Ron Wallace, IBM, USA
Ron Wallace, IBM Tivoli’s utilties industry marketing manager
A ‘perfect storm’ of daunting proportions is bearing down on utility companies: assets are aging; the workforce is aging; and legacy information technology (IT) systems are becoming an impediment to efficiency improvements. This article suggests a three-pronged strategy to meet the challenges posed by this triple threat. By implementing best practices in the areas of business process management (BPM), system consolidation and IT service management (ITSM), utilities can operate more efficiently and profitably, while addressing their aging infrastructure and staff.
In a recent speech, the chief information officer (CIO) of one of North America’s largest integrated gas and electric utilities said, “information technology is a key to future growth and will provide us with a sustainable competitive advantage.” The quest by utilities to improve shareholder and customer satisfaction has led many CIOs to reach this same conclusion: nearly all of their efforts to reduce the costs of managing assets depend on information management.
Echoing this observation, a survey of utility CIOs showed that the top business issue in the industry was the need to improve BPM1. It is easy to see why. BPM enables utilities to capture, propagate and evolve asset management best practices while maintaining alignment between work processes and business goals. For most companies, the standardized business processes associated with BPM drive work and asset management activities, and bring a host of competitive advantages, including improvements in risk management, revenue generation and customer satisfaction.
Standardized business processes also allow management to more successfully implement business transformation in an environment that may include workers acquired in a merger, workers nearing retirement and new workers of any age. BPM also helps enforce a desirable culture change by creating an adaptive enterprise where agility, flexibility and top-to-bottom alignment of work processes with business goals drive the utility’s operations.
These work processes need to be flexible so management can quickly respond to the next bump in the competitive landscape. Using standard work processes drives desired behaviour across the organization, while promoting the capture of asset-related knowledge held by many long-term employees. Utility executives also depend on technology-based BPM to improve processes for managing assets.
This allows them to reduce staffing levels without affecting worker safety, system reliability or customer satisfaction. These processes, when standardized and enforced, result in common work practices throughout the organization, regardless of region or business unit. BPM can thus yield an integrated set of applications that can be deployed in a pragmatic manner to improve work processes, meet regulatory requirements and reduce total cost of ownership (TCO) of assets.
Although the terms ‘business process management’ and ‘work flow’ are often used synonymously à‚— and are indeed related à‚— they refer to distinctly different things. BPM is a strategic activity undertaken by an organization looking to standardize and optimize business processes, whereas work flow refers to IT solutions that automate processes à‚— for example, solutions that support the execution phase of BPM.
There are a number of core BPM capabilities that, although individually important, are even more powerful than the sum of their parts when leveraged together. Combined, they provide a powerful solution to standardize, execute, enforce, test and continuously improve asset management business processes. These capabilities include: support for local process variations within a common process model; visual design tools; revision management of process definitions; web services interaction with other solutions; XML-based process and escalation definitions; event-driven user interface interactions; component-based definition of processes and sub-processes; and single engine supporting push-based (work flow) and polling-based (escalation) processes.
Since BPM supports knowledge capture from experienced employees, what is the relationship between BPM and knowledge management? Research has shown that the best way to capture knowledge that resides in workers’ heads into some type of system is to transfer the knowledge to systems they already use. Work and asset management systems hold job plans, operational steps, procedures, images, drawings and other documents.
These systems are also the best place to put information required to perform a task that an experienced worker ‘just knows’ how to do. By creating appropriate work flows in support of BPM, workers can be guided through a ‘debriefing’ stage, where they can review existing job plans and procedures, and look for tasks not sufficiently defined to be performed without the tacit knowledge learned through experience.
Then, the procedure can be flagged for additional input by a knowledgeable craftsperson. This same approach can even help ensure the success of the debriefing application itself, since BPM tools by definition allow guidance to be built in by creating online help or by enhancing screen text to explain the next step.
System consolidation needs to involve more than simply combining applications. For utilities, system consolidation efforts ought to focus on making systems agile enough to support near real-time visibility into critical asset data. This agility will yield transparency across lines of business on the one hand, and satisfy regulators and customers on the other. To achieve this level of transparency, utilities have an imperative to enforce a modern enterprise architecture that supports service-oriented architectures (SOAs) and also BPM. Done right, system consolidation allows utilities to create a framework supporting three key business areas: optimization of both human and physical assets; standardization of processes, data and accountability; and flexibility to change and adapt to what is next.
The Need for Consolidation
Many utility transmission and distribution (T&D) divisions exhibit this need for consolidation. Over time, the business operations of many of these divisions have introduced different systems to support a perceived immediate need à‚— without considering similar systems that may already be implemented within the utility.
Eventually, the business finds it owns three different ‘stacks’ of systems managing assets, work assignments and mobile workers à‚— one for short-cycle service work, one for construction and still another for maintenance and inspection work. With these systems in place, it is nearly impossible to implement productivity programmes, such as cross-training field crews in both construction and service work, or to take advantage of a ‘common work queue’ that would allow workers to fill open time slots without returning to their regional service centre.
In addition, owning and operating these ‘siloed’ systems adds significant IT costs, as each one has annual maintenance fees, integration costs, yearly application upgrades and retraining requirements. In such cases, using one system for all work and asset management would eliminate multiple applications and deliver bottom-line operational benefits: more productive workers, more reliable assets and technology cost savings.
One large Midwestern utility in the US adopting the system consolidation approach was able to standardize on six core applications: work and asset management, financials, document management, geographic information systems (GIS), scheduling and mobile workforce management. The asset management system alone was able to consolidate more than 60 legacy applications.
In addition to the obvious cost savings they provide, consolidated asset management systems are better able to address operational risk, worker health and safety, and regulatory compliance à‚— both operational and financial à‚— making utilities more competitive. A related benefit of system consolidation concerns the elimination of rogue ‘pop-up’ applications. These are niche applications, often spreadsheets or stand alone databases, which pop-up throughout an organization on engineers’ desktops. Many of these applications perform critical rolls in regulatory compliance yet are unlikely to pass muster at any Sarbanes-Oxley review.
Typically, these pop-up applications are built to fill a ‘functionality gap’ in existing legacy systems. Using an asset management system with a standards-based platform allows utilities to roll these pop-up applications directly into their standard, supported work and asset management system. Employees must interact with many systems in a typical day.
How productive is the maintenance electrician who uses one system for work management, one for ordering parts and yet another for reporting his or her time at the end of a shift? Think of the time wasted navigating three distinct systems with different user interfaces, and the duplication of data that unavoidably occurs.
How much more efficient would it be if the maintenance electrician was able to use one system that supported all of his or her work requirements? A logical grouping of systems clearly enables all workers to leverage information technology to be more efficient and effective. Today, using modern, standards-based technologies like SOAs, utilities can eliminate the counter-productive mix of disparate commercial and ‘home-grown’ systems.
Automated processes can be delivered as web services, allowing asset and service management to be included in the enterprise application portfolio, joining the ranks of human resources, finance and other business-critical applications. But although system consolidation in general is a good thing, there is a tipping point where consolidating simply for the sake of consolidation no longer provides a meaningful return, and can actually erode savings and productivity gains.
A system consolidation strategy should centre on core competencies. For example, accountants or doctors are both skilled service professionals. But their similarity at that high level does not mean you would trade one for the other just to consolidate the bills you receive and cheques you have to write. You do not want accountants reading your X-rays. The same is true for your systems’ needs. Your organization’s accounting or human resources software does not possess the unique capabilities to help you manage your mission-critical T&D, facilities, vehicle fleet or IT assets. Hence it is unwise to consolidate these mission-critical systems.
System consolidation strategically aligned with business requirements offers huge opportunities for improving productivity and eliminating IT costs. It also improves an organization’s agility and reverses the historical drift toward niche systems by providing appropriate systems for critical roles and stakeholders within the organization.
IT SERVICE MANAGEMENT
IT Service Management (ITSM) is critical to helping utilities deal with aging assets, infrastructure and employees primarily because ITSM enables companies to surf the accelerating trend of asset management convergence instead of falling behind more nimble competitors.
Used in combination with pragmatic BPM and system consolidation strategies, ITSM can help utilities exploit the opportunities that this trend presents. Three key factors are driving the convergence of management processes across IT assets (PCs, servers, etc.) and operational assets (the systems and equipment through which utilities deliver service).
The first concerns corporate governance, whereby corporate-wide standards and policies are forcing operational units to rethink their use of siloed technologies and are paving the way for new, more integrated investments.
Second, utilities are realizing that to deal with their aging assets, workforce and systems dilemmas, they must increase their investments in advanced information and engineering technologies.
Finally, the functional boundaries between the IT and operational assets themselves are blurring beyond recognition as more and more equipment utilizes on-board computational systems and is linked over the network via IP addresses. Utilities need to understand this growing interdependency among assets, including the way individual assets affect service to the business and the requirement to provide visibility into asset status in order to properly address questions relating to risk management and compliance.
Corporate Governance Fuels a Cultural Shift
The convergence of IT and operational technology is changing the relationship between the formerly separate operational and IT groups. The operational units are increasingly relying on IT to help deal with their ‘aging trilogy’ problem, as well as to meet escalating regulatory compliance demands and customers’ reliability expectations.
In the past, operating units purchased advanced technology, such as advanced metering or substation automation systems on an as-needed basis, unfettered by corporate IT policies and standards. In the process, they created multiple silos of non-standard, non-integrated systems. But now, as their dependence on IT grows, corporate governance policies are forcing operating units to work within IT’s framework.
Utilities cannot afford the liability and maintenance costs of non-standard, disparate systems scattered across their operational and IT efforts. This growing dependence on IT has thus created a new cultural challenge.
A study by Gartner of the interactions among IT and operational technology highlights this challenge. It found that “to improve agility and achieve the next level of efficiencies, utilities must embrace technologies that will enable enterprise application access to real-time information for dynamic optimization of business processes.
On the other hand, lines of business (LOB) will increasingly rely on IT organizations because IT is pervasively embedded in operational and energy technologies, and because standard IT platforms, application architecture and communication protocols are gaining wider acceptance by OT [operational technology] vendors.”2
In fact, an Information Week article warned that this cultural shift could result in operational conflict if not dealt with. Nathan Bennett and Stephen Miles wrote, “Companies that look to the IT department to bring a competitive edge and drive revenue growth may find themselves facing an unexpected roadblock: their CIO and COO are butting heads.” As IT assumes more responsibility for running a utility’s operations, the roles of the CIO and the COO will increasingly converge.
What Is an IT Asset, Anyhow?
An important reason for this shift is the changing nature of the assets themselves, as mentioned previously. Consider the question: “What is an IT asset?” In the past, most people would say that this referred to things like PCs, servers, networks and software, but what about a smart meter? It has firmware that needs updates; it resides on a wired or wireless network; and it has an IP address. In an intelligent utility network (lUN), this is also true of substation automation equipment and other field-located equipment.
The same is true for plant-based monitoring and control equipment. Today, if a smart device fails, do you send a mechanic or an IT technician? This question underscores why IT asset and service management will play an increasingly important role in a utility’s operations. Utilities will certainly be using more complex technology to operate and maintain assets in the future. Electronic monitoring of asset health and performance based on conditions such as meter or sensor readings, and state changes can dramatically improve asset reliability.
Remote monitoring agents à‚— from third-party condition monitoring vendors or original equipment manufacturers (OEMs) of highly specialized assets à‚— can help analyze the increasingly complex assets being installed today, as well as optimize preventive maintenance and resource planning. Moreover, utilities will increasingly rely on advanced technology to help them overcome the challenges of their aging assets, workers and systems.
For example, as noted above, advanced IT will be needed to capture the tacit knowledge of experienced workers, as well as replace some manual functions with automated systems. Inevitably, operational units will become technology-driven organizations, heavily dependent on the automated systems and processes associated with IT asset and service management.
The good news for utilities is that a playbook of sorts is available that can help them chart the IT5M waters in the future. The de facto global standard for best practices process guidance in IT5M is the IT Infrastructure Library (lTIL), which IT organizations can adopt to support their utility’s business goals. ITIL-based processes can help utilities better manage IT changes, assets, staff and service levels.
ITIL extends beyond simple management of asset and service desk activities, creating a more proactive organization that can reduce asset failures, improve customer satisfaction and cut costs. Key components of ITIL best practices include configuration, problem, incident, change and service-level management activities.
Implemented together, IT5M best practices as embodied in ITIL can help utilities better align asset health and performance with the needs of the business, and improve risk and compliance management. It can also improve operational excellence, reduce the cost of infrastructure support services, capture tactical knowledge from an aging workforce, utilize BPM concepts, and more effectively leverage their intelligent assets.
GOOD ENOUGH ISN’T GOOD ENOUGH
The perfect storm brought about by aging assets, an aging workforce and legacy IT systems is challenging utilities in ways many have never experienced. The current, fragmented approach to managing assets and services has been a ‘good enough’ solution for most utilities until now. But good enough isn’t good enough anymore, since this fragmentation often has led to siloed systems and organizational ‘blind spots’ that compromise business operations and could lead to regulatory compliance risks.
The convergence of IT and operational technology, with its attendant convergence of asset management processes, represents a challenging cultural change; however, it is a change that can ultimately confer benefits for utilities. These benefits include not only improvements to the bottom line, but also improvements in the agility of the operation and its ability to control risks and meet compliance requirements associated with asset and service management activity.
To help weather the coming perfect storm, utilities can implement best practices in three key areas: BPM technology can help utilities capture and propagate asset management best practices to mitigate the looming ‘brain drain’ and improve operational processes. Judicious system consolidation can improve operational efficiency and eliminate legacy systems that are burdening the business. IT5M best practices as exemplified by ITIL can streamline the convergence of IT and operational assets, while supporting a positive cultural shift to help operational business units integrate with IT activities and standards.
Best-practices management of all critical assets based on these guidelines will help utilities facilitate the visibility, control and standardization required to continuously improve today’s power generation and delivery environment.
1. Gartner’s 2006 CIO Agenda Survey.
2. Bradley Williams, Zarko Sumic, James Spiers & Kristian Steenstrup, ‘IT and OT Interaction: Why Conflict Resolution Is Important,’ Gartner Industry Research, 15 September 2006.