Informed Decision Making by Chris Trayhorn, Publisher of mThink Blue Book, May 15, 2006 Corporate management is increasingly called upon to make complex critical decisions in short time frames. Consolidations within industries, competition to maintain competitive advantage and pressure to maximize return on investment are key business drivers. Market leaders have learned that success in this environment requires comprehensive, accurate and timely data and the tools to effectively utilize them. Recent technological advances in service-oriented architecture (SOA), business and operational applications, digitization of field devices, the networks that link them and the tools to deploy them, along with the associated improvements in hardware price performance, open standards and security, have collectively provided a platform for information process transformation across industries and markets. This opportunity for transformation is unfolding industry by industry and market by market based on economics, competition, governmental policy and business opportunity. A Changing Approach to Change The energy and utility industries have heretofore been slow to take advantage of the transformational opportunities presented by technological innovation. The conservative culture of these two industries, their social importance to the communities they serve and their designation as critical infrastructure providers have resulted in their experiencing slower evolutionary change versus embracing more rapid transformational change. Currently this approach is changing as a result of multiple business drivers and opportunities, some of which include: There are aging transmission and distribution infrastructures domestically and emerging markets globally (e.g., India, China). Significant investments are anticipated over the next several years to replace aging infrastructure and sustain economic growth in developing countries. Environmental policies, such as the Kyoto Accord, are driving the need to better manage demand and use of current energy assets to avoid the construction of new infrastructure and minimize the impact of retrofitting facilities that do not meet emerging environmental standards. An aging workforce is causing employee turnover and an associated loss of corporate knowledge. There is a heightened focus on the efficient use of capital and maintenance budgets by investors, markets and regulators. Transformation professionals synthesized the information process needs associated with these drivers impacting the energy and utility industries and developed a comprehensive infrastructure business model for increased energy and utility value to enable a concept called informed decision making. For energy and utility companies, informed decision making is about using the data that is available from field devices, operational systems, business applications and network assets to improve the timeliness and accuracy of decision making. Informed decision making is made possible through the combination of an intelligent network that allows real-time connectivity across the enterprise, an SOA that allows integration of multiple business and operational applications and advanced analytics for business intelligence mining. Value of Informed Decision Making As an example of the value of informed decision making, the CIO of a large investor-owned utility that is aggressive in the acquisition of generation assets wanted to transform the IT organization from a support center to a business enabler. He felt that informed decision making was able to provide the basis for this transformation based on the following considerations. First, in terms of overall IT support to the enterprise, for IT to become a business enabler in this case, the department needs to rapidly integrate the business intelligence resident on legacy applications in the targeted acquisitions into the corporate platform, enabling IT to provide a vital service in delivering better data to key decision makers in multiple departments making acquisition decisions based on a wide variety of business metrics. These decision makers cannot be required to learn the intricacies of multiple legacy systems; the data in these legacy systems must be accessible through the business tools and models that the decision makers already know. Second, the IT platforms and business applications resident at the acquired plants have historically been treated as new stand-alone IT assets, to which no synergy savings can be applied. This is because historically it has been very difficult and costly to integrate such legacy assets with the corporate systems. Determining the extent of such savings is essential to both making an acquisition business decision and achieving the savings after the acquisition. IBMs SOA is the key to providing this capability. The SOA enables services to be created for business functions, such as work orders and purchase requests, and these services can be combined with other services regardless of the native applications within which they are created. Imagine one plant using a commercial software application for purchasing and another plant using a homegrown system, while the corporate systems are using SAP software. SOA allows purchase requests from both plants to be aggregated with those created in the corporate system to create one purchase order, helping to ensure that the corporations strategic sourcing initiatives are able to be realized across the entire enterprise, not just in the integrated plants using SAP. Now consider all the operational systems and the value of being able to rapidly integrate a newly acquired plant into the corporate network. Consider supervisory control and data acquisition (SCADA) data and corporate systems data combined on a single IP-enabled intelligent network using quality of service to determine priority of data packets on the corporate bandwidth. If this intelligent network is coupled with SOA, then advanced analytics for business intelligence are overlaid on top, the goal of having an IT organization that functions as a business transformation center can be accommodated. This is the approach presented to and embraced by this utilitys CIO. The informed decision-making infrastructure model (see Figure 1) depicts the framework needed to support the integration of data from field devices, business and operation systems. Implementing an Intelligent Network The foundation for informed decision making is implementation of an intelligent network within the enterprise. The key element of an intelligent network is the transition to a common IP-based environment. In the common environment, each element of the network is assessed and optimized based on the best low-cost IP service available, including internally provided or externally provided through a service provider. Each element of the infrastructure is migrated toward network intelligence based on life cycle or capability enhancement requirements. As this process unfolds, the informed decision-making infrastructure emerges, providing a wide range of decision-making tools. Data flows from the data source to the decision maker and back are created. The capabilities include features such as end-to-end security, resource management, data mining, common business views and adaptive computing. All of these capabilities are valuable within the current corporate boundaries and also provide positive business-case value in support of mergers and acquisitions. The intelligent network framework provides operational value by creating an aware environment through implementation of a single corporate IP-enabled network. Additionally, the network is used in conjunction with deployment of operational applications such as advanced meter management, mobile workforce management, asset life cycle management, remote asset monitoring/control and next-generation information brokering. Together, these components provide the foundation for advanced network analytics, enabling the transformation of data into insight, the key for informed decision making. The intelligent network provides a sense and respond framework that will provide the enterprise with real-time connectivity across the entire utility value chain, from data producer (e.g., flow computer, PLC, RTU, ESS) to data consumer (e.g., SCADA host, automatic meter reading system, inventory management system, modeling/leak detection). Figure 2 shows the intelligent network utility value chain. The favored architectural approach decouples the data producers from the data consumers. This key element insulates applications from the complexities of the control systems which formerly constrained them. Equally important, this independence provides energy and utility companies with business flexibility and agility for integrating or upgrading new operational environments. In other words, the intelligent network offers a plug and play business environment. This plug-and-play environment allows a decision maker to optimize decisions across the entire enterprise of today and tomorrow, unconstrained by organizational boundaries. This is the cornerstone of informed decision making. In the energy and utility industries, the device, network and data domains reach throughout the many networks currently in place. These networks include corporate enterprise WAN and LAN, land mobile radio, public cellular, SCADA and microwave. When viewed in historical context, these networks enabled discrete capabilities prior to the existence of many common carrier services. Within the operating environments of the utilities, land mobile radio predates cellular services, and microwave existed prior to T-1, frame relay and Internet service provider services. When the current utility networks are viewed holistically, in present-day terms with present-day capabilities, significant opportunities for reduced costs and enhanced capabilities emerge. Elements of an Intelligent Network While there are many elements of an intelligent network, the following four elements define the core design: Internet Protocol (IP) Communications. The intelligent network will help make the conversion from analog to digital while providing greater quality and access to operating information. By enabling all devices on the network through IP communication, companies will be able to grow their network quickly and use technology innovations. Examples of these technologies include wireless, broadband over power line (BPL) and Voice over Internet Protocol (VoIP). Open Standards-based, Consistent Architecture. The IT environment can grow increasingly complicated in energy and utility companies. As new projects are deployed, there are increased difficulties in having redundant systems or communication across systems. A common architecture is needed that incorporates industry-standard data models, open technology communications and adoption by business partners. Having a consistent model enables manageable growth while potentially reducing costs and overhead. In essence, lower total cost of ownership is available through open technologies. Consolidation through Public and Private Networks. Most energy and utility companies have elements of a converged communications and collaboration environment already in place. These elements may be a basic intranet portal or simply IP-enabled telephone systems. However limited such capabilities may be, they still are the foundational building blocks for deploying an integrated architecture that combines the disparate technologies to transform the business. To realize the promise of convergence, companies need a clear strategy to transform their organization from a disconnected business to one that has integrated key processes through collaborative portals. For example, the voice revolution started with the invention of the telephone, which allowed people to collaborate one-to-one in real time. The Internet provided a many-to-many communication network and enabled organizations to engage in truly collaborative processes on a global basis for the first time. Today, the convergence of voice, video and data is set to forever transform business relationships and collaborative strategies; the network of today and tomorrow needs to apply these technology innovations. Security Based on Data/Applications. Regardless of the current or future infrastructure, information access and security are critical to energy and utility companies. Without security technologies, companies can be targeted for security attacks, information theft and massive system failure. The network needs to leverage the latest technology advances using the three As: authentication, authorization and administration. This comprehensive diligence and focus on security is a key to business resilience of critical infrastructure. With these elements in place, tools can be used to mine data for business intelligence to create insights, thereby increasing the value of the data to the enterprise. Applying Business Analytics Leveraging the resources created by the four elements above, business analytics are software tools that transform raw data into meaningful business intelligence. They do this by applying business rules and processes to raw data, by supplying context through integration of information from multiple relevant sources and by presenting the information in a readily comprehended format, such as a dashboard. Data is generated continually within energy and utility companies; for example, SCADA data, meter data, service report data, financial data and outage data, among others. Analytics process this data to assist business managers in making more informed decisions. Analytics can be used to automate many aspects of utility operation, such as work management, load optimization and inventory management. Analytics are also valuable tools to analyze processes such as capital expense planning, service quality assessment and rate-case development and presentation. Analytics are a key component of comprehensive utility information architecture. Energy and utility companies have traditionally been capital- and labor-intensive operations, but as utility markets become more competitive and utilities become more automated, it becomes more crucial for utility business managers and executives to have the information that allows them to connect decisions with true business drivers. The business analytics component of informed decision making is used to refine raw data into information that creates business intelligence. As energy and utility companies add more intelligent devices and networking to their operations, the volume of available data will increase to the point of being overwhelming. Analytics are the tools that make sense of the volume of data and enable the workforce to focus on the highest-value decisions while automating the remainder. Analytics also provide a framework to manage the gradual increases in network awareness. For example, an energy or utility company might start out integrating SCADA data with financial data through analytics and gradually add automatic meter-reading data, remote grid or network sensing or data feeds from other connected enterprises. As each new level of awareness comes online, the analytics can integrate the new data smoothly into the existing business intelligence framework. The informed decision-making enterprise business platform is established through building business intelligence on top of existing business systems and is typically built in a phased approach, which begins with the implementation of analytics. Analytics alone can offer increased value by providing insight into existing data; however, the business value increases proportionally to the available level of grid observability. The further down the wire toward the customer you can monitor, the greater value you can realize. Conclusion IP-enabled networks, SOA-migrated application portfolios and analytics for business intelligence are each strong tools used by many energy and utility companies globally. However, when these tools are configured in an integrated approach, they can exponentially deliver greater value. Clearly, informed decision making has the potential to be transformational in these industries, delivering extended benefit and competitive advantage to clients. Filed under: White Papers Tagged under: Utilities About the Author Chris Trayhorn, Publisher of mThink Blue Book Chris Trayhorn is the Chairman of the Performance Marketing Industry Blue Ribbon Panel and the CEO of mThink.com, a leading online and content marketing agency. He has founded four successful marketing companies in London and San Francisco in the last 15 years, and is currently the founder and publisher of Revenue+Performance magazine, the magazine of the performance marketing industry since 2002.