratech report commissioned by Pinsent Masons, in partnership with the Institution of Civil Engineers ( ICE) and techuk, focuses on the convergence of digital technologies with physical infrastructure.

The survey questioned 60 direct equity investors in the infrastructure sector on matters relating to infratech and found 92 per cent of respondents said that over the next three years they expect to consider technology either often, or always, when making an investment decision. This compared to only 49 per cent who said this had been the case over the last three years.

Almost all investors surveyed ( 98 per cent) said businesses that include technology in their plans to develop new infrastructure would make them more likely to invest over the next three years. Investors are also increasingly pushing for pre- existing technology in infrastructure to be upgraded, the survey found.

All the investors said the technology component had been important to the success of the last infrastructure project they had been involved in, and 94 per cent said technology will grow in importance to the success of bids in the next three years.

The report said greenfield infrastructure developments – those built from scratch, such as new roads, bridges and railways – are a risky prospect for investors for various reasons. However, investors surveyed said integration of technology in infrastructure projects can go a long way in reducing the risks and uncertainty around greenfield investments – therefore making them a more attractive destination for investors’ money.

Greenfield projects are also more like - ly to win investment where technol- ogy providers form part of a consortium bidding for the work rather than where they merely act as sub- contractors “passively supplying technology to order”.

For infrastructure developments on brownfield sites, 96 per cent of investors said they are more likely to support those projects where technology is present in the existing infrastructure assets.

All the investor respondents said technology in brownfield assets in which they have an interest will be upgraded over the next three years.

As the convergence between infrastructure and technology starts to take hold, there are some very interesting trends emerging. Collaboration and integration are key. Infrastructure sector players need to better understand technology and data and the benefits and risks they bring, while technology providers and operators need to understand the different risk profiles attached to the build of physical infrastructure – all players need to work together to mitigate new and different risks for all providers in the ecosystem.

For investors, having technology providers play a leadership role means there are real incentives motivating them to provide the best technology and to speed up delivery.

Investors are willing to spend the money which will drive this growing trend, and collaboration is only going to increase. On projects where infrastructure and technology are truly integrated, you can imagine there is the potential for industry players not just to create more efficient assets but also to create new markets that haven’t existed before.

Infrastructure needs to learn from tech firms and start changing from the inside out by bringing digital technologies into all aspects of operation.

Both sectors will need to bring together their commercial objectives, whilst understanding each other’s varied risk appetites, commercial drivers and business models. l Nick Ogden is partner and head of client relationships, infrastructure, at Pinsent Masons

All players need to work together to mitigate new and different risks for

all providers