The Changing Landscape of Energy & Utilities
Oil prices have declined 50% within the last few years1.
Natural gas prices are following suit, with the excess supply in the market. How low will prices go? How long will the price decline last? Will demand increase or decrease? Will the cost structure of these industries stay the same or change? And, how will they change? These are the burning questions of the day.
Operators know that to provide services and products for the future, the planning and investment must continue today. Throughout the supply and demand (delivery) chain, oil, gas, power generation, and pipeline projects take years to develop, and price fluctuations are all a part of the process. RCG has worked with many energy and utilities firms in our 45- year history, and we have helped these firms with solutions to help manage both risk and uncertainty through both boom and bust.
Energy and utilities firms have to manage these long project lead times through a dynamic global economy, increasing population, changing population densities, aging infrastructure, and new and changing technologies. With population growth and concentration, energy demand will continue to increase. Weighing the risks versus benefits of new projects, new products and how much capital to invest, firms also have to consider regulatory, safety and environmental concerns. Balancing the need to supply consumers with the need to do it profitably is what RCG consultants in our Energy and Utilities Solutions help client firms navigate. Our current solutions are helping client firms address the following common challenges:
- Aging workforce and technology
- Market & regulatory changes
- Increasing cost of assets
- Process & data silos
In this white paper, we will discuss two of our over-arching solution themes that have become a focus of our Energy and Utilities Solutions group:
- Better decisions
- Improved productivity
Following a brief discussion of our perspectives on better decisions and improved productivity, you can read more about some recent engagements we’ve performed for energy and utilities clients and learn more about RCG’s capabilities that reach beyond specific solutions discussed in the following sections and where else we are helping clients navigate the uncertainty and risk in their own sectors. We anticipate beginning or continuing discussions with you.
These issues cross sector boundaries into any firm delivering on an energy or power service. Supply chains are global, whether you’re talking about supply of coal or natural gas to fire an energy production facility, supply of equipment to run these or similar facilities or field operations, supply of steel to produce midstream oil and gas transport, and the list goes on… supply of raw material and manufactured equipment crosses country boundaries. Threats from competitive firms and new technologies have never been greater, including having nation-state sponsors. Never before has a new approach to business more important. One of the first recommendations we make to our clients is to get control of data.
The data that reside inside a firm often is structured along organizational boundaries or silos. As bureaucracies in large firms formed and solidified over years and decades and information technology became more common, these IT systems began to mirror the bureaucratic structure. As we see in so many firms we support, these silos of data cause numerous problems, including:
- Blind spots in cost structures
- Unrecognized innovation potential
- Lack of visibility to internal best practices
Breaking down these silos yields one benefit that executives across functions strive for: BETTER DECISIONS.
To help firms make better decisions, RCG has developed an approach to breaking down data silos to capture the unrecognized benefit of often hidden or unknown business data. The approach, at its core, involves two components:
- Platform Optimization
- Advanced Analytics Implementation
In our experience with clients across multiple sectors addressing multiple problems, taking what is commonly referred to as a “big data” approach is a way that positions a firm for future benefit in the most cost effective manner. Big data has become a buzzword for many executives in energy and utilities sectors. By big data, we typically refer to both the data platform and techniques to managing data that allows a nimble and fast approach to getting value from that data. In our Strategic Roadmap approach, we seek to get data from multiple sources into a single platform so that, then, we might work with our clients to extract new value and insights from that data. The diagram below represents the major efforts in our approach.
The two components of the Strategic Roadmap approach can be broken into four phases:
- Optimization Roadmap: We will identify offload candidates, create architectural blueprint, implementation roadmap, business case and ROI.
- Optimization Implementation: We will execute Data and ETL/ELT off-load, active archive, implement data ingestion and data service
- Enterprise Enablement: Enterprise access, enriched data sources, service orchestration and data virtualization
- Data Value Realization: We will provide insight, data in motion, advanced analytics, information value creation, and visualization
Organizations have been building Enterprise Data Warehouses (EDW) for more than a decade. These EDW platforms have become de-facto storage for all enterprise data and typically reside on expensive massively parallel processing (MPP) databases, like Teradata, Netezza, DB2 or Exadata. Unused data in the EDW is being stored on expensive storage devices and data transformation (ELT/ETL) processes are consuming large amounts of CPU resources on these MPP platforms. It is not unusual for as much as 60% of CPU capacity to be consumed by data transformation and load processes, for more than 50% of data to be unused, and 95% of queries only access the most recent 2 years of data.
Increasingly enterprises are challenged with capturing large amounts of internally and externally generated data exceeding current EDW capabilities. Businesses are required to collect this data from an ever-expanding number of sources (social media, devices), in a wide variety of formats (structured and unstructured) at digital speeds. Today’s modern enterprise requires implementing new data architecture to avoid expensive MPP upgrades, optimize overall EDW costs and support enhanced data and analytics capabilities. ApacheTM Hadoop® reduces costs by deploying on commodity servers and storage devices and scales incrementally.
RCG provides an EDW Optimization solution that includes products from Hortonworks and Appfluent that assists our clients with effective implementations of Hadoop to augment their current EDW architecture to achieve the following benefits:
- Reduce cost and improve performance by off-loading EDW data and processing to Hortonworks Data Platform (HDP)
- Implement a platform that scales incrementally using low cost hardware and software
- Support unstructured, semi-structured and structured data in a single analytics platform
- Enable new analytic capabilities providing insight that is not possible to achieve from current environments
- Provide seamless access to data for analysis and business applications MODERN DATA ARCHITECTURE
RCG and Hortonworks are assisting our clients to reap the benefits of transforming their legacy data processing and analytics into a modern data architecture that incorporates HDP to allow organizations to collect everything, dive in anywhere and provide key stake holders flexible access to all enterprise data. This architecture provides benefits in the form of efficiencies and new capabilities not available in legacy solutions.
- Efficiencies: Significantly lower storage cost and optimization of data processing workloads such as data transformation and integration
- New capabilities: Flexible “schema-on-read” access to all enterprise data, and multi-use and multi-workload processing on the same sets of data (batch and real-time).
Optimizing where your data resides can facilitate breaking down barriers, which can yield insights that were not available in each data silo. The flexibility of RCG’s solution further allows you to combine new data sources, such as, weather, consumer data, raw market cost data, and benchmarking data, into this new data platform. By optimizing your data platform, you have now positioned your firm to be flexible and adapt to changing market and economic conditions with a cost-efficient data platform for the future. In the following section, you’ll see how the data that you’ve just optimized is leveraged for real value!
Advanced Analytics Implementation
Every business manager and executive is overwhelmed with data. What data is important? Which data are even relevant? Analytics is the capability that puts business data to work for you. This includes metrics, alerts to help business people know what situations need their attention, dashboards for managing business performance, and deep‐dive investigations into data and what can be learned from it… these learnings yield BETTER DECISIONS.
Insight occurs when analytics provides you with an intuitive understanding that allows you to see relationships you didn’t suspect and gives you a new perspective on how to improve a business situation. Analytics that provide this insight is a path to competitive advantage for business today… and the future.
Leveraging the optimized platform from the previous step, you are now prepared to enable your entire enterprise to make better decisions by enabling these analytic solutions, creating custom decision applications, or integrating to your existing line of business or enterprise resource planning applications. Examples of these types of analytic solutions include:
Successful Data Delivery solutions evaluate how information is used, creating a clear understanding of the business and functional requirements. Equally important is determining of how various constituencies (power-users, report-viewers, and executives) use and share information in and outside the organization. It is this understanding that allows “insight” to be drawn from analytics. By mapping out these process details, RCG learns exactly how to embed Data Delivery solutions into a company’s daily processes. In every case, the information must be carefully evaluated and its quality and integrity assured.
The increasing amount of data, metrics, reports, and other objects can make finding the right information overwhelming. To help with this problem, the ability to effectively search has become an important element of Data Delivery. Search establishes the mechanisms that index and find data and analytic elements by name, object, and other criteria.
Standard Business Intelligence analytics, like those found in reports, Dashboards, and Scorecards, are based on a structured view of data, created with a view of the business and how it operates in mind. These traditional analytics do not, however, address the richness of data or what might be found if data were analyzed in an unstructured manner. With data discovery, we look for unstructured, statistical, and exception/outlier relationships in data. A classic but rudimentary example is market basket or correlative analysis. Other examples include the use of data visualization to identify and analyze outliers, as well as, text analytics to perform sentiment analysis.
To be fully effective, Performance Management KPIs and metrics must support “drilling” down from C-level dashboards to dashboards containing related but different data used in other parts of the organization. This hierarchical structure or architecture of KPIs, metrics, and dashboards is critical for them to function properly.
Dashboards and Scorecards
The popularity of Dashboards and Balanced Scorecards has made them an important part of the enterprise data landscape. They quickly and succinctly display metrics that measure and monitor business performance.
Complex Event Processing
CEP allows decisions to be made without human involvement by detecting and analyzing event relationships, causality, and timing, based on patterns. Fraud is the bestknown example of CEP. Another is the evolving area of real-time ad placement for web sites and mobile applications.
Data Stream Analytics
Standard BI analytics processes data at rest, typically in a data mart, data warehouse, or even an application. However, Big Data volumes are too great for standard BI processing. Rather, data must be analyzed as it “goes by”, which Data Stream Analytics do.
According to Technology Review, often times the business need is not spelled out before solution development begins. This lack of clarity in business requirements leads to expensive and difficult changes later in the delivery cycle, causing project delays, cost overruns, and failure to gain business confidence and acceptance after go live.
Aligning the Organization
Business Alignment is the perennial chart‐ topper on top‐ten lists of IT issues. It's tough to keep business and IT aligned as business strategies and technologies evolve continuously driving the need for system improvements, functional enhancements and new business‐IT projects.
RCG has matured a model driven approach to developing business requirements. This approach provides the capability for business personnel to define Business rules, functions and processes across three levels of detail (blue prints, functional requirements and functional designs) to be delivered to IT for implementation.
The Business Process Innovation Solution from RCG is built upon RCG’s Business Consulting Practice, providing solution offerings that address Roadmaps that help align Business and IT strategy, Business Process Innovation, Governance, Portfolio Management, and M&A Due Diligence. The heart of this practice is ensuring the right relationships between the building blocks of Technology and the Business exist.
Business Process Innovation is dictated by business strategies and it in turn dictates the Application and Technology Architecture and the projects and programs that are used to fulfill the business’ IT needs.
Supporting with Applications
The RCG Architectural approach utilizes four layers of abstraction. Business Process (Business Architecture) is the first and fully defines the requirements for the Information, Applications & Infrastructure Architecture layers as appropriate. RCG ensures that Governance and Quality wraps all layers as required by the business.
Organizing for Transformation
Too often, organizations implement systems and reports, hoping that those systems and reports will make processes and decisions better, less expensive, and happen more quickly. However, while aligning the organization and architecting systems around the organization is good, governing the discrete implementation effort and governing the ongoing operation is where true transformation occurs. Implementing a governance system, or a Program Management Office, is critical for visibility and accountability. RCG has helped numerous firms implement these kinds of transformative solutions. We start with questions before starting your governance program:
- What business purpose is the governance process to serve?
- What outcomes will governance produce?
- How will you know that your governance process is successful?
Desired outcomes and measures provide a basis for a governance dashboard for monitoring your governance program’s effectiveness and avoiding bureaucratic tendencies that do not improve the business. While enforcing compliance, driving business value, controlling IT costs, and risk management are important reasons for governance, using governance as a tool to improve the business is the primary reason for management to invest in it.
There are many aspects of business operations and management that can be served by effective governance. These aspects include:
- Business Processes – governing processes ensures compliance, control, consistency, and management of core processes used in the business
- Architectures – governing architectures addresses the design ‘blueprint’ that binds business processes, applications and services, and data, together
- Data – governing data addresses master data, metadata, data quality, and data access in applications, analytics, reporting, B2B, and self- service for customers, suppliers, and employees
- Applications and Services – governing business processes for consistency requires governing the applications and web- and SOA-services that support them
Transforming an organization requires thinking end-to-end… aligning the organization and setting up a system to automate tasks is easy. Monitoring for effectiveness requires a discipline that must be thought through. RCG consultants have developed a number of models to help you think through how to not only plan for this level of governance, but our models can be managed operationally for ongoing monitoring… where true transformation occurs.
Examples of Energy and Utilities Solutions
Following are examples of a few of our recent engagements where we’ve helped firms make better decisions and create lasting productivity improvements:
Utility Systems Quality
Assessed maturity of software quality practices and provided a roadmap and methodology for improving the predictability and quality of systems
Smart Energy Portal
Developed portal to provide residential and commercial customers with online access to information from new smart meters
Oilfield Services Dispatching
Improved system for tracking & reporting dispatching of labor and equipment
Upstream Business Process Management
Developed process to integrate and manage information for oil well lease, production & accounting
Plant Performance Dashboard
Provided better visibility into the company operations with a dashboard for power sales. Resolved inconsistent power plant performance metrics
Well Information Management
Developed portal to access information across all aspects of well production
Utility Billing & Inventory
Developed a pole attachment billing and inventory system which provides secure tracking of Pole Attachment changes and accurate billing reports and analysis of pole rental business
Developed a demand forecasting system which provides timely and accurate information to more effectively run the lubricants business resulting in increased profits.
Utility PMO Healthchecks
Provided over a dozen healthchecks of PMO projects. Trusted advisor and go-to healthcheck provider for projects >$10 million.
Improved the process for generating &accessing production and financial reports for petroleum engineers
Employee Content Management
Increased employee efficiency by enabling employee self-service on the intranet and improving content management
1. IndexMundi is a data portal that gathers facts and statistics from multiple sources and turns them into easy to use visuals. www.indexmundi.com.
2 World Energy Issues Monitor 2015, World Energy Council. www.worldenergy.org/data/issues