Leveraging Operational Systems Assets to Realize Their Full Value by Chris Trayhorn, Publisher of mThink Blue Book, May 14, 2007 The electric utility industry finds itself confronted by a dynamic regulatory and market environment that is necessitating changes at all levels of these organizations. Whether a generation utility is participating in a commercialized or regulated market, the successful producer must be costeffective, environmentally compliant and flexible. Realizing such a position is no easy task. All of the obvious measures have been taken – utilities have made improvements in their supply chain, reduced staff and outsourced a variety of functions. Success requires that generation utilities dissect their core business processes in search of quantum improvements in operations. This doesn’t have to require significant investment; rather, that utilities more fully leverage the investments they’ve already made, including those in a spectrum of computer- based information and control technologies. These technologies can be organized into a three-tiered hierarchy that, working together, will provide the data and automation engines necessary to identify, implement and sustain necessary changes to operational processes. The following classes of computing technologies are included in this hierarchy: Enterprise-level Systems: These systems provide the basic computing infrastructure for the entire organization and include applications, services and resources such as financial analysis, ERP, desktop platforms, security, Internet presence, business continuance and LAN/WAN networking. Given the corporatewide expanse of enterprise systems, the staff levels needed to manage and support them, and the large costs involved, they receive significant attention at the executive level and have highly refined governance models. Enterprise systems can be thought of as enabling more specialized applications by providing the services and infrastructure they need. Most utilities have long since standardized enterprise applications across their organizations. Having done so, they have been able to reduce costs, obtain procurement leverage, avail themselves of outsource opportunities and better utilize internal technical resources. Enterprise systems are often models of IT governance best practices. Embedded Systems: At the other end of the hierarchy reside embedded systems. This category includes highly specialized hardware/software such as intelligent sensors, SCADA remotes, control devices, specialized diagnostic handhelds, etc. Embedded systems are rarely of any concern to the IT department except if they utilize connectivity and security resources provided by IT or source operational data to IT-hosted applications, scorecards and performance dashboards. Operational Systems: The final category of computer systems falls in the middle of the hierarchy. Utilities employ specialized control and information applications to operate, maintain and manage their generating assets. These specialized applications collectively referred to as operational software typically include distributed control systems, maintenance management systems and a variety of software applications to analyze and optimize unit performance. While software at this level may make extensive use of enterprise resources and platforms, the specialized applications themselves are not widespread within a utility; they are largely the concern of engineers and other specialists. As a result, they have historically been below the radar of IT management. It has been noted that utilities often model best practice behavior at the enterprise level of their organizations. Unfortunately such practices have not typically extended to operational software and systems, which is a smaller but potentially more critical class of application. Systems at the operational level deserve the same C-level governance attention. Operational Systems Issues While some operational improvements may involve costly and time-consuming mechanical modifications to generating plants, others can be realized more quickly and inexpensively by leveraging the information available from plant control and information systems. Challenges facing generation utilities include responding to newly imposed emissions mandates, improve heat rates, decrease the number of forced outages and reduce plant staffing and operating costs. Operational systems are critical to these goals, since they either generate the data needed for assessment and response and/or execute necessary actions. Many utilities are not fully leveraging the operational systems assets in their generating fleets; others have operational software and hardware infrastructures that do not readily lend themselves to higher-order capabilities. Historically, operational systems and software have been procured by individual plants, on limited budgets, to meet local concerns often driven by the need to replace obsolescent systems. Even in situations where advanced capabilities have been implemented, they are not used consistently. In brief, operational systems are not deployed using the same cross-competency approaches used for enterpriselevel systems, which may be hindering the realization of their full value. Of specific note are the following problem areas: Corporate Governance Despite investments exceeding $4 million per unit, operational systems seem to fly below the radar of many utility executives. When compared with enterprise applications, an individual operational system represents a relatively small dollar amount and has significantly fewer users. A different perspective would be gained if one considers the collective investment a utility has in operational systems at all units in its fleet, which can easily extend to the tens of millions of dollars and encompass thousands of users. The most significant impact of this lack of visibility may that many utilities have not standardized on a specific plant control platform. In these instances, control and information systems are bought locally with minimal corporate input and standards guidance. What are often lacking are not only provisions for a common hardware/software platform but standards for functionality too. Functionality should relate directly to the challenges utilities face in improving their unit operations. Overemphasis on Technology The focus on technology encompasses the entire project life cycle, from project inception through implementation and rollout. This was a major theme that emerged from a series of in-depth interviews with the persons experienced in architecting, deploying and managing operational systems at mid-to-large-sized investor-owned electric utilities. The research found that in initiating these projects, technical obsolescence of an existing software implementation was cited as the reason for embarking on an upgrade or replacement more than 50 percent of the time. The need for enhanced functionality was the driver in only 33 percent of replacement and was not cited at all as a reason for an upgrade. Once an operational systems project is approved, it moves into the requirements definition phase. Specifications for operational systems are largely technical in nature, and references to operational objectives or business processes are not often mentioned. Business process improvements are often used to justify software procurement, but they are apparently not being integrated into the specifications for operational software. One participant in the writer’s research said that only a small minority, “certainly no more than 20 percent,” of request-forproposal documents include any discussion of operational objectives. Lack of User Involvement There is general lack of user participation across the entire project life cycle from initial project inception and planning through final rollout of the application. Many organizations say they involve users throughout software implementation projects, but a closer look shows this may be limited to a few “super users” – those most technically astute who are involved with the most sophisticated application of the system in question. Even super-user participation is mostly limited to the development of specifications at the project start. The vast majority don’t jump back in until the software is ready to be rolled out for testing and training. Users participated minimally during the design phase, leaving their needs to the interpretation of software developers who may not be fully cog-nizant of user job tasks. As a result, user needs are often not fully realized in the final software implementation, when it is often not feasible financially or schedule-wise to make corrections to anything but the most egregious issues. The remaining user issues are left to “future releases” of the software and often are not addressed at all. Training and Change Management The general population of users doesn’t see an operational software application until it’s time for training. Usually this covers the functions of the software package, as opposed to training people on how to use the software to perform specific work-related functions. This approach, though prevalent, is unfortunate and significantly raises the risk that the utility won’t realize its ultimate business goals for implementing the system. For example, inappropriately trained operators tend to turn off optimization software applications they do not fully understand. Often these are the same applications that generators are counting on to address efficiency improvement and regulatory issues associated with their fleets. Overemphasizing Implementation Costs Generally speaking, many organizations obsess over initial capital outlays for software and associated implementation costs with little attention paid to life cycle costs – despite that total cost of ownership can be significant and is not necessarily reflective of initial purchase and implementation costs. Depending on the complexity of the software, its administrative burden, scalability and the duration of the expected upgrade cycle, the need for technical personnel to maintain software can vary considerably. In addition, a cost-centric approach can impact project elements beyond technology. Training is often the first thing cut when budgetary issues are encountered. Similarly, process re-engineering and user representation are frequently eliminated to save money. New Directions The previous sections have identified operational systems as a distinct and vital class of technology within utilities, one that mandates a governance approach already in place at the enterprise IT level. Moving forward, utilities should consider several calls to action. Develop Overall Governance Models Utilities would be well-served to elevate operational systems to the purview of executive management: Standardize on system platforms to more fully leverage procurement advantages and outsource opportunities and to more effectively concentrate increasingly scarce human resources on operational issues. Technology management is not a utility core competency; leveraging it to operational advantage is. Develop standard control and optimization applications that directly reflect operational and regulatory needs, reduce buss bar costs, etc. Utilities are advised to develop systems specifications centered on operational objectives, with technology assessed only to ensure efficient execution of needed functionality. Manage the project and the business case. Research shows that utilities justify the procurement of an operational system based on a business case but often fall short of achieving it. Projects are managed to be on time, on budget and compliant with technical specifications, but it is rare for a utility to revisit an implementation to validate whether it met its financial goals. Elevate operational systems to the status of enterprise applications. Operational applications often languish in obsolescence because of the rigid business- case criteria that must be met to justify replacement or upgrade. Control and information systems are critical to the business and should be elevated to the same infrastructure status as enterprise systems. Risk avoidance alone is a strong justification for this. De-emphasizing Technology Technology is just one competency needed for successful software/systems implementation. Three others are coordination with strategy, change management and process re-engineering. All too often technology is chosen based on a bits-and-bytes assessment; rather, it is how that technology is deployed that is critical to success. A control provider that integrates logic with continuous control; has algorithms and optimization software appropriate to generation, for example; and has credible experience in the industry is far more valuable than is any specific underlying technology. Promote User Involvement Lack of user participation is the most significant cause of project failure, a lesson that’s not been lost on enterprise IT. User involvement promotes more effective use of system features, avoids undue complexity and ensures timely retirement of costly legacy systems. Change management is often equated with “training,” but traditional classroom training is a small, albeit important, component of the overall picture. Equally critical to success is user participation in developing requirements, consultation with an appropriate cross section of users during the design process and an effective rollout strategy. Effective training is also critical, especially as plant systems grow more sophisticated. At the same time, there is the need to improve operating efficiencies, meet emissions requirements and manipulate a unit in response to varying market demands. If we consider EPRI’s findings, as reported by Power Magazine, that 30 percent of the utility workforce is over 50 years old and will be gone in 10 years, training becomes an even more urgent need. Operators must know how to operate the unit competently – not simply access the features of a particular control platform. And depending on the specifics of their situation, they must be periodically retrained. Fortunately simulator-based training tools are available and enhanced versions are being developed. Recognize Value, Not Costs Finally, when one considers the efficiency impacts of marginally designed systems and inadequately trained operators, appropriate funding for a cross-competency approach to operational systems is justifiable. Many of the cost issues encountered stem from operational systems not being viewed as on par with enterprise applications. Elevating operational systems to enterprise status would establish standards, implementation methodologies and funding regimes, thus mitigating financial obstacles that have a detrimental effect on final results. Often it is not even the costs associated with operational systems, but rather the justification of those costs that is the real issue. Control and information systems providers recognize the need to architect, implement and manage systems in line with business strategies. While no single source of expertise can provide a complete picture, control and information systems providers have a unique perspective on the industry – one that utility executives would be wise to consult in making decisions regarding operational systems. Operational systems are critical to the core business of utilities: the safe and efficient generation of electricity, in compliance with environmental regulations. These systems, long outside executive purview, are critical to the success of utilities in a changing market environment. 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.