Everyone seems to be excited about connected technologies from smart egg trays that wirelessly connect to your mobile device to track the number of eggs you have and tell you when they’re going bad to smart socks that provide real time coaching on your running technique. You might feel as though you live in a magical world of enchanted objects.
SAP has embraced the Internet of Things (IoT) for the real world of business, and at the recent Asset Management Council of Australia annual conference AM PEAK 2015 in Sydney, SAP stole the show with a live interactive demonstration of the Internet of Things in action, featuring a very smart toy train connected to the SAP IoT HANA Cloud Platform (thanks to SAP IoT superstars Malcolm Yeoman and Thorsten Freitag).
While the IoT demonstration captured the imagination of many the main theme at the AM Peak conference was the new ISO 55000 standard for Asset Management. Not surprisingly the ISO standard is largely silent regarding smart egg trays, wearables and augmented reality, however it does call for “horizontal alignment between asset management, financial management and risk management functions, by using a common terminology for financial and non-financial information”. Hence, tighter connectivity between finance and asset management systems is a topic that this is top of mind for many asset management professionals. How you approach this challenge depends on your current systems landscape.
In the Magic Quadrant for Energy and Utilities Enterprise Asset Management Software, Gartner segments asset management systems into “point solutions” and “ERP suite based software”. In both cases SAP helps Utilities to speak the same language across finance and asset management.
Analytics and Planning for ERP suite based Solutions
The Ausgrid network that covers urban Sydney and regional areas to north of the city carries more power than any other distributor in Australia. Ausgrid implemented their iAMS (Integrated Asset Management System) using SAP EAM with fully integrated finance and asset management business processes. In presentations to the Asset Management Council of Australia symposium in 2013, Ausgrid characterised their enterprise dashboard, reporting and analytics solution using SAP Business Objects as “Learning to Trust Again” with a solution that provided top to bottom transparency. They drew the key contrast that “To Measure Performance a set of Stand Alone Reports will Suffice” however “To Explain the ‘Why’ of Performance: Integrated Data is Invaluable”. This is true also of the planning solution that Ausgrid implemented using SAP Business Planning and Consolidation (BPC). In this case data integration is also driving significant value by increasing the accuracy and reliability of capital forecasts, while lowering the cost of forecast audits, scenario analysis, and regulatory compliance. When they are working iteratively with the regulator it is particularly valuable that Ausgrid can now audit their scenario modelling in 2 days rather than 2 weeks.
Analytics and Planning for Point EAM Solutions
When it comes to point EAM solutions, analytics and planning tools offer a pragmatic way to get them speaking the same language with finance systems to provide a consolidated horizontal view. Energex, the urban electricity distributor in Queensland, used SAP Business Objects to provide a “single source of truth” across 12 different non-SAP systems. The Energex Enterprise Performance Management project has delivered an outstanding reporting platform tracking KPIs across the business, making a massive reduction in manual efforts to produce reports. Energex focused on data quality and they use SAP Information Steward across the backend systems to monitor data health according to business rules. However getting multiple point solutions to talk the same language is complex, requiring a business led (rather than IT led) approach, which means this kind of project is not a trivial exercise and the Energex project took 3 years to complete.
Business process integration for Point EAM Solutions
For asset management professionals that want to go the next level and get their finance and asset management systems to speak the same language at the business process level things get decidedly more complex when you are working with point solutions. IBM Maximo is the undisputed leader in point EAM solutions and they illustrate the business process integration points in the diagram below.
The key point here is that just like Analytics and Planning, the business process level integration is not an IT problem. This is a business challenge because your point EAM solution and your ERP system can be configured in an infinite number of variations to meet your business process requirements and enabling an end to end business process like Procurement or Inventory Management involves complex processes that need to be tolerant of changes, cancellations and reversals. No standard adaptors can offer plug and play integration because they need to understand the business process meaning and assumptions on both sides. So if the ISO standards have inspired you to improve the connectivity between these systems, make sure that you take a pragmatic, business led, value driven approach to connect the business processes that really matter. If your program is an IT lead exercise focused on the technical integration protocols with little business input then alarm bells should be ringing.
Speaking the same language without compromise
An often raised concern from days gone by was that a suite based EAM solution like SAP would mean that asset management operations would need to compromise to meet the demands of finance. With the contemporary SAP EAM suite, financial integration should not inhibit how you work. With the flexibility of operational level costing in SAP you can plan costs and capture actuals differently for each task in a work order as illustrated below. This provides tremendous flexibility and allows you to raise and manage work orders in a way that truly supports your operational objectives.
More recently SAP Simple Finance utilises the power of the HANA in-memory database to eliminate pre-calculated aggregated totals. This means that the finance team has more flexibility than ever in how they report and analyse costs and can more easily accommodate the preferred operating models of asset managers.
The Transformational benefits of speaking the same language
At the SAP International Utilities conference in Berlin a presentation “Asset Lifecycle Budgeting at Nuon” demonstrated very simply the transformation benefits of asset management and EAM speaking the same language. Nuon budget for materials, internal hours and external hours by work type (preventative, corrective, capital work) by asset subsystem, and by project. The key is that, as you can see below, the integrated business processes in SAP allow them to collect actual costs at exactly the same level.
This allows them to track actual against budget in real time, but the effect on budgeting has been transformational. Because actuals are captured at the same level and budgeted numbers, Nuon has been able to devolve the budgeting process from Finance to the Asset Management professionals. This means that the asset planners can build on their actuals from last year, factor in impacts of their Strategic & Tactical Asset Management Plans and then propose budget figures for the future. This results in more reliable budgets and a much higher degree of accountability and empowerment because the people tasked with executing against the budget own the bottom up inputs into the budget. Surely this is the essence of what the ISO 55000 standard is calling for in horizontal alignment between asset management and financial management.
The value of horizontal alignment
It might not appear quite as exciting as integrating sensors, drones and wearable technologies, but SAP Value Management benchmarking studies find that there are 24% fewer asset management staff required for organisations where maintenance systems are fully integrated with inventory management, MRO purchasing, reliability engineering, planning and scheduling, finance and maintenance reporting. SAP offers free self-service benchmarking to help you identify the valuable opportunities to target pragmatic financial integration especially if you have a point EAM solution.
So while SAP continues to simplify the internet of things for business in a hyper-connected world, there are transformational benefits for many Utilities by better integrating their existing Finance and Asset Management functions. SAP’s integrated financials and EAM suite is not a silver bullet but it makes speaking the same language across finance and asset management a lot more simple.