1 How well you focus… will determine your reality “Asset Management & Utility Automation at the...

1How well you focus… will determine your reality

“Asset Management & Utility Automation at the Crossroads”

The Evolution of Asset Management in Utility Automation/IT Markets

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2© 2004 InfoNetrix LLC All Rights Reserved Unauthorized reproduction or distribution of this document is expressly prohibited.

Presentation Contents

• Session Organization• Webcast Objectives• Topic Background• Speaker Introductions• Presentations• Question & Answer Session• Wrap-up


Session Organization

• 90-minute Session consists of: 3 featured presentations; 20-25 minutes each; 2

by InfoNetrix analysts; 1 guest speaker• Strategic Perspective by Mike Marullo• Tactical Perspective by Mike Smith• Guest Perspective by Roy Brandon

15-20 minute Q&A (Time permitting; can be extended via email chat after session ends)

Session Wrap-up


Webcast ObjectivesEducate • Stimulate • Relate

• Educate Explain topic in clear terms that can be

easily understood and interpreted Offer rudiments that can be used in

substantive, practical (actionable) ways Provide a basis for further understanding


• Stimulate Offer provocative concepts, ideas and

suggestions that can be applied to the activities of session participants in ways can deliver tangible results

Show how automation & IT can be used to meet specific market challenges and create business opportunities that are financially and technologically sound



• Relate Highlight ways to apply market intelligence

for practical use and applications Provide bridging paths from concepts to

actionable measures Build a foundation upon which specific

market entry (or expansion) strategies, tactics and action plans can be clearly formulated and executed



Today’s Topic

“Asset Management & Utility Automation at the Crossroads”

The Evolution of Asset Management in Utility Automation/IT Markets


Today’s Speakers

• Mike Marullo: Strategic Perspective InfoNetrix Co-founder & Principal-in-Charge of Strategic

Market Research & Development 30+ years industry experience

• Mike Smith: Tactical Perspective InfoNetrix Co-founder & Principal-in-Charge of Tactical

Market Research & Development 15+ years industry experience

• Roy Brandon: Guest Presentation Strategic Asset Management Client Relations Officer 25+ years industry experience

9

“Automation/IT and Asset Management Trends in North American Utility Markets”

Presented by Mike MarulloDirector-Strategic Market Research & Development

InfoNetrix LLCNew Orleans, LA

Strategic Perspective


Why A/M now?

• Aging infrastructure Assets nearing end of useful life Most are 35-50 years old (or more) Affects substantially all market sectors

• Electric power grid• Water mains & distribution lines• Roads, bridges, rail, telecommunications, etc.


Why A/M now?Continued

• Do more with less! Restructuring of electric and water utilities has introduced a

profit motive just as infrastructure is at its weakest point• Deregulation• Privatization• Consolidation

Besides pure cost-cutting measures, utilities are looking for operational efficiency and work force optimization

• CMMS (Computerized Maintenance Management Systems)

• Mobility & Field Force Automation


What changed?

• In the past 10 years: The utility view of automation has changed from a reactive,

expense posture to an increasingly pro-active, investment view Technology convergence and industry standardization have

blurred the lines among formerly segregated platforms Aging utility infrastructure is being pushed beyond traditional

safety and reliability limits by restructuring and demand evolution

Political & regulatory pressures on utilities to level the playing field and improve safety and reliability have substantially increased while investment has waned and infrastructure has fallen into disrepair

Customer service expectations are increasing even as utilities face new barriers to repair/replace/upgrade facilities


What are the choices?

• Build more generation? Not likely in time; not really the problem• Build more transmission? Takes too long; the problem is NOW!• Do Nothing? (Been there; done that!)• The result was at least somewhat predictable: 8-14-20038-14-2003

Largest blackout in US/Canadian history 50 million+ lost power for up to 38 hours


• Just repair the things that break? Most of the large transmission transformers, pumps/filters,

and other pieces of critical infrastructure equipment) are built outside North America

Procurement lead times for replacement of these assets can run from several months to several years

Utilities can no longer afford to keep excess inventory on hand in case of a catastrophic failure

The entire infrastructure is in decline, increasing the chances for multiple, simultaneous failures of critical infrastructure

The blackout caused outages but virtually no equipment damage; the next time we might not be so lucky!

What are the choices?(Continued)


• Monitor assets more frequently and more precisely Utility automation platforms are already in place at most

utilities but are under-utilized for various reasons:• Outdated (compartmentalized) budgeting process• Piecemeal approach to addressing “wholesale” problems• Automation viewed as a luxury rather than a necessity• Communications bandwidth limitations• Mounting security issues

Holistic solution sets need substance; not lip service Huge amounts of data collected are widely…

• Extensively unknown to the people who want it• Inaccessible to the people who need it• Access restricted by the people who have it

What are the choices?(Continued)


What’s on the horizon?

• Suppliers must understand the drivers and incentives Economic justification (It’s all about the money; get used to it!) Technology is not the barrier; make the business case Move the information to where it’s needed; when it’s

needed; in the form & format it’s needed• Utility view of automation must change

Automation saves time & money; it doesn’t just consume it Suppliers must become full partners in problem-solving to be

effective; internalized “spec & bid” practices are outdated There is no shortage of data; only information. We must all

get smarter about making the distinction between the two


What are the drivers?

• Critical assets first High value infrastructure Single mode of failure Weakest link Long repair/replacement period Those with limited support knowledge pool


Drivers (Cont’d)

• Infrastructure decay• Staff reductions & brain-drain• Non-operational data demands• Better information access for…

Reliability-centered maintenance (RCM) Condition-based monitoring (CBM) CMMS


The Funding Plan

• Key elements of the funding plan1. Holistic Budgeting Model (Automation + A/M)2. Business Case (ROI & CBA)3. Technology Strategy Plan, and…

Information Flows & Functions:Information Flows & Functions:Where it’s needed • When it’s needed • In the form it’s needed


And, finally…

• Business case Do the homework (What is really critical?) Do the math (ROI, Cost:Benefits Analysis, etc.)

• The Carrot and the Stick Show the benefits Know the consequences

• You can’t prove a negative! Use automation to show safety, efficiency and

cost savings Don’t try prove that something won’t happen

21

Next, Mike Smith will present a tactical market perspective …

InfoNetrix Advisory Services FocusPoints™FocusPoints™ Online Market Briefing

“Asset Management Impact on Automation/IT Spending in North American Utility Markets”

22

“Asset Management Impact on Automation/IT Spending in North American Utility Markets”

Presented by Mike SmithDirector-Tactical Market Research & Development

InfoNetrix LLCSacramento, CA

Tactical Perspective


Presentation Contents

• Asset Management Views• Traditional Platforms• IAS Program Scopes & Survey Results


Asset Management Views

• Perspectives on Asset Management from senior industry executives “Asset Management is the job of every person in

the utility, with the possible exception of a few people working in the billing department.”

- Executive of an Asset Management Software Company

“All of this SCADA data creates the basis for a utility to implement asset management.”

- Sr. Consultant with a leading IT Services Firm

What does all of this mean?


Asset Management Views (Cont’d)

• Asset Management is still emerging and evolving New suppliers are entering the market from other markets;

even other industries New solution/service offerings are being introduced

• “Traditional” solution suppliers repositioning offerings

• Increasing M&A activity will blend and borrow from various sources

• A “new” market is organizing and taking shape Absorbing pieces of existing (traditional) markets Creating new solution sets Nurturing a new generation of suppliers


Traditional Platforms

• Geospatial & Field Automation Solutions (GFAS) AM/FM/GIS Work Management Workforce Management Mobile Computing

• Real-time Automation & Controls (RTAC) SCADA EMS/DMS Field Data Devices

• Utility Customer Care Solutions (UCCS) CIS CRM Call Centers EBPP & Bill Print

• Computerized Maintenance Management Systems (CMMS) Focused primarily on the maintenance activities in the utility Starting point for many Water/Wastewater utilities


GFAS Program

• Includes IOUs, Munis, RECs & others Survey: 963 electric utility decision-makers

surveyed during program year Results: 314 systems projects valued at

$72 MM Plus:

• 174 Projects with a Mobile component, valued at $44 MM

• 200+ service projects valued at over $63 MM


GFAS Program(Continued)

• Asset Management Implications for GFAS Emphasis on leveraging significant GIS investments

• “We have built the system and created the data; now what?”

Work Management Implementations• WMS has evolved from managing large design projects to

Managing the Life Cycle of Assets Taking it to the Field…

• Migration of centralized applications into field applications• Workforce Management (Efficiency & Optimization)


ESRI41%

Intergraph3%

Enghouse3%

GE2%

Bentley1%

Other6%

AutoDesk44%

Leading Geospatial Platform Suppliers By Number of Projects

(Based on 677 Projects for US & Canadian Utilities with <100K Customers)

GFAS Program Results


AutoDesk20%

GE14%

Intergraph4%

Enghouse2%

Bentley2%

Other4%

ESRI54%

Leading Geospatial Platform Suppliers By Total Project Values

(Based on $65 Million in Projects for US & Canadian Utilities with <100K Customers)

GFAS Program Results (Continued)


Intergraph19%

AutoDesk22%

ESRI39%

Other5%GE

15%

Leading Geospatial Platform Suppliers By Number of Projects

(Based on 136 Projects for US & Canadian Utilities with 100K+ Customers)



Other4% GE

38%

ESRI25%

Intergraph22%

Enghouse6%

AutoDesk5%

Leading Geospatial Platform Suppliers By Total Project Values

(Based on $148 Million in Projects for US & Canadian Utilities with 100K+ Customers)



ATS3%

Origin/PDA7%

Miner/Miner12% Milsoft

17%

NISC20%

UAI22%

Other19%

Leading Field Automation* Suppliers By Number of Projects


*Applications include Outage Management; Work Management; Workforce Management & Mobile Computing



Minimax3%

UAI5% Worksuite

7% Advantica7%

LogicaCMG7%

SPL-CES7%

CGI8%

Miner/Miner23%

Other33%

Leading Field Automation* Suppliers By Number of Projects


*Applications include Outage Management; Work Management; Workforce Management & Mobile Computing



RTAC Program

• Includes IOUs, Municipals, RECs, etc. Electric Utilities

• Survey: 987 electric utility decision-makers interviewed in program year

• Results: 288 System & RTU Projects valued at over $150 MM

• Plus: Over 8,700 planned RTU installations

Water/Wastewater• Survey: 988 water/wastewater decision-makers interviewed in

program year

• Results: 215 System & RTU Projects valued at over $82 MM

• Plus: Over 3,600 planned RTU installations


• Asset Management Implications of RTAC RTAC is primarily an operations tool, BUT:

• Generates A LOT of data that can (and does) support Asset Management

• Data is often interfaced to GIS, OMS, CMMS, and other systems/applications, creating opportunities to improve numerous asset management and customer service scenarios

RTAC Program(Continued)


ABB3%

OSI4%

Siemens8% Telvent

9%C3-ilex

9%

Survalent11%

QEI15%

ACS18%

Other23%

Leading Electric Utility RTAC System Suppliers By Number of Projects


RTAC Program Results


OSI8%

Telvent8%

QEI10% Survalent

10%

ACS17%

Siemens22%

Other16%GE

2%

C3-ilex7%

Leading Electric Utility RTAC System Suppliers By Total Project Values

(Based on $173.3 Million in Projects for US & Canadian Utilities with <100K Customers)

RTAC Program Results (Continued)


Telvent6%

OSI6%

ACS10% Areva

12%

ABB13%

GE14%

Siemens19%

Other16%QEI

4%

Leading Electric Utility RTAC System Suppliers By Number of Projects




Telvent4%

SNC Lavalin4%

ACS5% OSI

6%

Areva11%

ABB12%

GE14%

Siemens19%

Other25%

Leading Electric Utility RTAC System Suppliers By Total Project Values

(Based on $523.6 Million in Projects for US & Canadian Utilities with 100K+ Customers)




Leading Water/Wastewater RTAC System Suppliers By # of Projects

(Based on 799 Projects for US & Canadian Utilities)

Other31%

Invensys2%

ABB2% Bristol Babcock

4% Rockwell/Allen Bradley7%

Wonderware28%

GE/Intellution26%



Leading Water/Wastewater RTAC System Suppliers By Total Project Values

(Based on $504.5 Million in Projects for US & Canadian Utilities)

Wonderware15%

GE/Intellution15%Other

47%

HSQ3% Bristol Babcock

4%

Rockwell/Allen Bradley

5%

Westinghouse11%


UCCS Program

• Over 1,000 Electric/Water/Gas utilities interviewed in program year includes: IOUs Municipals RECs Federal/State/District Utilities

• Program identified 128 CIS/CRM Projects

• Valued at $278 MM+

143 Other Customer Care Projects• Valued at $21 MM+• Includes Call Center, EBPP, Bill Print & Consulting


• Asset Management Implications of UCCS CIS solutions usually includes work/service orders, critical

pieces for asset management Customer data that resides in CIS Indus Service Delivery Model (SDM) combines:

• Asset Management

• CIS

• Mobile Workforce Management

UCCS Program(Continued)

Is this the emerging model for comprehensive asset management solutions in the future?

Is this the emerging model for comprehensive asset management solutions in the future?


Other

Sungard (including HTE)

SEDC

Indus

ADS (including Orcom)

DaffronHarris (incuding Cayenta)

NISC

In-House

Leading CIS Suppliers By Number of Sites

(Based on 614 Installations at US & Canadian Electric/Gas/Water Utilities)

UCCS Program Results

46

Next, Today’s Guest Speaker Roy Brandon…

ASSET MANAGEMENTASSET MANAGEMENT

““A Management Strategy for Utilities”A Management Strategy for Utilities”


47

“Asset Management:A 21st Century Management Strategy for Utilities”

Presented by Roy BrandonClient Relations Officer

Strategic Asset ManagementRancho Murieta, CA

Guest Presentation


What is Asset Management?

• An accounting strategy

• A software product

• A maintenance concept

• Just another flavor of the month?


Asset Management Provides a Common Path

Align plant resources to

achieve the business goals

of the organization at the

lowest cost.


AssetAssetManagementManagement

PurchasingPurchasingEngineeringEngineering

ProductionProductionControlControl

OperationsOperationsSystemsSystems

AccountingAccounting

Aligned Utility Vision & Strategies with Roles & ResponsibilitiesAligned Utility Vision & Strategies with Roles & Responsibilities

MaintenanceMaintenance

Asset Management is a cross-functional Initiative


Asset Management Connects Knowledge Silos

Cap

aci

ty P

lan

nin

g &

Man

age

men

t

Mai

nte

nan

ce M

anag

emen

t

Lo

gis

tics

Man

agem

ent

Op

erat

ion

s M

anag

emen

t

“Asset Management Processes"


• Documents the vision of the future state

• Creates a shared ownership

• Identifies current situation.

• Identifies desired outcomes — quantitative & qualitative.

• Supports the corporate business case.

• Outlines series of initiatives/projects over several years with approximate costs.

• Identifies structure, accountability, and responsibility.

• Contains specific targets in lead and lag indicators.

Asset Management is the core of the change process, successfully leading to new behaviors by all.

Asset Management is the core of the change process, successfully leading to new behaviors by all.

Elements of an Effective Asset Management Plan


Advantages of Effective Asset Management

• Accurate analysis of equipment maintenance, repair, and replacement records

• Increased availability of production systems and equipment

• Fewer failures of production systems and equipment, resulting in fewer unplanned outages

• Elimination of process deviations and the associated product quality issues

• Lower costs for system and equipment maintenance, spare parts inventory, and capital replacement


Advantages of Effective Asset Management (Continued)

• Enhanced morale among management and the workforce, as they learn to enjoy a proactive environment instead of surviving in chaos.

• Improved relationship with investors, owners, regulatory agencies, insurance companies, and other stakeholders.

• Additional capacity as operating units are able to operate at higher levels for sustained periods without excessive equipment failure.

• Higher profits from the compounded effect of reduced conversion costs and increased production levels.


Managing SystemStrategic Planning Information Management

LEAD

Ownership / Empowerment / DevelopmentENABLE

“Completely align resources to achieve the business goals of the organization at the lowest cost.”

Capacity Development & Disposition

Production Management

Asset Healthcare Management

Logistics Management

EXECUTE

Asset Management Model


It’s All About People and Processes


A Managing System Unites Interdepartmental Goals & Objectives


Five Keys for Success

1. Analyze your current status & establish the baseline

2. Quantify “Asset Management Opportunity” in terms of financial improvement goals

3. Develop a compelling business case for Management.

4. Involve all Stakeholders in the solution

5. Define the “WIIFM Principle” for each level in the organization.


What Are the Potential Profit Mechanisms?

• Eliminate waste This mechanism includes all strategies based on cutting costs,

expenses or assets that have been determined to be non-value added in service delivery. Initially this mechanism tends to be low risk and offers high rewards.

• Change the rules of the game This mechanism includes all strategies based on changing either

the offering, the market’s perception of the offering, or how the offering is delivered to the customer. Changing the rules of the game can offer the highest rewards but also the highest risk .

• Improve fixed asset productivity This mechanism includes all strategies directed at ensuring

processes consistently operate at peak performance. Typically, the risk-reward relationship for improving reliability falls between the prior two strategies.


Four Mechanisms for Significant Return

1. Fixed Cost Expense Reduction

2. Increased Production

3. Capital Spending Avoidance

4. Reduction of Inventory Investment


Reduction in Fixed Cost

• A.T. Kearney created the Maintenance Cost to Replacement Value Ratio (RAV) in the early 80's as part of a benchmarking survey for DuPont. It is calculated as

• RAV% = 100 x Maintenance Cost/Asset Replacement Value

• Industry experience has shown that excellent performance is indicated by a RAV of 1.5% - 2.5% depending on the industry and type of manufacturing process.

• To date, it is an accepted measure in the maintenance and reliability profession; however, it is not an absolute number and must be used in conjunction with other performance metrics.


To calculate RAV, companies such as Rohm and Haas and Dupont, inflate original and subsequent construction costs by a CPI equivalent or inflation indices provided by the insurer. (Sample table)

RAV Index (Insurance Inflation Indices)

Category BuildingsMachinery & Computers

Lab Equipment

Office Equipment Vehicles

1901 46.7 55.0 123.0 306.5 98.6

1902 46.7 55.0 123.0 306.5 98.6

1903 48.0 55.0 123.0 306.5 98.6

1904 47.7 55.0 123.0 306.5 98.6

1998 1622.4 1049.6 547.9 890.8 330.9

1999 1677.0 1060.1 555.6 894.6 337.5

2000 1707.8 1065.3 561.6 561.6 339.8

2001 1711.8 1091.6 567.3 567.3 366.5

2002 1809.0 1091.4 589.8 589.8 334.2


What’s In A/M For Me? (WIIFM)

• Senior Management Improved financial performance Less problems and stress More bonus money

• Middle Management Improved working conditions Fewer surprise events Intrinsic & financial rewards

• Supervision Empowerment Enhanced leadership skills

• Workforce Proactive environment Predictable assignments Higher skill level


Awareness

Advocacy

Commitment

Buy In

Understanding

Time

Ab

ilit

y t

o C

han

ge

Culture Change Is a Succession of Ownership Steps


Sr. Mgmt

Mid-Mgmt

Supervision

Workforce

Aware Understand

Buy In Commit Advocate

AssessmentAssessment

BusinessGoals

BusinessGoals

Strategic PlanningStrategic Planning

DesignDesign

ImplementationImplementation

Process Assures Alignment and Ownership


Change Sequence – Allow some “Soak Time”

• Change Behavior Define Processes Define Roles Train & Coach Performance Indicators Establish Accountability

• Change Thinking Train & Coach Measure Results Communicate Success Empower Workforce Educate Leadership

• Change Culture Define WIIFM Employ the “Loop” Process Audit progress Allow “Soak Time”


Service Requirements:What are the standards for how we interact with & treat customers?

Information Reporting

Output Requirements:

What features or characteristics of our “final” product or service are key to customer satisfaction?

Key Performance Indicators

Customers

OutputsInputs

Process

Suppliers

CustomerInterface

Asset Management Work Process Model


Here’s what it takes to realize tangible results…

• Create a sense of urgency• A team of the right people• A compelling vision / argument• Send clear, compelling messages• Remove barriers to action• Create & communicate short term wins• PUSH UNTIL the VISION IS REAL• Make the change stick

69

Thank You

Roy O. BrandonClient Relations Officer

Strategic Asset [email protected]


70

Q&APLEASE NOTE

You can also email your questions to us at: [email protected]


Contact Ushttp://www.InfoNetrix.com

• Mike Marullo (InfoNetrix) New Orleans, Louisiana USA [email protected] Tel +1-504-466-3460 Fax +1-504-466-2230

• Mike Smith (InfoNetrix) Sacramento, California USA [email protected] Tel +1-916-984-7430 Fax +1-916-984-7431

• Roy Brandon: [email protected]

72How well you focus… will determine your reality

Thank you for your participation in this FocusPoints™ Online Market Briefing!

Coming next to FocusPoints…“Ethernet & Internet Communications in the Utility Automation/IT Marketplace”

73

How well you focus…

…will determine your reality

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