Utility companies face a triple threat of aging assets, an aging workforce and legacy IT systems. The solution to these threats is a triple antidote of business process management, system consolidation and IT service management.
During the keynote address at a recent Utilities Technology Conference, the CIO for one of the largest integrated gas and electric utilities in North America said, “Information Technology is a key to future growth and will provide us with a sustainable competitive advantage.” The quest to improve shareholder and customer satisfaction has lead many CIOs to reach this same conclusion – nearly all efforts to reduce costs, improve business processes and overall return on assets, both physical and human, depend on IT.
Today key business drivers include regulatory compliance, operational efficiency, aging assets and an aging workforce. Increased regulatory compliance stems from cyber security, physical security and reliability concerns affecting grid integrity, emissions, safety, and, new governance and accounting requirements. Reliability is closely linked to work and asset management in response to blackouts in 2003.
Utility industry brain drain
Aging assets and the aging workforce are also linked to technology as aging infrastructure is replaced with more technically sophisticated equipment, all capable of remote sensing and, in some cases, self diagnosis. To reduce costs, utilities need to capture the processes that long-time employees have in their heads and add these processes to business process automation tools.
The aging workforce is not an imaginary issue. According to the Bureau of Labor Statistics, the median age of utility workers is second only to workers in the oil & gas industry. The problem is further magnified by a preponderance of employees in the 45-54 year old categories. The workforce that grew up with the utility is rapidly reaching retirement age. By 2010 approximately 50% of utility workers are expected to retire. To make matters worse, utilities have instituted a number of programs to reduce staff, including early retirement incentives or layoffs.
Another study has shown that an exodus of professional staff won’t be filled in key areas. Gas utility employment is projected to be down 6.2% and electric utility employment down 9.2% by 2010; coupled with a downward trend of about 10% for electric and nuclear engineers. The utility industry is especially sensitive to engineering and technical positions, as well as operations and maintenance personnel since the use of less skilled workers can impact key performance indicators, especially for safety and reliability. This “brain drain” has created the need to move business processes that are in the heads of workers into IT systems so the knowledge is preserved.
Aging assets
The workforce isn’t the only aging concern in the industry. The U.S. Department of Energy reported in 2002 that the U.S. transmission system is in urgent need of modernization. The system has become congested because electricity demand keeps growings while investment in new generation facilities has not been matched by investment in new transmission facilities. Transmission problems have been compounded by the incomplete transition to fair, efficient and competitive wholesale electricity markets. Because the existing transmission system was not designed to meet present demand, daily transmission bottlenecks increase electricity costs to consumers and increase the risk of blackouts.
According to the Electric Power Research Institute, industry needs to invest $180 billion over the next 20 years on load growth, upgrading transmission lines and building the “system of the future” using new technologies to greatly improve grid reliability and provide a stable electric supply for future economic growth. And another $123 billion is needed to build out the distribution system.
A 2005 American Society of Civil Engineers report also confirmed the U.S. power transmission system is in urgent need of modernization. Despite increased demand, transmission capacity has decreased. In addition, maintenance expenditures have decreased one percent annually since 1992. In 2002, the Department of Energy stated that the existing transmission system was not designed to meet present demand, which could result in increased electricity costs to consumers and greater risk of blackouts. The August 2003 blackout cost billions of dollars in lost productivity and revenues.
The bottom line: Aging workforce and aging assets are real headaches and many utilities are counting on new information technology deployments to make workers more efficient and productive and make assets more reliable, safe and affordable.
Business Process Management
The key to solving this dilemma is to have an adaptive enterprise where agility, flexibility and top-to-bottom alignment of work processes to business goals are a core value. These processes need to be flexible so management can quickly respond to the next bump in the competitive landscape. Using standard work processes will drive desired behavior across the organization and promote the capture of asset knowledge held by many long-term employees.
A recent survey of CIOs by a leading IT research firm showed the top business issue in the utility industry was improving business processes. it is easy to see why. For most companies, business processes driving work and asset management activities are the source of the competitive advantage: risk management, revenue generation, and customer satisfaction. Standardized business processes allow management to successfully implement business transformation in an environment which may include workers acquired in a merger, workers near retirement and new workers regardless of age.
Utility executives are depending on technology-based business process management (BPM) to improve processes that allow reduced staffing levels without affecting worker safety, system reliability or customer satisfaction. These standardized and enforced processes result in common work practices throughout the organization, regardless of region or business unit. BPM, used in conjunction with system consolidation, yields an integrated set of applications that can be deployed in a rational way to improve work processes, meet regulatory requirements and reduce total cost of ownership.
How is business process management defined? BPM and workflow are often used synonymously, and while they are related, they are also distinctly different. BPM is a strategic activity for an organization looking to standardize and optimize business processes; whereas workflow is the IT solution to automate processes or the execution phase of business process management.
There are a number of core BPM capabilities that are individually strong. But when grouped together they form a solution that provides a powerful way to standardize, execute, enforce, test and continuously improve asset management business processes.
The eight capabilities are:
• Support for local process variations within a common process model
• Visual design tool
• 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
• Single engine supporting push-based (workflow) and polling-based (escalation) processes
What is the relationship between BPM and knowledge management? Research has shown the best way to capture knowledge in a worker’s head 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. It is also the best place to put information required to perform a task an experience worker “just knows” how to do. With workflow and BPM, workers can be guided through a de-brief stage, where they can review existing job plans and procedures, and look for tasks not defined sufficiently to perform without the tacit knowledge the worker holds in his head. Then the procedure can be flagged for additional input by a knowledgeable craftsman. The same is true for the application itself, since the BPM tools will allow guidance to be built in with online help, or addition text to explain the next step.
System Consolidation
System consolidation is especially attractive to T&D utilities because they often have several similar, but different, systems for asset management, work management and mobile workforce management. When it comes to maximizing ROI from work and asset management software systems, using one system for all work and asset management needs delivers three money-saving benefits: productivity gains in workforce, greater asset reliability and lower total cost of ownership of the technology itself. Software systems enable organizations to improve upon current operations to: reduce cost, improve revenue generation, mitigate risk, manage regulatory compliance, and maintain a competitive edge. Bottom line: consolidated asset management systems make utilities more competitive.
One form of system consolidation involves reviewing the typical asset life cycle; i.e., where assets are engineered, constructed, operated and maintained. It’s not uncommon to use two or three work and asset management systems across the life cycle. So simply moving all these applications to one platform would achieve system consolidation. However, this is just the beginning.
Consolidating applications can yield significant savings. If an organization can operate better with fewer systems and resources, everyone wins. Yet, consolidating simply for the sake of consolidation can be a no-win situation. In fact, there is a tipping point where consolidation no longer provides a meaningful return and can actually erode savings and productivity gains.
The most important part of a consolidation strategy is for the organization to understand the business processes utilized throughout, and which systems are managing those processes. Once understood, they can analyze the consolidation plans to ensure they are rational, while grouping domain expertise and like business processes. In the end, this strategy becomes a balancing act between operational excellence and system consolidation.
Overshadowed by recent focus on revenue growth and profitability, asset management has often been undermined by the lack of a single, organization-wide system capable of managing a diverse asset base. But, with cost-effective, standards-based technologies now entering the mainstream, organizations can turn to asset and service management systems to eliminate the counter-productive disparate commercial and “home-grown” systems. In essence, asset and service management is joining the enterprise application portfolio. The solution unites business processes across organizational lines where critical assets have historically been fragmented
A system consolidation strategy improves operational efficiency, lowers total cost of ownership and enables agility. Consider how many systems the average employee might touch during a typical day. Consider the maintenance mechanic 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? Imagine the time spent if these were three distinct systems with differing user interfaces, and the duplication of data that must occur. Imagine a streamlined process in which the mechanic utilizes one system that supports the deliverables and objectives set forth by their work requirements. A rational grouping of systems clearly enables all workers leveraging information technology to be more efficient and effective.
To understand lower TCO, consider how much it costs a company to maintain the three systems vs. one. Take into account maintenance fees, upgrade costs, integration costs and IT efficiency. IT departments can improve their service and likely lower their costs of doing so via a system consolidation program; provided they perform the balancing act of lowering cost of ownership while respecting the needs of the business (do not exceed the tipping point).
To improve agility, apply technology to create competitive advantage; finding the right pieces at the right time. A system consolidation program can move you towards an agile IT infrastructure, based upon standards, that will support the business better by providing a streamlined and integrated set of rational systems, coupled with a likely decrease in investment requirements.
In the earlier system consolidation example, the asset life cycle was consolidated, but there are additional opportunities at most utilities. In a vertical integrated utility, it’s possible to use a common platform for T&D assets, generation facilities, vehicle fleets, regional distribution centers and IT assets.
And, finally, system consolidation can help eliminate the plethora of niche or rogue applications that “pop up” throughout an organization on engineers’ desktops, in spreadsheets, or stand alone database. Typically, these applications are built to resolve a critical requirement or regulation where it would be too difficult to incorporate this functionality into the existing legacy systems. Using an asset management system with a modern, standards-based platform allows utilities to roll these “rogue” applications directly into their work and asset management.
A system consolidation strategy should center on core competency. To use an everyday example, accountants or dentists are both well-educated, competent service professionals. But just because they share those traits doesn’t mean you would trade one for the other just to “consolidate” the bills you receive and the checks you have to write. Think about their processes and the services they provide. You don’t want accountants filling your cavity. The same is true for your systems’ needs. Your organization’s accounting or human resource software does not possess the unique capabilities to help you manage your mission-critical transmission and distribution, facilities, vehicle fleet or IT assets.
Consolidating systems offers huge opportunities for gains in productivity, elimination of cost from the IT budget, and certainly improves an organization’s agility. It eliminates the historical drift towards stovepipe or niche systems by providing appropriate systems for critical roles and stakeholders within the organization. In effect, grouping like business processes and utilizing rational suites to eliminate duplication, waste and false prioritization due to lack of visibility, training requirements, and a host of other activities can avoid wasting critical resources like time and money.
Information Technology Service Management
The cornerstone of IT Service Management is the IT Infrastructure Library (ITIL), which refers to a set of comprehensive, consistent and coherent codes of best practice for Information Technology Service Management (ITSM). The objective for developing ITSM is to increase the business effectiveness of the Information Technology (IT) organization, while maintaining or improving IT services. The ITIL concepts provide a structure for service-oriented best practices. They are used as a benchmark for organizations attempting to measure the quality of ITSM. Key components of the ITIL best practices include configuration management, incident management, problem management, change management and service level management.
• Configuration Management is the process of identifying, recording and reporting on all IT components.
• Incident Management is the process of restoring normal service operation as quickly as possible in order to minimize the adverse impact on business operations.
• Problem Management is the process of minimizing the adverse impact of incidents and problems caused by errors in the organization’s infrastructure on the business, and to prevent recurrence of incidents related to these errors.
• Change Management is the process of ensuring that standardized methods and procedures are used for efficient and prompt handling of all changes—the goal being to minimize the risk of change- related incidents and improve day-to-day operations.
• Service Level Management is the process of maintaining and improving service quality through a constant cycle of agreeing, monitoring and reporting to meet the customers’ business objectives. Successful Service Level Management depends upon the planning and implementation of service level agreements (SLAs); essentially contracts between business units or the organization and its customers, which guarantee a service deliverable in quantitative terms.
Let’s face it: your utility is going to be using more complex technology-based systems to operate and maintain assets today and into the future. None of these systems stands alone and to gain the most advantage from your business systems it is strategically imperative that you deploy an IT service management system whose mission is to keep your mission-critical business and operational systems up and running. This should be part of your strategy, because only by cost effectively maintaining these new technology-based systems will you be able to recognize the benefits that your need to bring to the bottom line.
During the keynote address at a recent Utilities Technology Conference, the CIO for one of the largest integrated gas and electric utilities in North America said, “Information Technology is a key to future growth and will provide us with a sustainable competitive advantage.” The quest to improve shareholder and customer satisfaction has lead many CIOs to reach this same conclusion – nearly all efforts to reduce costs, improve business processes and overall return on assets, both physical and human, depend on IT.
Today key business drivers include regulatory compliance, operational efficiency, aging assets and an aging workforce. Increased regulatory compliance stems from cyber security, physical security and reliability concerns affecting grid integrity, emissions, safety, and, new governance and accounting requirements. Reliability is closely linked to work and asset management in response to blackouts in 2003.
Utility industry brain drain
Aging assets and the aging workforce are also linked to technology as aging infrastructure is replaced with more technically sophisticated equipment, all capable of remote sensing and, in some cases, self diagnosis. To reduce costs, utilities need to capture the processes that long-time employees have in their heads and add these processes to business process automation tools.
The aging workforce is not an imaginary issue. According to the Bureau of Labor Statistics, the median age of utility workers is second only to workers in the oil & gas industry. The problem is further magnified by a preponderance of employees in the 45-54 year old categories. The workforce that grew up with the utility is rapidly reaching retirement age. By 2010 approximately 50% of utility workers are expected to retire. To make matters worse, utilities have instituted a number of programs to reduce staff, including early retirement incentives or layoffs.
Another study has shown that an exodus of professional staff won’t be filled in key areas. Gas utility employment is projected to be down 6.2% and electric utility employment down 9.2% by 2010; coupled with a downward trend of about 10% for electric and nuclear engineers. The utility industry is especially sensitive to engineering and technical positions, as well as operations and maintenance personnel since the use of less skilled workers can impact key performance indicators, especially for safety and reliability. This “brain drain” has created the need to move business processes that are in the heads of workers into IT systems so the knowledge is preserved.
Aging assets
The workforce isn’t the only aging concern in the industry. The U.S. Department of Energy reported in 2002 that the U.S. transmission system is in urgent need of modernization. The system has become congested because electricity demand keeps growings while investment in new generation facilities has not been matched by investment in new transmission facilities. Transmission problems have been compounded by the incomplete transition to fair, efficient and competitive wholesale electricity markets. Because the existing transmission system was not designed to meet present demand, daily transmission bottlenecks increase electricity costs to consumers and increase the risk of blackouts.
According to the Electric Power Research Institute, industry needs to invest $180 billion over the next 20 years on load growth, upgrading transmission lines and building the “system of the future” using new technologies to greatly improve grid reliability and provide a stable electric supply for future economic growth. And another $123 billion is needed to build out the distribution system.
A 2005 American Society of Civil Engineers report also confirmed the U.S. power transmission system is in urgent need of modernization. Despite increased demand, transmission capacity has decreased. In addition, maintenance expenditures have decreased one percent annually since 1992. In 2002, the Department of Energy stated that the existing transmission system was not designed to meet present demand, which could result in increased electricity costs to consumers and greater risk of blackouts. The August 2003 blackout cost billions of dollars in lost productivity and revenues.
The bottom line: Aging workforce and aging assets are real headaches and many utilities are counting on new information technology deployments to make workers more efficient and productive and make assets more reliable, safe and affordable.
Business Process Management
The key to solving this dilemma is to have an adaptive enterprise where agility, flexibility and top-to-bottom alignment of work processes to business goals are a core value. These processes need to be flexible so management can quickly respond to the next bump in the competitive landscape. Using standard work processes will drive desired behavior across the organization and promote the capture of asset knowledge held by many long-term employees.
A recent survey of CIOs by a leading IT research firm showed the top business issue in the utility industry was improving business processes. it is easy to see why. For most companies, business processes driving work and asset management activities are the source of the competitive advantage: risk management, revenue generation, and customer satisfaction. Standardized business processes allow management to successfully implement business transformation in an environment which may include workers acquired in a merger, workers near retirement and new workers regardless of age.
Utility executives are depending on technology-based business process management (BPM) to improve processes that allow reduced staffing levels without affecting worker safety, system reliability or customer satisfaction. These standardized and enforced processes result in common work practices throughout the organization, regardless of region or business unit. BPM, used in conjunction with system consolidation, yields an integrated set of applications that can be deployed in a rational way to improve work processes, meet regulatory requirements and reduce total cost of ownership.
How is business process management defined? BPM and workflow are often used synonymously, and while they are related, they are also distinctly different. BPM is a strategic activity for an organization looking to standardize and optimize business processes; whereas workflow is the IT solution to automate processes or the execution phase of business process management.
There are a number of core BPM capabilities that are individually strong. But when grouped together they form a solution that provides a powerful way to standardize, execute, enforce, test and continuously improve asset management business processes.
The eight capabilities are:
• Support for local process variations within a common process model
• Visual design tool
• 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
• Single engine supporting push-based (workflow) and polling-based (escalation) processes
What is the relationship between BPM and knowledge management? Research has shown the best way to capture knowledge in a worker’s head 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. It is also the best place to put information required to perform a task an experience worker “just knows” how to do. With workflow and BPM, workers can be guided through a de-brief stage, where they can review existing job plans and procedures, and look for tasks not defined sufficiently to perform without the tacit knowledge the worker holds in his head. Then the procedure can be flagged for additional input by a knowledgeable craftsman. The same is true for the application itself, since the BPM tools will allow guidance to be built in with online help, or addition text to explain the next step.
System Consolidation
System consolidation is especially attractive to T&D utilities because they often have several similar, but different, systems for asset management, work management and mobile workforce management. When it comes to maximizing ROI from work and asset management software systems, using one system for all work and asset management needs delivers three money-saving benefits: productivity gains in workforce, greater asset reliability and lower total cost of ownership of the technology itself. Software systems enable organizations to improve upon current operations to: reduce cost, improve revenue generation, mitigate risk, manage regulatory compliance, and maintain a competitive edge. Bottom line: consolidated asset management systems make utilities more competitive.
One form of system consolidation involves reviewing the typical asset life cycle; i.e., where assets are engineered, constructed, operated and maintained. It’s not uncommon to use two or three work and asset management systems across the life cycle. So simply moving all these applications to one platform would achieve system consolidation. However, this is just the beginning.
Consolidating applications can yield significant savings. If an organization can operate better with fewer systems and resources, everyone wins. Yet, consolidating simply for the sake of consolidation can be a no-win situation. In fact, there is a tipping point where consolidation no longer provides a meaningful return and can actually erode savings and productivity gains.
The most important part of a consolidation strategy is for the organization to understand the business processes utilized throughout, and which systems are managing those processes. Once understood, they can analyze the consolidation plans to ensure they are rational, while grouping domain expertise and like business processes. In the end, this strategy becomes a balancing act between operational excellence and system consolidation.
Overshadowed by recent focus on revenue growth and profitability, asset management has often been undermined by the lack of a single, organization-wide system capable of managing a diverse asset base. But, with cost-effective, standards-based technologies now entering the mainstream, organizations can turn to asset and service management systems to eliminate the counter-productive disparate commercial and “home-grown” systems. In essence, asset and service management is joining the enterprise application portfolio. The solution unites business processes across organizational lines where critical assets have historically been fragmented
A system consolidation strategy improves operational efficiency, lowers total cost of ownership and enables agility. Consider how many systems the average employee might touch during a typical day. Consider the maintenance mechanic 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? Imagine the time spent if these were three distinct systems with differing user interfaces, and the duplication of data that must occur. Imagine a streamlined process in which the mechanic utilizes one system that supports the deliverables and objectives set forth by their work requirements. A rational grouping of systems clearly enables all workers leveraging information technology to be more efficient and effective.
To understand lower TCO, consider how much it costs a company to maintain the three systems vs. one. Take into account maintenance fees, upgrade costs, integration costs and IT efficiency. IT departments can improve their service and likely lower their costs of doing so via a system consolidation program; provided they perform the balancing act of lowering cost of ownership while respecting the needs of the business (do not exceed the tipping point).
To improve agility, apply technology to create competitive advantage; finding the right pieces at the right time. A system consolidation program can move you towards an agile IT infrastructure, based upon standards, that will support the business better by providing a streamlined and integrated set of rational systems, coupled with a likely decrease in investment requirements.
In the earlier system consolidation example, the asset life cycle was consolidated, but there are additional opportunities at most utilities. In a vertical integrated utility, it’s possible to use a common platform for T&D assets, generation facilities, vehicle fleets, regional distribution centers and IT assets.
And, finally, system consolidation can help eliminate the plethora of niche or rogue applications that “pop up” throughout an organization on engineers’ desktops, in spreadsheets, or stand alone database. Typically, these applications are built to resolve a critical requirement or regulation where it would be too difficult to incorporate this functionality into the existing legacy systems. Using an asset management system with a modern, standards-based platform allows utilities to roll these “rogue” applications directly into their work and asset management.
A system consolidation strategy should center on core competency. To use an everyday example, accountants or dentists are both well-educated, competent service professionals. But just because they share those traits doesn’t mean you would trade one for the other just to “consolidate” the bills you receive and the checks you have to write. Think about their processes and the services they provide. You don’t want accountants filling your cavity. The same is true for your systems’ needs. Your organization’s accounting or human resource software does not possess the unique capabilities to help you manage your mission-critical transmission and distribution, facilities, vehicle fleet or IT assets.
Consolidating systems offers huge opportunities for gains in productivity, elimination of cost from the IT budget, and certainly improves an organization’s agility. It eliminates the historical drift towards stovepipe or niche systems by providing appropriate systems for critical roles and stakeholders within the organization. In effect, grouping like business processes and utilizing rational suites to eliminate duplication, waste and false prioritization due to lack of visibility, training requirements, and a host of other activities can avoid wasting critical resources like time and money.
Information Technology Service Management
The cornerstone of IT Service Management is the IT Infrastructure Library (ITIL), which refers to a set of comprehensive, consistent and coherent codes of best practice for Information Technology Service Management (ITSM). The objective for developing ITSM is to increase the business effectiveness of the Information Technology (IT) organization, while maintaining or improving IT services. The ITIL concepts provide a structure for service-oriented best practices. They are used as a benchmark for organizations attempting to measure the quality of ITSM. Key components of the ITIL best practices include configuration management, incident management, problem management, change management and service level management.
• Configuration Management is the process of identifying, recording and reporting on all IT components.
• Incident Management is the process of restoring normal service operation as quickly as possible in order to minimize the adverse impact on business operations.
• Problem Management is the process of minimizing the adverse impact of incidents and problems caused by errors in the organization’s infrastructure on the business, and to prevent recurrence of incidents related to these errors.
• Change Management is the process of ensuring that standardized methods and procedures are used for efficient and prompt handling of all changes—the goal being to minimize the risk of change- related incidents and improve day-to-day operations.
• Service Level Management is the process of maintaining and improving service quality through a constant cycle of agreeing, monitoring and reporting to meet the customers’ business objectives. Successful Service Level Management depends upon the planning and implementation of service level agreements (SLAs); essentially contracts between business units or the organization and its customers, which guarantee a service deliverable in quantitative terms.
Let’s face it: your utility is going to be using more complex technology-based systems to operate and maintain assets today and into the future. None of these systems stands alone and to gain the most advantage from your business systems it is strategically imperative that you deploy an IT service management system whose mission is to keep your mission-critical business and operational systems up and running. This should be part of your strategy, because only by cost effectively maintaining these new technology-based systems will you be able to recognize the benefits that your need to bring to the bottom line.
