Rishi (00:41)
Today our guest is Kris Lengieza. Kris, welcome.

Kris Lengieza (00:46)
Hey, how are you?

Rishi (00:46)
Good. The theme today is funding the AI future of construction when software becomes labor. First section here, is on your career and perspective. You've spent 20 years in construction, starting on job sites and now leading technology innovation at the industry's largest platform. How has that field experience shaped the way you think about where technology actually creates value?

versus where it just creates noise.

Kris Lengieza (01:17)
Yeah, absolutely. I I I think Rishi, I think the the important part to remember is at the end of the day on the job site we're all trying to get the same job done, right? Which is to build whatever it is that we're out there for. And

I think coming from the field and spending a lot of my career, you know, as a project manager, running safety, running quality and operations, it really helped me. and then our organization, Procore in general, because we bring a lot of people from the industry that help that are rooted in the problem of the pain that we're actually trying to solve. And and so I think there's a lot of times there are technologies that are shiny objects that aren't really

addressing those those root pain points that are out there. And that's

Rishi (02:02)
Mm-hmm.

Kris Lengieza (02:03)
that's where we need to we need to focus on. We need there's a you know there's a tremendous amount of opportunity in the construction industry to solve problems that people do hundreds of or thousands of times on a job site. And you know, we don't have enough people in the industry already. It's a hard enough job as it is. So how can we go and focus on building technologies that actually make a dent in

in

that instead of solving maybe a problem that people don't actually are really have.

Rishi (02:34)
Yeah, it's tight labor market.

Kris Lengieza (02:37)
Very, very tight labor market. Tough to find people and if you find them you gotta hang on to for sure.

Rishi (02:42)
Yeah, especially good ones.

Kris Lengieza (02:44)
Yes. Yeah.

Rishi (02:46)
You said that the role of the CFO in construction is changing, becoming more strategic, owning IT, HR, and capital deployment. What's driving that shift? And what does the quote unquote modern construction CFO look like to you?

Kris Lengieza (03:05)
Yeah, I think one of the changes I I spend a lot of my time talking to executives. It's part of my role, right? To to meet with the executives on our clients and talk to them about what's happening in their business. And I think if you look at what's happening in construction is there's a there's a a transition happening in CFOs. You know, CFOs tend to stay with companies for very long times. You have a lot of family-owned businesses. And so people have been the CFO for those businesses for maybe twenty years in some cases.

And they did a fantastic job, but the role that they were doing for the business was very, very different. It was really focused on just purely the finances, you know, keeping the books, making sure that we were doing the the tax returns, all the things that needed to be done. And I think in today's world, people are looking to their CFOs to be a more strategic inputter. they're sitting at more of an executive level. You're bringing in a the next generation of CFOs.

That

may even be coming from another industry. So they're starting to think about things like, hey, how do I deploy my capital? They may even be over the top of things like IT and data and analytics, right? Because they are very numbers-driven folks. And so because of that, they have a much different view of the business or the opportunity to have a much different view of the business than others. And they can be a very important strategic partner to.

the CEO, the COO, and others that are running the business on a day-to-day to think about, hey, how do we grow? Which markets do we go after? Do we have capital to go deploy? Should we go in, you know, we're seeing a lot of consolidation. Should we go buy another company? And these are the type of conversations I'm seeing more and more now be led and and highly engaged by a CFO inside of their organization.

Rishi (04:53)
We have several listeners in this podcast who are new to construction and they're CFOs.

Kris Lengieza (04:59)
Yeah. Yeah, I think it's also nice to bring outside perspective a lot of times because, you know, we've done things the same way in a lot of cases for a very long time and so fresh perspective is not necessarily a bad thing. I've seen it work out very, very nicely.

Rishi (05:14)
Yeah, yeah. The next section here is the productivity gap and construction's labor crisis. Procore's Future State of Construction report identified a persistent productivity gap and worsening labor shortage. You've argued the answer is automation and augmentation. Can you break down what each of those means in practical terms for a mid-size GC?

Kris Lengieza (05:42)
Yeah. I think when I talk about automation and augmentation I I think of

Two things. One is a a digital automation or augmentation. And that's what we're talking about today with hey, giving people the tools, whether that be a piece of software that automates steps in a workflow, or maybe, you know, in today's world it's it's agents that are actually performing work on in their on their behalf. You know, automating the steps to get a contract routed around the organization, signed, approved, reviewed, right, are things that take a lot of time.

And

take away from fix. But there's also a physical automation and augmentation out on the job site, right? Making sure that they either have the information that they need. There are certain requirements of information that needs to be both collected and or found to get the job done. And people spend about 35% of their day just really, you know, on tasks that don't add a lot of value. They spend almost 20% of their time just looking.

For answers to questions they have. And so if we can we can augment our best field workers with the information that they need, maybe we give them a voice agent that has access to the entire project documentation that they can just talk to either via an app or you know go a little bit crazy, maybe they're wearing a set of meta glasses, right? And when they get NC certified, now they get that answer in three seconds, right? And they don't have to walk back to the trailer.

They don't to call anyone, and they can continue with their work, that will significantly take a bite into the productivity challenges we have. And so it's it's the automation and augmentation, not just in the back office or in the trailer, but also out in the field where we see them making sure that they can get the work done that they need to as quickly as possible.

Rishi (07:38)
Actually, since you and I talked last, Procore just announced the acquisition of DroneDeploy. So there is definitely physical side of automation you guys are moving towards.

Kris Lengieza (07:49)
Absolutely. I mean when we talk about augmentation I also a lot of times think about robotics and I think that was one of the things you have on your list here to talk about. But, you know, just things like site capture, right? Traditionally today some a human is walking around the job site taking photos or with a camera, right, to record the job site. I I think that's a thing that is primed for robotics. We already see customers using that. You know, drones are an extension of that as well. And and then I think there's also like robotics

augmentation

that are getting work done. We think about robots that do layout that actually perform work. There's still a human very much in the loop that's running those robots, but yeah we're very excited about both the data collection and reality capture space with drone deploy and their robotics integrations as well.

Rishi (08:37)
You've pointed out that construction loses a lot of people early in their careers. Burnout, intensity, the grind. How does technology, specifically AI agents, change the experience for a first year project engineer in a way that actually keeps them in the industry?

Kris Lengieza (08:55)
Yeah, I think people who come to construction come to construction because they like to solve problems. and when you show up on the job the first day as a project engineer, and for me it was I need you to go update the six sets of drawings that were in the trailer, copying notes between drawings, stamping them, you know, stapling revision sheets in.

That wasn't problem solving for me. That was like clerical work. And it was pretty demoralizing in many, many cases. And in today's world, while it may be digital, a lot of that work is still the same, right? But that's the type of work that is really primed to be to be leverage leverage agents, right? We have agents today through ProCorps, digital co-workers that will review some middles for you, that will review and draft RFI.

For you, that'll compare document sets and help you mark them up. And I think the value there is it gets the the engineer, the the site assistant superintendent to doing the tasks that actually contribute a lot of value to the project and going and working on the hard things that they get a lot of enjoyment out of that helps them push through. Like, listen, construction's never going to be an easy industry, right? It's a lot

Rishi (10:14)
Mm-hmm.

Kris Lengieza (10:14)
of hours, you know, the the problems.

are tough, right? But when you solve them, it feels really, really good. and so giving them the time and the space to go do that. And you know, I think the second part of that is, you know, most people in construction would not argue with you if I told you if if I said to them, you work probably what, 60 to 70 hours a week, and they'd all go, yep. And I think, wouldn't it be great for them to just be able to work like, let's be real, like 50 hours a week? I think everybody would applaud. Everybody would be like given high fives if like they could work 50 hours a week, right?

and so this is this is the stuff that when we start to introduce agents and automation to the workflows, I don't think we're worried about like people going away. I think we're worried about giving some a sigh of relief to the teams

Rishi (10:59)
Yeah.

Kris Lengieza (10:59)
that are on the projects today. And I think that will keep people because they get to work on that high value stuff a lot more.

Rishi (11:05)
So Procore's agents, are mostly operating within Procore and there are maybe a few other systems, but construction, as you know, the software space is very complicated, right? Procore in a

Kris Lengieza (11:15)
Mm-hmm.

Rishi (11:16)
lot of sense, it's not even system of records most of the time. You know, we're thinking about like accounting systems that are sitting there. So how do we think about agents which can work across these software packages, including Procore?

Kris Lengieza (11:31)
Yeah, I I think one of the reasons that we acquired Datagrid, which is the foundation of Procore AI, is you know, they found they were founded and started as a a data platform to connect to many different systems. And so whether that be your ERP, Sage, CMIC, so on and so forth, your internal document management systems, SharePoint, Google Drive, Procore

Rishi (11:54)
Mm-hmm.

Kris Lengieza (11:55)
obviously being a big one, having agents that can connect to those different systems and take action

Across them is incredibly powerful. We always talk about how construction is a team sport. It's also a

Rishi (12:06)
Mm-hmm.

Kris Lengieza (12:06)
multi-system sport. Like you're never going to have one thing that has literally everything in it. What we want to have happen is we want you to have those systems connected. We want those agents to have access to those systems, right? So that they can take action in the system that is the most important system for that information to be in, right? You might look across and there might

Be information you need to gather from the ERP, but what I'm actually doing is in creating a change order that needs to be sent to an owner, and that system record is actually Procore, so we need to go and send that out. And so we think about it very much as I need the agents to connect to as many of the systems as I use in my business, and that's why we have over 150 different connectors into the data grid agents today. And you know, they're gonna be able to work across Procore and they understand Procore really, well.

well but they're also gonna be able to access and leverage data from other systems as well.

Rishi (13:03)
Makes so much sense. last week, was this news whereby an agent, GPT-6, escaped the sandbox and attacked an open source AI company

Kris Lengieza (13:14)
Yeah.

Rishi (13:14)
hugging face. So tell me what you think about the security of these things going into wild and maybe hurting companies as well.

Kris Lengieza (13:24)
Yeah, I think I think security and privacy and containment of your data and where these agents work is incredibly important, right? This is why we talk about you know Procore AI so much in that, hey, it's only looking at your data set, it's not going out to the internet, it you can shut all that functionality off so that it's only working on a contained set of data and in a contained area.

I think people have to learn a lot still about about agents, about AI, not just in construction, but in general. And I find that those who are doing the best at it are those who are thinking about it in, okay, I know how to train a person to go do this work, maybe an intern, right, to go run this report. I should have an SOP and a set of steps to go do that. And now I'm gonna go deploy an agent. But I'm only giving them access to the systems that they need.

And I'm keeping it,

Rishi (14:18)
Mm-hmm.

Kris Lengieza (14:19)
and I'm only giving them the permissions that I would give the intern, right? Those things become incredibly important because that's what protects our data. That's what protects us from the agents not being able to do it. I think there's a whole set of like cybersecurity risks that are out there around agents and things like that as well. But I think this is why we see a lot of our customers are thinking very specifically around how do I have AI that's secure.

trusted and and controlled in my environment to deliver to my people because they all want it but I need to make sure that it's not going to give information that it shouldn't get access to information that it shouldn't or or run up bills that are are way more than I'm expecting as well.

Rishi (15:03)
Yeah, token cost. On the augmentation side, you believe physical AI and robotics will make a meaningful difference. Where are you seeing the most promising real world applications right now? And what's still five plus years away?

Kris Lengieza (15:19)
Yeah.

I mean I think I think I've talked about a couple of them, right? We just acquired drone deploy. I think they're doing or or they have the intent to acquire drone deploy. and they're doing a lot with robotic capture of the job site, bringing being the eyes on the job site. So that's a very practical reality of of robotics and automation going to work as we speak. We see great examples like Dusty Robotics, you know, the Canva drywall robots where they're working alongside of a crew.

To go and perform work. I think those are also great use cases. I call those robots as tools. There is a human still controlling what they are doing. It's just safer. It's faster. It's maybe more efficient and higher quality. So we're gonna go ahead and use the robot to do the work in conjunction with the human that's gotta go set it up, tell it what to do, all of those things. And then I think you get into some of the areas where I get excited around things that are somewhat more full autonomous think of.

Like Waymo cars, but for the job site, and that's where we go with companies like Bedrock Robotics, who are really focusing on deploying you know, operator out-of-the-cab, you know, autonomous heavy equipment to do dirt work, right? And they're not doing everything, we're not eliminating the operator because most cases you probably have an operator that's actually doing some fine grading or trenching that requires a high level of technical capability, and then

he's gotta jump out of that cab or or move that piece of equipment and then go load trucks right with just dirt. That doesn't take a lot of skill, it's just scoop and dump, right? And so like there are great opportunities here for automation because we don't have enough operators as it is. and and I think you're gonna see these things they're already starting to show up on job sites. They're starting to show up on big job sites. and I think that's only gonna continue over the next few years.

Rishi (17:11)
2031 Kris what is your prediction?

Kris Lengieza (17:13)
Twenty thirty one. I I think I think we in twenty thirty one we will very much schedule robots to work alongside us on the job site, the way that we do pieces of equipment or the way that we do humans. They will become another resource that we put to work.

I don't know if by twenty thirty-one we'll see humanoids doing work on job sites, but I think you'll see a lot of robots as tools. I think you're gonna see more and more use cases that make sense like this. And I think you're gonna see pieces of equipment that have been automated in many other ways become much more autonomous. Yeah, heavy equipment, material movement, you know, trash. Think about how much contractors spend just moving trash in and out of buildings.

perfect task for a cart that's autonomous that can just drive and get to the lift and go down the lift and go dump it, right? Like these are things that I think will become somewhat commonplace. and then the the challenge or the opportunity for us will be how do we coordinate them with all the humans, the crafts, the trades, the schedule that go along with them, and how do we deploy them as an asset the same way that we think about, you know, where we decide to put a a backhoe today or where do we decide

to put a crew today and and that'll be the new challenge that we have to evolve to.

Rishi (18:28)
said. The next section here is the quote unquote agents versus labor funding

Kris Lengieza (18:34)
Mm-hmm.

Rishi (18:35)
narrative. You've made a compelling argument that construction companies don't blink at spending $500,000 on a backhoe because they see it as a revenue tool, but they agonize over a $50,000 software investment. Why does that mental model exist?

and how do we break it.

Kris Lengieza (18:58)
Yeah, I think the reason that that mental model exists today is they know that the piece of equipment, that backhoe, if you get the right size, is actually going to drive more productivity and therefore drive more margin to the bottom line for their business, right? I think to date, construction software has been very much a risk

avoidance or a risk, you know, it's it's how do I avoid the car crash?

But I don't actually necessarily improve the margin as much. And I think where we're going and and where we're really moving to with how Procore is thinking about becoming a a system of intelligence that can take action on your behalf. And we start to think about, okay, so I've got these agents that actually can go do work for me. And and after we get through the first phase where we've just given some people some relief.

Rishi (19:55)
Mm-hmm.

Kris Lengieza (19:55)
Right.

Then we can start to think about well, can I deploy my resources a little bit differently? Right? Can I have two project engineers on a project instead of three? Can I go get another project now because I've got more project engineers that I couldn't find, right? And especially

Rishi (20:13)
Mm-hmm.

Kris Lengieza (20:14)
when you get into a lot of these technical projects. And so I think the the the the switch that needs to happen is

We as the in as the construction technology industry need to do a better job of showing them the proof is in the pudding that when they deploy these softwares there's actually a true productivity gain for them. And now they start to go, okay, well, I would have hired labor to do that, right?

Great example with the backhoe. You could hire 20 humans to dig a hole, or you could get backhoe,

Rishi (20:41)
Mm-hmm.

Kris Lengieza (20:42)
right? Same thing with I've got three thousand submittals to review on this project. I could go get five project engineers or I could get one really good project engineer and give them a bunch of tokens to work with an agent that's good at reviewing submittals and have them crank through that. And that's the mental model shift that people need to make.

Rishi (21:03)
Yeah, yeah, always hard to prove it's software.

Kris Lengieza (21:07)
Yeah.

Rishi (21:07)
You shared a powerful story about a CFO who said, quote unquote, I trust my PMs to hire day laborers from their project budget. Why shouldn't they have the same autonomy to fund AI agents? Walk us through that conversation and why it was such a light bulb moment.

Kris Lengieza (21:27)
Yeah, it was very interesting. So I was talking to a CFO and I was really trying to talk to him about the idea of agents as labor instead of agents as software costs. Because the sensitivity that every CFO tends to see is my IT and my software spend is just ballooning, right? Where does this come from? Right? And when it

the light bulb went off for him almost immediately on okay, I get this. This is actually gonna go do work for me, right? It's actually gonna perform a task. So it if I treat it like labor, that makes sense. And the next question he asked me is, well

Do you have the ability for me to allow my project managers to decide how much they spend on it? Right? And I thought that was so insightful because you know what he was really identifying is my project managers are responsible at the end of the day for the financial success of that project.

I don't get into their books and, you know, for the most part, don't really push on, hey, do you need a couple extra day laborers to make sure that the the cleaning on the site, the the housekeeping is really, really good. probab you know, that's not usually the granular level of detail that they go to. So if you choose to get the job done a little bit differently, to my example of twenty twenty laborers to dig a hole versus a backhoe, you get to choose the tool you want to use. You have a budget you have to work within that envelope. And

Rishi (22:46)
Mm-hmm.

Kris Lengieza (22:48)
You know, I think this was insightful because

We should allow people to use the tools and to to spend in order to get the job done. There's a lot of different ways to get the job done. I think where the challenge comes in is are we giving them the right guardrails and are we giving them the right controls, right? So that they're not just going and buying, you know, a bunch of different licenses and things and we're worried about is it actually gonna be productive? Give them a controlled environment, but then them let them a lot let them control how much they deploy it and for

what tasks and I think that's a really great way to think about some of this.

Rishi (23:25)
Actually, the cost control is such a big deal. Even the other day I was running an agent and I was thinking it's going to cost me $10, $20 and it cost me like $700 to run that agent in just one day.

Kris Lengieza (23:38)
Yeah. Yeah. Yeah. It's

Rishi (23:40)
So,

Kris Lengieza (23:41)
it's it the visibility and understanding. and this is where I I will say this is one of the reasons that I get excited about Pro Core I as well is

We've really built what I like to say are our hardened out of the box agents. Things that we know are efficient. They're not gonna run up a seven hundred dollar bill d reviewing one submittal, right? They're gonna be efficient. We've we've we've built them in a way and we've worked on the instructions to make them hyper efficient. And that's what this industry needs. They need it to be simple. They need to kind of click a button, one click AI with something that a customer said the other day, like I just need to be able to click on it and say, Hey, go review the submittal and do nothing else. Like I don't wanna have to prom

I don't want to have to do any of that stuff. I just want to give it the documents and say, go go do this work for me. And you know, visibility into how people are using and how much they're spending and how much those agents are burning is is a high level of of need. And that's why we we put the control tower inside of ProCore AI I so you can have an understanding by user, by project, by agent, how they're doing that. So you can say, hey, how much is it actually costing me to review a seminar?

On a job. Alright, now for the next job, I need to budget that in. I know it's you know $3 or whatever to review every submittal.

Rishi (24:56)
Yeah, talking about Procore AI, you guys mostly using open source models like Kimi K3 or let's say GLM, or you're actually using closed source. We're talking about Opus or GPT

Kris Lengieza (25:09)
Yeah, so we are using

our own proprietary model reasoning model for all of the instruction

Rishi (25:14)
Hmm.

Kris Lengieza (25:15)
specific workflows and then we use you know we actually you have the ability to choose which models you use as a customer whether that's Opus whether that's GPT whether that's Gemini and that's for all of the hey I just need to translate this I need to create the documentation those things that are not construction specific and so we are blending the two together

To provide the optimal experience for customers so that they can get the value of our proprietary model, which is trained on construction and optimized to understand the intricacies of drawings and specifications and the ontology of our industry, as well as coupling the the great other models that are out there that they can leverage as well. Mm-hmm.

Rishi (26:01)
Thank you.

If a CFO listening to this wanted to pilot the agents versus labor funding model in their company tomorrow, what would you tell them to do first? What guardrails need to be in place?

Kris Lengieza (26:16)
Yeah. I think it's really important to have those guardrails and I think one of those guardrails is focus on a very specific use case first. Right. This is why we have the digital coworker starter pack, is because we identified that RFIs, submittals, daily logs, finding information and reviewing contracts are like the things that take a lot of time for project teams.

And so we built agents specifically for that, right? And I think if you start with a use case that you know takes a lot of time for folks and that they deeply understand, you'll also have a very quick understanding, is this agent doing what I need it to go do? And how much time is it actually saving me? So that you can validate that if my idea is I actually am gonna save, you know.

20 PE hours a week by using these agents, you can validate that with the project engineer working alongside of that agent. How much did it cost me versus how many hours did they save during that course of the week? And was it actually worth the spend to go do that? And and we have a lot of customers that are deploying these starter agents specifically to test that model and seeing a lot of success. level 10 out in San Francisco, they took their submittal review process.

down from weeks to a few hours. and and that's the type of, you know, hey, I can now relate that to labor, right? I go, hey, I I need a little bit less project engineer time, or I can redeploy that project engineer to spend more time on quality out in the field and less time reviewing the paperwork.

Rishi (27:51)
Yeah, makes sense. Construction companies currently spend around 1 to 2 % of revenue on technology versus 3 to 5 in other industries. As AI agents start replacing tasks that used to require headcount, do you see that technology spend number converging? Or does it get reclassified entirely out of the IT budget?

Kris Lengieza (28:16)
I think this is gonna be a company by company situation, right? Some will probably

Rishi (28:20)
Hmm.

Kris Lengieza (28:20)
decide, hey, I'm gonna go fund this, I'm gonna pull money and I'm gonna put this into project costs because it's just like labor. And others are gonna keep it in their IT spend. I mean, this already is can i is a challenge in the construction industry, I think, as well. One of the reasons I believe our IT spend is so low is because they project cost so much, and so it doesn't show up as IT spend, it shows up as project cost.

Rishi (28:46)
Mmm.

Kris Lengieza (28:46)
Right.

and so I actually think that our IT spend has actually grown pretty significantly in the industry over the last few years. and I think it will only continue to grow. now the question is is is that the right question? Is that the right benchmark to measure ourselves against here? And if it is technology used for the project to do work, it should be in the project cost. It's the cost of getting the job done, right? If it's more open

overhead IT and technology spend, like it's the company's email and Microsoft Word, where it's not specific to working on that project, those things probably stay in your IT budgets. And that might not actually grow that much. it all it's a little bit philosophical from a both a CFO and a CTO perspective on how they recognize those costs.

Rishi (29:34)
Yeah, classification can be challenging in this tumultuous changing moments.

Kris Lengieza (29:39)
Yeah.

Rishi (29:40)
Workforce transformation, the human side. You've talked about how project engineers of the future won't do what they do today. They'll orchestrate and direct work instead of processing paperwork. What skills do we need to start developing now to prepare that workforce?

Kris Lengieza (30:01)
Yeah. I I think there's a few things. we had a conversation yesterday with some clients around this.

I think digital fluency is gonna be incredibly important. That's like a prerequisite. I think if you're coming into the industry as a product engineer, your understanding of just some of the basics of of of the digital tools that are available. And it's one of the reasons that ProCore invests so heavily into being into university and trade programs is so that we can train the industry on the tools that they'll come across when they when they come into the industry. I think the other thing is that they're gonna need some skills or even personality traits.

To be more successful. I think that I am thinking more and more about how to prioritize things like curiosity as a personality trait into those coming to the industry because they will ask good questions, they will learn faster. It'll be a new way of consuming and and and working and problem solving in the new world. I think the the skill that they need to be taught a lot sooner than maybe they have.

In the past is how to prioritize work and how to orchestrate work across multiple people or agents or parties. That's usually something you don't start to have to really tackle until maybe you've become an assistant project manager or something like that. You're kind of given tasks, and it's like, go do these tasks, get them done, things will be great, right? But I think in the future world where you have maybe agents that are working with you, it's like, okay, which submittals

– should I review first? And and maybe we're even, you know, maybe Procore is providing you recommendations on which ones because you understand the lead times and the tie to schedule, right? Okay, well I'm gonna go and I'm gonna deploy this agent and delegate that work to go do that work now, and now what else do I go work on? Right? That's gonna be a skill that I don't think a lot of entry level product engineers traditionally had to tackle right away, that I think they will as as we move into this new world.

Rishi (32:03)
Yeah, and intelligence is getting cheaper and cheaper. The things that we used to value so much like five years ago, taking all these exams and getting really good at these tasks, all of that is so easy now.

Kris Lengieza (32:16)
Yeah. I th I think it's interesting because I think a lot of people that came into construction had a different type of intelligence.

they could spatially reason, right? They liked problems. Like a lot of people went to school to be engineers. Engineer is at the core, no matter what type of engineer, you're a problem solver, right? Some of them are using equations, some of them are physical, but like and I I think I think that's such a valuable skill and I'm I'm excited to see more and more maybe even come from outside of our industry, into our industry with those skills, and be like, Hey, I'm gonna pivot from over here th

physical world seems way more fun for me, but I'm a process and this system thinker and so I know how to go use these tools to then go solve whatever problem is I come across on the job site.

Rishi (33:01)
Tell us the quote unquote Trisha story, a project admin at your previous company whose role was completely transformed by technology, not eliminated, but elevated. What happened and why is that the example every construction leader needs to hear?

Kris Lengieza (33:19)
Yeah.

So Trish was a a a project admin that we had at at my previous company. And you know, when I was there over the seven years that I was there, we implemented a lot of technology, and a lot of things that were low-hanging fruit were things that were attacking the tasks that a lot of our project administrators would do: lien waivers, contract creation and signature, payment distributions. And so what was interesting is

is you know, a lot of these things that we we paid a person to go do and we, you know, very much scaled with how much work we were doing. We were now making easier and easier so they could cover more work. And what was really interesting is Trish became a a a a different type of asset to Teams. She became an asset that could go and work on things that were outside of just the traditional help me move the paper through the organization to to get projects done. And

you I was recently catching up with some former colleagues and they were telling me about how, you know, Trish is still there. and she actually moved remote, which is what she wanted to do to be close to some aging parents. And she was able to do that because of the technology that was available and and teams love working with her because she she doesn't just stay within the box of, hey, I'm just gonna move these pieces along. I'm gonna do what I need to do to help the job. So she became a lot more strategic in her impact.

on on projects as well. And I think for leaders in the industry right now, one of the things we have to be thinking about is as we as we – create more automation, as we use more AI, as we bring in more technology, we're making space for other things.

I think for some they might go, okay, I need less people. And for others, it may be how do I give those people more interesting or more advanced tasks to go do and improve the business, right? And and I think that's ev something that every every leader right now it needs to wrestle with on your approach.

Rishi (35:24)
Yeah, completely changed the jobs.

Kris Lengieza (35:28)
Yeah.

Rishi (35:28)
It's so eye-opening. Change management is the silent killer of tech adoption in construction. You've rolled out major platforms at a GC. What actually works to get field teams and back office staff to embrace new tools instead of resisting them?

Kris Lengieza (35:48)
Yeah, I mean, listen, change is not easy with technology in any industry, but construction is extremely resistant to change. we've been doing yeah. The joke is, yeah, I always did it that way before, I'm gonna keep doing it that way before you know, it worked for me before, why not? And I think in in our industry, in order to get people to adopt new technology, to go through that change process and even from one technology to another,

there is a resistance to to that. It's not even like where the process is the same, but it's just new, right? You have

Rishi (36:22)
Mm-hmm.

Kris Lengieza (36:22)
to take people on that change journey. You have to help them understand why are we doing this.

How is it going to improve your job? How is it going to improve the company? Right. And then you need to ride along with them on that on that change curve, right? There's going to be early adopters. There's going to be those who are stuck in the trough of disillusionment for a very long time, right? Things will never always go perfectly, right? So

Rishi (36:48)
Yeah, yeah.

Kris Lengieza (36:49)
you have to over-communicate. You have to keep reinforcing. Why are we doing this? Why is this important to the business? What does it mean to you? great example.

Of this is one customer that we work with, heavy ProCore user, but every single one of their offices had a different setup of Procore. And so as a company, they wanted to consolidate and have everybody use it the same way. They could drive consistency, they could drive better reporting. Well, that's a lot of change for people that were used to doing things the same way.

But what it meant for the people that were working in these projects is actually a huge amount of opportunity for career growth. Because by standardizing the way that they did things across, I think it was like 27 different offices, that now meant if you wanted the opportunity to get promoted and go become a PM and a job came up in a different region and you wanted to go do it, you didn't have to be scared that it was gonna be like moving to another company. They were doing things the same way, right?

and you can really start to like think about the growth and opportunity for your people through mobility. and that's just a good example on why sometimes like the change may be hard and it may be difficult, but there's actually something in it for you and why we're doing this for the organization that goes beyond just like we wanna force everybody to do something the same way or we wanna implement a new tool, like there's a lot of opportunity there.

Rishi (38:15)
we work with construction CFOs and controllers. The accounting systems in this industry are so old. They're like in from their 80s and 90s. So a lot of times when the people are trying to move from, let's say, an old accounting system to a new accounting system, something that's like web based, – half those transitions fail,

Kris Lengieza (38:37)
Mm-hmm. Mm-hmm.

Rishi (38:39)
it's not that…

change is risky here, but even the data is telling us that the system changes are not working very well for this industry. What do you think about that?

Kris Lengieza (38:48)
Yeah.

I think that can be very true. I think I think it's Deloitte or McKinsey, one of the two, has a report that says seventy-six percent of digital transformations sa fail. Right? They don't achieve their desired outcome.

And I think, you know, ERP migration is a very hot topic right now. Many of these solutions are twenty, thirty, forty years old and ironically it aligns with those changing CFOs. New CFOs come in, they want to implement a new tool, they don't want something that was implemented by the last CFO, right? And, you know, if you think about accounting systems as well, it doesn't just impact accounting, it impacts the whole business.

Rishi (39:28)
Mm-hmm.

Kris Lengieza (39:28)
And and where we've actually seen some success in our customers is because we integrate with those accounting systems, you know, a lot of people have been moving from Sage three hundred to like Sage Intact and things like that.

you can actually insulate the rest of the business outside of accounting from that that change because they were already doing their financials in Procore and it was migrant it was, you know, integrating with CH three hundred, so now you're just switching the back end. So that's like one approach. I think the other thing to think about is like why are we doing this, right?

Rishi (39:58)
Mm-hmm.

Kris Lengieza (39:59)
If if at the end of the day it doesn't provide us with a better product, a better experience, right?

then we're just making change for the sake of change. And and and you have to do a really good job of vetting why it is you want to make this change before you start down that path.

Rishi (40:16)
very well said. The last section here, Kris, is startup ecosystem and the future.

Kris Lengieza (40:22)
Mm-hmm.

Rishi (40:22)
VC compared selling construction tech to selling porta-potties. The barriers to building are gone, so differentiation comes down to relationships and depth. For the startups listening, what separates the companies that will endure from the ones that disappear in 18 months?

Kris Lengieza (40:42)
Yeah, I think excuse me. I think it's becoming easier and easier to build. I think everybody knows that.

And I think one of the things that is gonna separate those startups and and the ecosystem is are you solving a really hard problem to solve? I mean, I know this is product management one o one, but like is there something differentiated about that? And do you have incredibly deep knowledge of that problem? Right? That could be because you came from the industry, that because you have deep relationships with your customers. I think those'll be the the startups

that will be successful. I think this is where people get hyp need to get hyper focused on the problem they're solving. This is why like things that are very, very purpose built for an industry or a portion of an industry. you know, anyone's gonna be able to spin up a an app and in Claude and and with a mere application of some credits and some time. now the question is is can you get people to use it?

how good is it, how much is it helping them get their job done, right? And and that's where it's gonna come down to those relationships. It's gonna come down to the depth of understanding that problem and the depth that which you're solving that problem. And then I do think like there's a portion of like there is a bit of fatigue on point solutions. So you have

Rishi (42:04)
Mm-hmm.

Kris Lengieza (42:05)
to have a strategy on how you're integrating into the other tools.

that they are using in the business and are you attacking the entire space or are you just attacking one portion of it and and that's gonna also determine I think some success criteria as well.

Rishi (42:23)
Yeah, actually generally

thinking about a software market over the last one year, know, a trillion dollar in market cap is gone. know, Salesforce lost so much value. All these big SaaS companies we thought had a lot of values. They all are like now valued based on EBITDA instead of ARR, including even Procore has lost like 20 % of the market cap in last one year. So tell me like the entire SaaS ecosystem seems like is totally shaken here.

Kris Lengieza (42:51)
yeah, and I well, I think the the

That is a fact, right? The SAAS pocalypse is real in many ways. I think the companies that you're seeing be successful and continue to grow, right? And actually drive revenue and and really most importantly, service their customers better are the ones who are super deep into their vertical or the problem that they're solving. And I think they're the ones that are actually shifting from a hey, this is a a software that you just use to a tool that works for you.

Like actually getting work done. and I think that's you know, you look at what's happened recently. our earnings were this week, and you know, the market's kind of rebounding a little bit on us because they're seeing what we're doing on bringing that system of intelligence and action to life so that customers can actually go and how important it is for them to run their business on it, right? I

Rishi (43:44)
Yeah, I have.

Kris Lengieza (43:44)
think switching costs are gonna be cheaper and cheaper over time, and so you won't necessarily have the lock-in. So if you're not

driving the value for the business, it's gonna be really, really hard. but I still think there's a lot of very difficult to solve, very important problems to go solve in this industry. And I still think that there's a lot of great opportunities for startups in the in you know in the construction technology space for sure.

Rishi (44:12)
Yeah, ProCore created a lot of value for the market in the last couple of weeks after this acquisition announcement. So the physical side seems like the market wanted you guys to go there and do that.

Kris Lengieza (44:24)
F the physical side, the the launch of our digital coworkers, the launch of our owners tools, all of those things I think are are showing that we have deep expertise in the industry. We're investing in in the platform and delivering more value and more adjacencies, right? The drone deploy intended acquisition is a great example of that as well.

Rishi (44:46)
You said that the real defensibility for startups isn't better software. It's proprietary data and deep domain expertise that doesn't exist in the public domain. Can you give an example of what that looks like in practice?

Kris Lengieza (45:03)
Yeah, I mean there's a tremendous amount of data that goes unused in the construction industry. It's like 95%, right?

Rishi (45:08)
Okay.

Kris Lengieza (45:09)
And it's really hard to make sense of unless you understand construction. And for many of our customers, they've been using Procore and other platforms for many, many years, but they haven't been tapping into the data nearly as much as they can. I think for both the contractors and the software vendors who have that data and information,

They are going to be able to unlock insights. They're going to be able to unlock automations, right? They're going to be able to unlock things that others just aren't able to. It'll become a competitive advantage. It'll become your knowledge base of lessons learned of how you do work. And that will separate the best contractors from others because they have this data, right? And they rely on

you know, platforms like Procore to capture a lot of that information. And it's only gonna become easier to capture more and more data, right? Drone Play is a great example of this. Think of all the photo

Rishi (46:02)
Yeah.

Kris Lengieza (46:03)
documentation. But also like voice is gonna unlock a lot of things, right? Visual is gonna unlock a little a lot of things. And so there's only gonna be more and more data. Can you make sense of it? Do you understand how it's all interwoven, right? That is

Rishi (46:18)
Mm-hmm.

Kris Lengieza (46:18)
the thing I think that is really truly defensible. And that's why we've been spending so

much time and building these proprietary models and building, you know, the the connected tissue, right? The the ontology some would call it, right? Of how these these records relate to each other and what the industry means when they say a sub. Is it a subcontractor or is it a submittal? Well it could matter based on the question. Those are things that'll that'll pay off big dividends for the user and and for the business if they can tap into them.

Rishi (46:51)
So going back to that question a little bit deeper, how do you build a defensible software business here?

Kris Lengieza (46:57)
Yeah. I mean I think I think the way to build that defensible business is

You gotta get deep domain expertise on the problem you're trying to solve. And

Rishi (47:05)
you

Kris Lengieza (47:06)
you gotta you gotta do something that is gonna hit the bottom line for people. just just being able to say, Hey, we just help you in case of the shit moments, is is is not gonna be enough in the future. And people I think are really looking for much more, hey, how does the surf software work for us? Right? How does it help us get jobs done faster?

How does it help us better manage the project? Not just I need a place to document things.

Rishi (47:33)
Yeah, well said. The last question here, Kris, is if you could fast forward to 2030, what does the typical construction project team look like? How many humans, how many agents, and what's the relationship between them?

Kris Lengieza (47:50)
Yeah. I actually don't think there'll be a significant drop off in humans on construction projects. I think

Rishi (47:56)
Hmm.

Kris Lengieza (47:57)
there will be an explosion of agents. I think

Rishi (48:00)
Mm.

Kris Lengieza (48:00)
you I I think you will have

A project engineer might have a hundred agents that they work with, right? 'Cause they're gonna be trained to do very specific things. and so what and and they're gonna be really good at that one task and then they're gonna hand off to something else. So the orchestration that the project engineer does across of them is gonna change them significantly. I think that they're

You know, there's always a limit on how much how many people you can put on a job site. And I think there's also a limit of like how much robotics you can put on a job site. But if I look forward I think I think data collection comes a lot easier, right?

We're gonna see photo, we're gonna see wearables, we're gonna use robotics to capture more. I think there'll be a lot more automation in how do we analyze that. But I think the humans that are there today are gonna spend their time working on, hey, I actually need to now make go make sense of this and make some decisions. I need to be in the loop here on what the action we want to go take. I it might even be a recommended action by the agent, but I still need I'm I'm the one that's held accountable until until somebody can sue.

an agent, right, for for

Rishi (49:07)
Yeah.

Kris Lengieza (49:07)
everything. I there's gonna have to be a human involved. So I think the number of humans on job sites is probably gonna stay the same because people are always gonna want to go faster, right? And build more or they'll be on more projects. but I think the number of agents is going to go way, way, way up.

Rishi (49:22)
The agents are coming.

Kris Lengieza (49:24)
They're not coming they're here.

Rishi (49:26)
there.

Kris Lengieza (49:26)
I think I think the adoption is growing. Yeah. I think I think there are great use cases of agents that are already very, very useful in the hands of customers today. And we're seeing more and more customers adopt it. And the the interesting thing when I talk to customers is everybody's playing with AI. They're all doing it at home on their own Claude account or Gemini or whatever.

But it's a different thing than actually having an agent that's purpose built to do work that you do every single day. and when they see the difference in that experience, they go, I now understand how this is different, right? And so they're starting to adopt more and more of that and they're starting to think about how do I put this in the hands of more and more of my people.

Rishi (50:11)
Yeah, the audit log and traceability is so important with these agents as well.

Kris Lengieza (50:16)
Mm-hmm. Yeah.

Rishi (50:18)
And if someone's doing, let's say, a claude account by themselves on the site, it's suddenly a lot of this visibility is gone.

Kris Lengieza (50:27)
Well, not only that, but the the data sprawl.

Right? Where is your

Rishi (50:30)
Well…

Kris Lengieza (50:30)
data going? it's going out to other systems, is it proprietary? Should it be out there? you know, like you said, the audit log of what actions were taken by that agent. Is that related to you? Is it related to your agent? How do we know? Those are all the things that we think about very much and and why we have the agentic platform built into Procore. Is so you have all those things, right? You don't have to take the data anywhere else. We already have it all. and so that's that's a a very topical conversation.

for a lot of our customers.

Rishi (50:59)
It's a good place for us to stop. Kris, thank you for coming onto the show.

Kris Lengieza (51:03)
Absolutely appreciate it. Thank you for having me.