06.15.11Patrick Zirnhelt, Director, Energy & Asset Management, IFS North America Inc.

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Many companies in the electric power industry are facing major changes including the consolidation, extensive construction of new assets, asset lifecycle extensions or deployment of new business models or technologies. Never before has the ability to effect rapid business change -- enterprise agility -- been so important in this sector.

But in many cases, the enterprise software they use to run their business is not equipped to help them successfully negotiate these changes. According to the results of a study conducted by IFS North America, the enterprise resource planning (ERP), enterprise asset management (EAM) and other enterprise software can be a significant barrier to enterprise agility. In the study, 100 energy executives shared their thoughts about whether their enterprise software was helping or hindering their enterprise agility.

In this article, we'll examine the different enterprise agility barriers reported by study respondents and discuss how energy industry executives can select software for enhanced enterprise agility and change readiness.

The Status Quo

One thing is for certain. Electric power executives expect to encounter plenty of change in the next two years. More than 66 percent of executives said they planned to make business changes. And when asked specifically what changes they plan to make in the next 24 months, almost 47% said they planned to re-engineer their internal processes and more than 45% planned new product or service lines. Another 35 percent plan to enter a new geographic market and more than 27 percent or respondents plan to purchase another company. Major capital projects are on the horizon for another 25 percent.

Meanwhile, 53% of respondents said their ERP prevents them from taking advantage of new opportunities or slows them down as they try to change the way they do business.

Only 16% of respondents said that they expected their enterprise application to handle these changes "extremely well." Meanwhile almost 20 % said that their enterprise software would not handle change very well and almost 7% said they would need to completely re-implement their enterprise software to handle these drastic business changes.

What this data suggests is that energy executives and the enterprises they lead are likely to realize some significant and perhaps unanticipated costs as they adjust to changes. These may be changes the market is imposing on them or changes required for them to take the initiative and foster growth or expansion. But what is certain is that enterprise software like ERP and EAM -- in its current state -- lacks the flexibility to deliver electric power companies the agility they need.

Delivering Enterprise Agility

Electric power executives participating in the study cited a number of ways that their software vendor could help them enhance enterprise agility. Study participants were asked two different ways about the single most important thing their enterprise software vendor could do to enhance enterprise agility, and in both cases answered the same way. The single most popular answer was that software vendors need to make it easy to change the way the software is configured without the additional cost of consultants and system integrators. Other important steps software vendors need to take, according to respondents, include simple things like listening and learning about the customers' business needs. Product design is also a concern, with more than 32% stating that software needs to be designed for quick, easy implementation and reconfiguration.

The answer to yet another study question provides additional on how ERP and other enterprise software vendors can increase enterprise agility for their customers. Data suggest that a single flexible product -- as opposed to a tiered product strategy that requires implementation of completely different or more advanced products as needs change -- delivers greater enterprise agility. When asked about the single most significant way that enterprise software slows the enterprise down or makes change more difficult, more than 37% of respondents said that in order to gain the new functionality we need to accommodate change, we need to move to a completely different, more advanced enterprise software product offered by our vendor."

The second most popular answer had to do with inflexibility of the application once it is in place, and 21% of respondents said they had a hard time reconfiguring their application, "as if it were dipped in concrete."

Conclusion

When looking at study data, it becomes apparent that electric power executives face significant barriers to change within their organizations, and in many cases these barriers are caused by the very enterprise software they use to deliver efficiencies. It is clear that executives need to consider -- during the enterprise software selection process -- how an enterprise application facilitates change and delivers enterprise agility. Only then will electric power executives be able ensure that their technology lowers their total cost of agility enterprise-wide.

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Reader's Comments

Date	Comment
Len Gould 6.16.11	Perhaps the answer to the problem is written right onto your article. When you put a bunch of lawyers and MBA's, by definition barely technically aware, in charge of selecting something as core to the company as its enterprise software, you likely get just what you deserve. A poorly designed conglomerate of software originally designed by a dozen separate companies then consolidated when the large software company took over the smaller ones, and packaged into a set of similarly printed boxes with similar looking smartly designed Powerpoint slides designed to make you think they're interactive. Most executives these days are lucky to not fall asleep during the final decision process on software, much less have any intuition or knowledge about what they're doing.
J Norman 6.21.11	Rather than being the exception, the rule is that executive management makes business decisions with little regard or understanding of the implications of the proposed changes on the software being used to run their business. The analog world affords an infinite number of possibilities for conducting business but software is not always that flexible. Configuration decisions such as those around accounting, equipment identification, system classification, or, other protocols, can be difficult to change midstream without adversely impacting the abillity to maintain coherent data for trending or in the worst cases may require a complete reimplementation. There are large costs associated with this negligence. It might be akin to suddenly deciding to change a large Library off of the Dewey Decimal system or changing engineering standards in the middle of a construction project. There is a greater appreciation of those implications but less so for software since managers often think they can have software programmed or reprogrammed to "do anything". An approach to change that recognizes these limitations and requires an up front assessment of the costs and implications to the enterprise whenever the options are being considered is a 'best practice' that should not be ignored. It may require consultation but that is far cheaper than making the decision then trying to deal with the resulting chaos.
Arun Mishra 6.21.11	It's an age old problem, either you build or nuy. Whenever the buy is about products and not skills, one lends in change trouble. The consultants only try to bridge the gap in skills and wheever management do not trust inhouse capability, consultants do not have product familiarity, utility ends up buying add on product or replace existing one depending on the age of existing product v/s trust in the existing vendor. Alas all short cuts lead to postponement and not solution of problem. It's beter to partner solution provider rather than buy product. A K Mishra

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