High-Performing Information Systems Aligned With Utility Business Strategy [Project #4316]
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1 High-Performing Information s Aligned With Utility Business Strategy [Project #4316] ORDER NUMBER: 4316 DATE AVAILABLE: June 2013 PRINCIPAL INVESTIGATORS: David W. Harris, Esteban Azagra, Rod van Buskirk, and Corey Williams This report describes the issues, approaches, and benefits to water utilities of implementing high performing information systems that are well aligned with utility business strategy and needs. For the purposes of this report, Business-IT alignment is defined as The highest level of shared vision between business and IT leaders about the contributions information technology solutions can make to the utility, followed by the most effective implementation of those solutions to achieve the desired result. The central hypothesis is that information systems can be better aligned with business needs and when they are better aligned the benefits to the utility will outweigh the costs. ALIGNING IT WITH UTILITY STRATEGIES Part 1, Aligning IT with Utility Strategies, describes the challenges and recommended approaches to better alignment primarily from the business perspective. It is recognized that the alignment process needs to be a collaborative effort involving all areas of management, in which promoting and sustaining relationships and dialogue between stakeholders is essential. Utility business leaders and other stakeholders can most readily identify the chronic and persistent information challenges faced by the utility, and utility IT leaders can assist in identifying potential solutions. In the process of exploring solutions, new ways to organize and perform work are likely to emerge. As the shared vision of business-it alignment becomes sharper and more refined, the potential and realization of business benefits will grow. Figure S.1 depicts the most compelling benefits that can be derived by improving business-it alignment. While information technology solutions will require capital and operating investments that compete with other utility expenditures, perhaps the ultimate measure of better alignment is a positive return on the IT investment.
2 Expected Benefits of Alignment Better Return on Information Technology Investments Efficiency Benefits Produce more with less input Effectiveness Benefits Elevate performance levels Benefits Enable better decisions Figure S.1 Expected Benefits of Effective Business-IT Alignment In preparing this report, utility business and IT leaders throughout North America were interviewed to gain their perspectives on the current state of business-it alignment and the areas of greatest need. The interview responses were mixed. At many utilities there is a moderate to high level of satisfaction with what has been achieved. However, in some areas, the majority of leaders questioned saw substantial room for improvement. In several focus areas, such as IT strategic planning and IT support for system users, there was a notable divergence of opinion between the utility business leaders and the IT leaders, which was indicative of a breakdown in setting and maintaining expectations for IT solutions. The interview reinforced the conclusion that business-it alignment at many utilities is not a unified and seamless endeavor. Instead, organizations struggle with bridging common gaps in alignment, as shown in Figure S.2. On the one hand, there is a chasm between the needs of utility business leaders to promote effective business processes and the technology offered by IT to support those processes. On the technical side, there is a gulf between the substantial capabilities offered by individual software applications at utilities, and the ability of IT to wire the systems together. Central to both gaps is the need for integration of business processes and utility data in essence, to provide a unified information system for all major business functions.
3 Figure S.2 Business-IT Alignment Chasm For many utilities, the approach to achieving better business-it alignment, and closing the gaps, has been a traditional combination of planning, oversight, and feedback for the IT function. Over the past 20 years, a more rigorous approach for alignment, known as Enterprise Architecture has evolved. Enterprise Architecture (of which there are several widely adopted approaches) typically consists of a framework for documenting, assessing, and planning all aspects of the organization s information needs. The frameworks tend to be complex, and many organizations that adopt an Enterprise Architecture approach will pick and choose, or simplify the frameworks to better suit their organizational needs. A comprehensive Enterprise Architecture is intended to provide a reference model for the utility that can guide business-it alignment and the effective implementation of IT solutions to achieve the desired results. Most Enterprise Architecture frameworks promote the development of different views of the organization. A functional organization chart is one view that is familiar to all. A business process diagram is another common view that is essential for understanding how work is organized within the utility and how tasks may flow across organizational boundaries within the utility as well as external entities. As shown in Figure S.3, the Architecture Diagram is a logical view that clarifies what systems are in use or planned, and how those systems must be interconnected to provide support for business processes.
4 Utility Performance Monitoring Customer Care & Billing Finance, Purchasing and Inventory Maintenance Enterprise Data Warehouse Enterprise Integration Capital Program Laboratory Information Geographic Information Control Historian SCADA and Distributed Control s Standard Enterprise Network Services File Storage, Data, Document, , Web Portal, Internet Utility wide Communications Network = pre built integration = utility specific integration Figure S.3 Example of High Level Architecture Diagram Finally, the Enterprise Architecture includes more technical views that are largely of interest to IT infrastructure specialists, but should be regarded as business critical; for example, an Enterprise Network Diagram shows the communications capabilities that must be sustained to make the systems and business process levels effective. In addition to focusing on Enterprise Architecture, a key process recommended to all utilities to enhance business-it alignment is strategic IT planning. The planning process, as shown in Figure S.4, involves all utility functions and requires significant information gathering. Outputs from the planning process include prioritized initiatives (typically organized as projects), a resource plan, and a change management plan.
5 Portions of the IT Strategic Plan will also provide necessary elements of the Enterprise Architecture (described above). Critical Inputs into Planning Process Where are you today? Strengths Weaknesses Opportunities Threats/Obstacles Where are you going? Vision Mission Goals Objectives How will you get there? Strategies Tactics Success Factors Best Practices How will you know you have arrived? Performance Measures Reporting Accountability Action Plans IT Strategic Planning Process IT Priorities in Utility Context Aligned IT Strategies IT Project Priorities IT Program Framework Resource Requirements Business Case IT Program Budget Organization Roles and Responsibilities Program Plan Prerequisites Schedule Dependencies Risks Commitment to Change Executive Advocacy Stakeholder Input Cross departmental relationships Governance Framework Critical Outputs from Planning Process Figure S.4 Critical Inputs and Outputs into the Strategic IT Planning Process Strategic IT planning is often undertaken in utilities every 3 to 5 years. However, a more continuous process is needed to sustain the defined initiatives and adapt to changing business needs. Strategic IT planning occurs in the context of IT Governance. IT Governance includes both an organizational structure, such as an IT Steering Committee, and a process for receiving, evaluating, and making decisions on high level IT issues and solutions. One purpose of IT Governance is to make sure the major decisions about IT involve the correct decision-makers. Accordingly, as shown in Table S.1, a Decision Rights Matrix is used to develop a clear understanding of the types of decisions to be made, and the roles of individuals or groups involved in the process. Once the Decision Rights Matrix is finalized, the IT Governance organization and processes are designed to support the decisions.
6 Role General Manager Department Senior Manager IT Steering Committee IT Leader Capital Procurements Committee Table S.1 Typical Utility Decision Rights Matrix IT Principles Provides Input Approves Develops IT Standards Provides Input Develops and Approves IT Support Procedures Provides Input Develops and Approves IT Annual Plan and Budget Approves Provides Input Approves Develops IT Capital Investment Approves* Provides Input Provides Input Recommends and Approves* Approves* *Investment approvals according to utility s policy for financial delegation of authority INFORMATION TECHNOLOGY OPPORTUNITIES Part 2 of the report presents a cross section of IT related opportunities for water utilities. IT opportunities evolve over time as technology innovations spur software and hardware changes, as well as new methods of communicating. Water utilities are advised to reconsider the value of their existing systems through routine IT planning and governance. Some of the major technology developments are shown in Figure S.5.
7 Figure S.5 Significant IT Developments over Time One characteristic of today s evolved information systems is that their productive use is not confined to a single department within a utility. Figure S.6 depicts the major information systems typically used, and the utility departments (functional areas) that will benefit from using the systems. In most cases, there will be two or more departments benefitting. This characteristic suggests there may be a broad set of stakeholders for any given information system. As opportunities for new or upgraded information systems are considered, all potential stakeholders should be engaged, educated, and involved in the assessment.
8 Functional Areas that Derive Benefits Water Operation Customer Service Asset Water Quality Financial Supply Chain Capital Project Human Resource Core Information s Industrial Control /Process Control P S D S Laboratory Information P D S P Computerized Maintenance S P P Geographic Information P P P P S Capital Program D D P S P P D Customer Information & Billing S P S D P Financial Enterprise Resource Planning D S D D P P S S Human Resources/Payroll D D D D P D D P P S D Primary beneficiary of this system Secondary beneficiary of this system Provides data for reporting and decisions Figure S.6 Benefits of Core Utility Information s IT opportunities are described in detail for a select group of utility functions: Operations Industrial Control Maintenance Computerized Maintenance Customer Service and Billing Customer Information and Billing Meter Reading Automated Meter Reading Finance and Human Resources Enterprise Resource Planning (ERP) Engineering and Projects Capital Program Geospatial Asset Geographic Information
9 Water Quality and Compliance Laboratory Information Each section presents information about an IT opportunity in a consistent format. The subsections include: An introduction to the technology what type of system is being described. A brief recap of business benefits associated with successful system use. Trends that have affected the technology what s new with these systems. Implementation considerations for a new or upgraded systems project. In addition, there are IT opportunities that cut across all utility functional areas. Two notable systems are described in depth: Integration and Business Process s the standard protocols and software responsible for moving data between separate systems and orchestrating services provided by separate systems so that business processes become as seamless as possible. For example, an integration system can be used to ensure customer service, operations and maintenance teams participate in an end-to-end utility process for managing system shutdowns, customer notifications, and repairs. Business Intelligence and Reporting s software and databases that enable utility performance management, analytics, and reporting of data combined from multiple systems. These systems are used to create management level dashboards and report on key performance indicators. INFORMATION TECHNOLOGY IMPLEMENTATION Part 3 of the report focuses on IT implementation practices that will most likely benefit utilities. Utilities are advised to consider that IT implementations, and particularly software-based systems, are implemented in ways that are both similar and dissimilar to capital design and construction projects. Accordingly, the methods for procurement and management of implementation may be different. Software selection and procurement is described in detail. The recommended process includes Identifying stakeholders and assembling a cross-functional team Gathering requirements and creating business process models Formulating system testing and validation plans Assembling and administering a request for proposals Crafting a selection plan Executing the selection plan One key difference between software projects and capital construction projects is that leading commercial software products are highly malleable and can adapt to a wide
10 range of business requirements. With one product, many outcomes are possible. The traditional sequential implementation approach for these products is too constraining. A more flexible and adaptive approach may be more appropriate, as shown in Figure S.7, however, extra management attention is required to successfully execute such an approach and avoid major risks. Figure S.7 Traditional Methodology and EPIC Process To manage the elevated risks attendant to IT implementations, a formal approach is recommended for IT program and project management. The formal approach starts with development and approval of a Project Charter, which is essentially an agreement among stakeholders with respect to the scope, justification, and major resource commitments. Beyond the Project Charter, a proven project management approach is advisable, such as the one defined by the Project Institute Body of Knowledge (also known as PMBOK). Implementation of IT solutions is both a technical challenge and an organizational challenge. More often than not, the technical issues of system implementation are solved before the organization fully adopts and effectively uses the system. Organizational Change is the discipline of proactively planning and managing the impact of change on the organization. The motivation for doing so is illustrated in Figure S.8, which depicts the effects of a major change over time on people and organizational productivity. Typically for IT projects in which employees are asked to use a new system, business performance will decline during initial use. But the goal is actually an improvement in performance. Organizational Change seeks to minimize the depth of decline and shorten the timeframe for recovery so that the benefits of improved performance are realized sooner.
11 Figure S.8 Performance through OCM MANAGING INFORMATION TECHNOLOGY The practice of managing the information technology function in a water utility is similar to many other organizations. Several best practices are presented in detail in Part 4, because their adoption by most utilities will result in a better return on the IT investment and fewer management issues related to IT. IT Service IT Service is the process by which the IT organization, in collaboration with all other departments, defines the services it offers, commits to service level agreements, and then executes the necessary system operations, maintenance, and support functions to provide the agreed level of service. The emphasis is on making an explicit connection between the business needs for IT related services, and the technical work performed by IT technicians, engineers, and analysts. The most common customer-facing service provided by IT is a Helpdesk ; however, the typical organization will define 20 to 30 services with corresponding service levels under the IT Service umbrella, including system availability and response times. IT Service is executed using the familiar Plan-Do- Check-Act approach, as shown in Figure S.9.
12 Figure S.9 IT Service Improvement Processes IT Efficiency and Cost Reduction An IT organization should have an ongoing process for reducing total cost of ownership for IT. Due to innovations in the past 10 years, IT managers have many opportunities to reduce costs and improve efficiency. Some of these initiatives have the added advantage of contributing to lowering the carbon footprint of a utility. These technology investments, many of which are more recent innovations, include Virtualization Software as a Service Cloud Computing Service-Oriented Architecture Green Computing Initiatives Storage Technologies Mobile Computing Data Governance Utilities have often been described as data rich and information poor. This may be attributed to a lack of system integration, or it may simply be the legacy of compartmentalized management of data, which leads to redundancy, inconsistency, and pockets of data. Data Governance is the process by which an organization classifies and manages data to achieve appropriate confidentiality, availability, and integrity of information assets across the entire organization. Data Governance encompasses multiple focus areas, as shown in Figure S.10.
13 Figure S.10 Multiple Focus Areas for Data Governance While IT Governance defines management decision making across all IT resources, Data Governance is a more specialized technical function focused specifically on the information assets of the organization. The business objective of Data Governance is to ensure that information is properly classified and proper controls are in place to ensure the necessary confidentiality, availability, and integrity of data across the utility. RESEARCH PARTNER: U.S. Environmental Protection Agency
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