ARC STRATEGIES. Information Management Strategies for Asset Lifecycle Management VISION, EXPERIENCE, ANSWERS FOR INDUSTRY JANUARY 2010

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1 ARC STRATEGIES By Sid Snitkin & Bob Mick JANUARY 2010 Information Strategies for Asset Lifecycle Executive Overview... 3 The Staggering Costs of Poor Information in ALM... 4 What Information Is Needed for ALM Excellence?... 7 ALM Information Challenges Developing an Appropriate ALM IT Strategy Standardization Is Fundamental VISION, EXPERIENCE, ANSWERS FOR INDUSTRY

2 Asset (Object) Attribute Value Note ID P Type CPump DFlow 200 CFM PR-MAX 3.5 Material Ni-222 Internal ARC Strategies January 2010 Document Formats Paper Image DWG, XML Std XML Organized by Documents Files Drawings P&ID Installation Electrical Piping Virtual Views Meta Data P P D Organized By List or Object Asset (Object) Database Data Instrument Lists Equipment lists Bill of Materials Assemblies Sub-Assemblies Standards Performance History Virtual Models Data Formats Proprietary RDB Object DB XML Std XML Attribute Value Note ID Type P CPump Documents Manuals Operating Procedures Maintenance Procedures Formal Structures DFlow 200 CFM PR-MAX 3.5 Material Ni-222 Internal Information Complexity Requires an IT Strategy for Every ALM Process Project Information (PIM) ALM Information (ALIM) Asset Information (AIM) Asset & Project Portfolio Info (APPIM) Information Sharing Demands Coordinated ALM IT Strategies 2 Copyright ARC Advisory Group ARCweb.com

3 Executive Overview Information is a quintessential part of every Asset Lifecycle (ALM) process. Asset portfolio managers need information about future customer needs and the status of existing assets to evaluate and refine capital project proposals. Project teams need analysis and design information at progressively refined levels to select the right Information is a quintessential part of solutions and to coordinate many different every ALM process. project activities. They also need timely feedback on all activities to keep expenditures and To optimize performance, every ALM schedules on track. Operating and maintenance process needs an IT strategy to ensure that each person and system has fast, personnel need information about the equipment to optimize its use and availability and efficient access to the right information for their tasks. information about quality and resource consumption to maximize the return on assets. As information needs vary significantly across ALM processes, organizations need To meet these needs, organizations need IT separate IT strategies for each process. strategies that ensure that all ALM information But some information is common to is complete, comprehensive, and granular multiple ALM processes, so they also need enough for each process and user role. They overriding governance to ensure that all exchanges are effective and efficient. also need to ensure that this information is accurate and readily accessible so that stakeholders This ARC report discusses the information can confidentially use it for decision-making. management challenges inherent to ALM and describes the key elements of a As information needs vary significantly across corresponding ALM Information the major ALM processes, organizations need strategy. unique IT strategies for each process. But information sharing is fundamental to ALM, so they also need an overall Asset Lifecycle Information (ALIM) strategy to ensure effective and efficient information exchange. This report discusses the key issues that organizations must address as they develop their own ALM Information strategies. It also expands on various ALM concepts introduced in earlier ARC reports on Asset Lifecycle. 1 1 See Asset Lifecycle Performance : Managing Performance Across the Asset Lifecycle - ARC Strategy Report, August Copyright ARC Advisory Group ARCweb.com 3

4 The Staggering Costs of Poor Information in ALM Various studies show that poor information management is a critical problem for stakeholders across the asset lifecycle. During project activities, it significantly increases capital costs and extends project schedules. The impact is even worse for operations and maintenance, Poor management of information is not a new problem in ALM and the impact of this on value chain stakeholders has been the focus of various reports... Probably the most well-known is the 2004 NIST report. This identified annual losses of $15.8 Billion for a small sample of plants in North America. This represents a 4.2 percent penalty in as it limits plant availability and raises operating costs throughout a facility s extensive lifetime. Poor information is also the root cause of many environmental and safety issues that damage the reputation and survival of organizations. Probably the most well-known study in this area is the 2004 NIST report 2 that examined the Cost of Inadequate Interoperability in the U.S. Capital Facilities installed cost for every facility Industry. This study defined interoperability as the ability to manage and Owner/operators incur $10B of this loss communicate electronic product and project data on an ongoing basis, which would between collaborating firms and within individual represent a 2.8 percent penalty in ROA companies design, construction, maintenance, and based upon these installed costs. business process systems. NIST estimated the increased CAPEX and OPEX cost of poor interoperability across the complete design, build, and operate supply chain to be $15.8 billion per year. As they further note, Of these costs, two-thirds are borne by owners and operators, which incur most of these costs during ongoing facility operation and maintenance (O&M). In addition to the costs quantified, respondents indicated that there are additional significant inefficiency and lost opportunity costs associated with interoperability problems that were beyond the scope of our analysis. Thus, the $15.8 billion cost estimate developed in this study is likely to be conservative. The NIST study covered projects representing a capital spend of $374 billion. Combined, the additional CAPEX and OPEX costs that the NIST team identified represented a loss of 4.2 percent of installed cost. And, if an owner/operator used installed cost as the basis for evaluating financial per- 2 Cost Analysis of Inadequate Interoperability in the U.S. Capital Facilities Industry, National Institute of Standards and Technology, NIST GCR , August Copyright ARC Advisory Group ARCweb.com

5 % of Group 40% 35% 30% 25% 20% 15% 10% 5% 0% formance, the additional OPEX costs suggested by this study would represent an ongoing penalty of 2.8 percent in ROA 3. To appreciate the NIST report fully, it is useful to also look at the kinds of problems it attributed to poor interoperability. NIST classifies these according to the following types of activities, which are useful for analyzing any information management issue: Avoidance - efforts undertaken to prevent or minimize the impact of technical interoperability problems before they occur. Examples include costs for redundant CAD/CAE systems, maintaining paper backup systems, etc. Mitigation - activities in response to interoperability problems. Often these represent the largest portion of interoperability costs. Examples include costs related to reentering information into multiple systems, redesign and rework, verifying information, etc. Delay that arise from interoperability problems that, for example, delay the completion of a project or increase the length of time a facility is not in normal operation. Examples include costs for idle resources, profits lost due to delay, losses to customers and consumers due to delay in the availability of products and services, etc. A less rigorous survey conducted by Intergraph and ARC at the Intergraph 2007 conference in EPC O/O Nashville, TN, showed similar results. Participants in this survey felt that the costs of poor interoperability (with a similar meaning as the NIST report) averaged 3 percent of plant revenues (3 percent of revenues for a 100,000 bpd refinery was approximately $60 million per year in 2007 when the survey was taken). The opinions expressed in this survey were relatively consistent whether the respondent was an owner/operator or EPC. While the survey results Intergraph-ARC Survey (2007) were not analyzed to determine the source of these losses, the potential savings are obviously large and compelling. How much does poor Interoperability with Major Project Engineering cost your Plant each year? Less than 1% of Plant Revenues 1 to 3% of Plant Revenues 3 to 5% of Plant Revenues 5 to 10% of Plant Revenues More than 10% of Plant Revenues 3 This estimate was not part of the NIST study itself. It is the author s calculation based upon the assumption that the O&M problems identified in the study persist and that ROA is calculated on the basis of installed cost. ARC s research indicates that many of the problems noted in the report do indeed persist as the organization never has the time or the funds to completely recover from the startup situation. Copyright ARC Advisory Group ARCweb.com 5

6 Studies of performance in operating facilities are not as dramatic or broadly publicized, but they clearly reinforce the seriousness of information problems in ALM. For example, wrench time, a common measure of maintenance efficiency, is commonly found to be around 25 to 30 percent in complex facilities, like process manufacturing and power plants. Wrench time reflects the time that technicians actually do productive work on the equipment (i.e., inspecting and repairing) and Studies in maintenance consistently many consider 60 to 70 percent to be world class. show a 30 to 40 percent efficiency gap Poor information and poor access to information due to poor information management... are frequently cited as major reasons for the gap. This is a direct labor cost to owneroperators. More importantly, this cians spend 40 percent of their time just looking for Other studies indicating that maintenance techni- affects the time it takes for shutdowns, information, searching for parts, etc., substantiate turnarounds and outages and for this. emergency repairs resulting in lower facility availability... Obviously, this gap in maintenance efficiency is an additional cost to owner/operators. More importantly, poor wrench time results in longer Good information management is also vital for organizations to meet their EH&S goals. shutdowns, turnarounds, and outages, and more time for emergency repairs. These translate into lower facility availability. When many companies are sweating their assets to meet demand with minimum investments in facilities, lost availability converts directly into the loss of significant revenues and profit. While it s not easy to convert EH&S (environmental, health and safety) concerns to financial costs they clearly represent a top priority for organizations operating complex facilities. Availability of asset information is vital to ensure that people follow defined procedures, and crucial for identifying the root cause of incidents. In many industries, this alone can justify making whatever investments are necessary to manage ALM information properly. 6 Copyright ARC Advisory Group ARCweb.com

7 What Information Is Needed for ALM Excellence? Information is a quintessential part of every Asset Lifecycle (ALM) process. Physical and human asset productivity is directly affected when people cannot conveniently access and use the volumes of information they need to do their work. In addition, they must be able to trust this information and effectively use it in their workflows to achieve maximum efficiency and avoid costly errors and rework. Information Needs Vary Across the ALM Processes Responsibilities vary significantly across the three major ALM processes and, not surprisingly, each process has unique information requirements. Schedules Budgets Analyses Permits Designs BOMs POs Contracts Status Reports etc. Project Performance (Design & Build) Handover Asset Performance (Operate & Maintain) Analyses Permits Designs Procedures Practices Recipes Materials Contracts Warranties History etc. Funded Projects Asset Portfolio (Evaluate & Select) Modification Requests New Facility Requests Information Needs of the Key ALM Processes Individuals in Project Performance (PPM) are responsible for bringing new assets on stream within given cost/time/quality constraints. While organizations often outsource much of the actual work, owner/operators still need many skilled, expensive people to manage their contractors and suppliers. To do this, they need to monitor various budgets and schedules; review and approve volumes of technical information; acquire permits and track compliance with myriad regulations; monitor complex contracts; evaluate bids and expedite purchase orders; track materials and coordinate site activities; verify compliance, release payments, and closeout contracts, etc. Copyright ARC Advisory Group ARCweb.com 7

8 Asset Performance (APM) is responsible for optimizing returns from assets after they are commissioned and ensuring that they perform safely, profitably, and responsibly throughout their expected lifetime. To achieve these goals, APM personnel need information about the equipment and its capabilities; procedures for safe and efficient use and maintenance of all equipment and infrastructure; MRO bills of materials, inventory reports and supplier lists to ensure efficient preventive maintenance and repairs; warranties and service contract agreements; etc. Individuals in Asset & Project Portfolio are responsible for optimizing the long-term performance of all of the organization s asset investments and capital resources. They need information to help them evaluate the costs/benefits of modifications and new opportunities, identify those that offer the best risk/return, and coordinate implementations to minimize service disruptions and manage cash flow. Their information needs include project histories, current asset status and performance, forecasts of customer requirements, trends in the costs of materials, the availability of labor, and so on. Even at this high level of analysis, it is clear that organizations need to provide their ALM teams with a Experienced organizations understand ALM information needs and have mechanisms in place to collect, tremendous amount of information. This includes catalog, and maintain much of the reference data about every asset s functional capabilities, physical design, and what a person needs to needed information do to assemble/disassemble, operate, and maintain But few do this in a way that enables the equipment in a safe and efficient manner. It also performance to be optimized and includes status information about projects and assets that can enable people to control performance, productivity maximized. and historical records that can help them determine the root cause of problems and incidents. Having Content Is One Thing, Using It Is Another Experienced organizations understand ALM information needs and have mechanisms in place to collect, catalog, and maintain much of the needed information. But few do this in a way that truly enables the organization to optimize performance and maximize productivity. This only occurs when people trust the information enough to use it to make better decisions and can conveniently integrate it into their daily workflows. This requires that all of the organization s information resources satisfy the following criteria: 8 Copyright ARC Advisory Group ARCweb.com

9 Complete Includes all information needed to address every issue that users would reasonably encounter in their work Accurate Information properly reflects the actual situation with respect to the design of assets, purchase order content, contractor scope, material inventories, site status, project and operating cost according to area and activity, etc. Timely Information properly reflects the current situation, with measures of real-time that are appropriate for the topic under investigation Consistent All users find the same values and statements about every topic of interest in all documents and databases used in their work Accessible All information and information systems are organized to allow authorized users to quickly and conveniently access the information they need, wherever they need it, whenever they need it, using only reasonable knowledge about the topic. The systems must also present information in a way that meets their individual needs and perspectives. While stringent and idealistic to a certain degree, these requirements call for nothing more than what a reasonable person would expect to be able to perform Asset Lifecycle assignments efficiently and effectively. From an IT perspective, many of these criteria fall under the category of data quality. Organizations that support these requirements provide high quality ALM information to their people, enabling their ALM teams to optimize the performance of all assets and projects. Copyright ARC Advisory Group ARCweb.com 9

10 Asset (Object) Attribute Value Note ID P Type CPump DFlow 200 CFM PR-MAX 3.5 Material Ni-222 Internal ARC Strategies January 2010 ALM Information Challenges Information management is a critical issue for every modern organization and encompasses a variety of processes. These include collecting information from one or more sources, storing and taking care of information, and distributing information to one or more audiences. Information management also includes organizing and controlling the structuring, processing, and delivery of information. Good information management provides high-quality information as defined in the previous section of this report. To achieve this goal for ALM information, the organization must have effective strategies in place for a variety of issues characteristic of the kinds of information that we find in ALM. ALM Information Comes in Many Forms and Flavors Every ALM process has to deal with legacy and current information in a variety of forms like paper documents, scanned images, CAD drawings, data tables, etc. While much of the new ALM information an organization receives and generates will be in electronic form, there will still be a variety of formats, spanning various image formats, multiple versions of Microsoft Document Formats Paper Image DWG, XML Std XML Organized by Documents Files Drawings P&ID Installation Electrical Piping Virtual Views Meta Data P P D Organized By List or Object Asset (Object) Database Data Instrument Lists Equipment lists Bill of Materials Assemblies Sub-Assemblies Standards Performance History Virtual Models Data Formats Proprietary RDB Object DB XML Std XML Attribute Value Note ID P Documents Manuals Operating Procedures Maintenance Procedures Formal Structures Type CPump DFlow 200 CFM PR-MAX 3.5 Material Ni-222 Internal ALM Information - Many Forms, Many Complex Relationships 10 Copyright ARC Advisory Group ARCweb.com

11 Office documents and spreadsheets, proprietary data files, relational data bases, XML messages, PDF files, etc. Some of this information will be structured (where individual items are understandable by IT solutions) but much will also be unstructured (where the file represents a single entity that may be viewed, but not automatically decomposed into its constituent information items). Information Linkages Pervade ALM Information Complex information linkages are a particularly challenging characteristic of ALM information. Every document and data item will generally be related to many other documents and data items. This complex network of many-to-many relationships has to be made explicit and managed to enable efficient navigation and effective change management across related information. Complex information linkages are a particularly challenging characteristic of ALM information and modeling these relationships is non-trivial Some uses will favor an asset-centric data model, where all information is linked to all of the assets that it relates to so that these links can be used in reverse to access all information about each asset. Modeling these linkages is non-trivial. Some cases will favor an asset-centric data model, where all information is linked to all of the assets that it relates to so that these links can be used in reverse to access all information about each asset. Good asset-centric data models also include linkages that support a variety of asset hierarchies that people can use to navigate quickly across assets according to their own particular perspectives, like physical location, asset classes, system, etc. Asset-centric modeling is almost always Mapping between different asset definitions is also necessary, but not sufficient to address commonly required to enable information sharing all of the information linkage challenges across groups. For example, a project team may in ALM. Data models that reflect Project assign a single tag number to a purchased system, and Physical Processes can be equally but the asset management group will likely consider this to be multiple maintainable assets. important according to the user s role. Conversely, a project team may tag every separate pipe spool to facilitate procurement and construction planning, while the asset management organization treats them all as one combined piping system for their inspection and maintenance activities. Financial analysts will also have their own way of grouping assets into depreciable bundles. Asset-centric modeling is almost always necessary, but it is not sufficient to address all of the information linkage challenges in ALM. Many users will Copyright ARC Advisory Group ARCweb.com 11

12 need Project and Physical Process centric data models that help them navigate through the maze of budgets, schedules, contracts, procedures, analyses, reports, and so on that cannot be easily related to specific physical assets. Even where asset-centric linkages are possible, they still offer little benefit to users who are simply interested in information that is related through completely different criteria like suppliers, contractors, issues, incidents, etc. A proper ALM information management strategy identifies and supports the linkage needs of all ALM stakeholders. Information Duplication Presents Additional Challenges Information duplication is extremely common in ALM information, particularly when information is managed as documents. This creates additional linkage and change management problems. For example, a maintenance manual will often include copies of relevant drawings and circuits to ensure that the user has all the information they need, in one place, to do their work safely Information duplication is extremely common in ALM information, particularly when information is managed as and properly. While this makes the document selfcontained, it complicates change management and documents, and this creates additional linkage and change management means that links must be maintained so that a problems. change in one document triggers changes in all that reference it. Change management is particularly challenging during the design of a new Change management is particularly challenging facility and this prompted use of datacentric approaches within modern plant during the design of a new facility. This prompted design suites. use of data-centric approaches within modern plant design suites. In this case, equipment information is maintained in a common database and This is certainly a godsend for plant designers and has enabled more the individual design tools generate their drawings collaborative design strategies, but it automatically using this single source. This ensures that equipment changes are automatically does not necessarily solve the problem for all asset lifecycle stages. reflected across all related drawings. A data-centric approach provides significant benefits to plant designers and enables more collaborative design strategies, but does not necessarily solve the problem for all asset lifecycle stages. Organizations will always have to maintain various versions of their asset information, such as as-designed, as-built, as modified, and various versions for modifications being planned and in the process of being executed. Users must carefully evaluate the ability of a given data-centric solution before they can assume that it will accommodate all of their change management needs. 12 Copyright ARC Advisory Group ARCweb.com

13 Another issue not normally solved by data-centric strategies is the embedding of snapshots of design information in the middle of text external documents. Using XML for documents can alleviate this somewhat by enabling references to replace copies. However, this certainly is not a universal capability that every organization can take for granted. Furthermore, none of these approaches addresses the data duplication problem for legacy documents, which often form the largest part of an owner/operator s ALM information stores. ALM Information Sharing Is a Corporate Challenge The lifecycle of a typical asset investment includes many stages, spanning initial planning, design & build, operate & maintain, modification, and facility retirement. Responsibility for these stages rests in the hands of many different groups and they frequently need information created by others, often for different Leveraging information across ALM stakeholders is vital for driving efficiency purposes. For example, design groups perform and enabling more effective teamwork and coordination across all ALM groups... many calculations to size equipment and operating personnel need this same information to Organizations need to establish the optimize performance of the final facility. environment, with all needed processes and technology, to encourage and To drive efficiency and enable more effective manage these information flows... teamwork and coordination across all ALM groups, it s vital to leverage information across all It is most appropriate, therefore, to ALM processes. Organizations need to establish consider ALM Information to the environment, with all needed processes and be a corporate-wide issue that requires a corporate-wide ALM IT strategy. technology, to encourage and manage these information flows. It is most appropriate, therefore, to consider ALM Information to be a corporatewide issue that requires a corporate-wide ALM IT strategy. ALM Information Must Support Many Kinds of Devices and Interfaces ALM Information is created throughout the asset lifecycle by a variety of people, IT solutions, and hardware devices used to inspect, control, and maintain the facilities. A good ALM Information strategy captures and manages all this information in an integrated manner to ensure that it is available for users who may need it later. Obviously, this necessitates considerable system integration and organizations should consider standardization and standards as a means to minimize the associated Copyright ARC Advisory Group ARCweb.com 13

14 costs. SOA interfaces and modern collaborative platforms provide another way to ease this burden, while also providing a flexible environment for the eventual upgrades that will most certainly occur. Like everyone today, ALM stakeholders expect to be able to access the information they need through a broad palette of devices, from PCs to smart cell phones. They also expect the information to be presented in a way that accommodates their particular issues and tasks. Again, this is best addressed through a strategy that incorporates a modern collaborative platform. 14 Copyright ARC Advisory Group ARCweb.com

15 Developing an Appropriate ALM IT Strategy CIOs spend a lot of their time and resources on issues related to information management. Business processes imply certain information requirements and evolving business processes create constant flux in underlying data models, content and information delivery mechanisms. Technology developments further disrupt established strategies as they make certain solutions obsolete and enable new business processes. Historically, CIOs have not been heavily involved with managing ALM information from a holistic viewpoint. The technical nature of the information has favored care by the individual Historically, CIOs have not been too functional groups, which have defined their own involved with managing ALM information management processes and selected information. The technical nature of the the technology they believe best suits their own information has favored care by the purposes. This approach offers some significant individual functional groups... benefits as those who use the information will likely take care to ensure that it is properly The resulting silo-behavior is a root cause for many of the problems maintained. But, the resulting silo-behavior is a identified in the NIST report. root cause for many of the problems identified in Overcoming this requires a corporatewide strategy and full support from the the NIST report. Overcoming this requires a corporate-wide strategy and full support from the CIO s office to ensure that it is achieved. CIO s office to ensure that it is achieved. While ALM information should be considered a corporate resource, research tells us that centralized management of all information is not feasible. This approach requires too much coordination, creates new control problems, and neglects the opportunity to leverage information management capabilities that already exists in the individual functional groups and their unique IT tools. A blended strategy, integrating local information management with global governance of information used in multiple processes, can be a more effective approach. Good Information Begins within Each Major Process Information management is not a new challenge for people involved in ALM. Every ALM process, whether it is PPM, APM, or Portfolio, relies upon a set of specialized applications to drive efficiency. Copyright ARC Advisory Group ARCweb.com 15

16 Each has an embedded information management system to support the needs of its functional users. EAM applications provide a perfect example. They effectively manage the volumes of information created and used by maintenance organizations. And they provide many of the capabilities that we described earlier for good information management, structuring information around various asset hierarchies and enabling convenient rolebased access to this information by planners, technicians, MRO material managers, and others. The ALM information problems described earlier are not due to an inability of these technology solutions to properly manage and deliver information. On the contrary, they generally do an excellent job for their users. However, when one looks across all applications used within a given ALM process, like Asset Performance, they While some ALM information should be will find multiple copies of information that are considered a corporate resource, inconsistent, with multiple structures for organizing the same information, and siloed information research tells us that centralized approaches to information management rarely work... management processes that may preserve local information integrity, but ignore the impact that A blended strategy, which integrates local changes have on others. local information management with global governance of information Rather than sharing information, most ALM exchange, is a more effective approach. groups naturally want their own copies of all information they may need. There are many reasons for this: if the information is important, they will not trust others to take care of it for them; for the sake of efficiency, they want all information easily accessible from within their own applications and workflows; and, they don t want to learn how to use some other group s applications for an occasional need. And this natural tendency towards silos is fostered whenever organizations do not invest enough in application integration. While multiple copies of documents are something every IT person would like to avoid, there is nothing inherently wrong with this approach. In fact, local ownership of information encourages accurate change management. However, these same people have little understanding or appreciation for the needs of other groups that may use the same information. So change management across groups remains challenging. Individual groups within major ALM processes, such as PPM, APM, and Asset & Project Portfolio, may be focused on the same goals, but still do significantly different work. This leads them to view ALM in- 16 Copyright ARC Advisory Group ARCweb.com

17 formation differently; refer to it with different, incomparable descriptions; and manage it with different structures. Sharing information in this case becomes inefficient and difficult, so users understandably revert to silo behavior. Clearly, organizations can gain significant benefits from exploiting the capabilities of individual functional applications as the front line for managing and delivering ALM information to users. But just as clearly, there are problems that these applications will never resolve that must be addressed with an overriding IT strategy that drives standardization and enables effective information sharing across groups and their functional applications. Project Information (PIM) Handover Asset Information (AIM) Funded Projects Asset & Project Portfolio Information (APPIM) Modification Requests New Facility Requests Unique Needs Demand Separate ALM Process IT Strategies As many cross-functional problems are specific to a given ALM process, there is clearly a need for each of the major ALM process areas to establish a strategy for managing information across all of their applications. ARC calls these strategies Project Information (PIM), Asset Information (AIM), and Asset & Project Portfolio Information (APPIM) and sees them as major areas within an overall ALM Information strategy. These strategies provide guidance and governance for all information management processes and associated technology investments within their respective areas. This includes all functional groups that contribute to the overall process, as well as all in- Copyright ARC Advisory Group ARCweb.com 17

18 stances of these groups that may exist across different plants, different geographic regions, different project teams, different business units, etc. Good strategies will also support the needs of external stakeholders in each of these areas to facilitate their integration into the process performance. Information Transfers Require Corporate Governance An organization s information assets may be created within individual ALM processes, but decisions regarding content and management cannot necessarily be left to the individual groups. A single item of ALM information is often of value to other ALM processes and An organization s information assets their needs and interests must be recognized and may be created within individual ALM accommodated. processes, but decisions regarding certain content and management cannot ARC s has been researching ALM for many years be left to the individual groups. and it is abundantly clear that teamwork across ALM processes is vital to achieving good returns ARC s has been researching ALM for on major capital investments. We developed our many years and it is abundantly clear that teamwork across ALM processes is models for ALM to help organizations understand vital to achieving good returns on major the many processes and stakeholders involved capital investments. throughout the lifecycle of a typical facility and structure programs in ways that support more effective group interactions. A single item of ALM information is often of value to other ALM processes and their needs and interests must be IT strategies such as PIM, AIM, and APPIM will recognized and accommodated. solve many problems, but are not adequate to address all the ALM information problems outlined in this report. A key characteristic of real ALM programs is that ALM processes recur many times over the lifetime of a facility. So there will be many information transfers between the three ALM processes. These transfers include information vital to the efficiency of those on the receiving end and poor exchanges are costly at best, and frequently impossible to recover from. As studies like the NIST report clearly demonstrate, information handovers from EPCs to owner/operators rarely go smoothly. And PPM organizations often neglect to collect information from equipment vendors during project lifecycle stages that the APM organization needs to efficiently operate and maintain the facility. When information is provided, it frequently is done so too late in the project to allow the APM organization to populate its IT solutions properly. This leads to ongoing inefficiencies. In the same 18 Copyright ARC Advisory Group ARCweb.com

19 sense, APM organizations often fail to maintain design documents so the PPM organization has to waste valuable time and money doing physical audits of facilities every time they need to do work. They also continue to purchase equipment that had to be changed out before due to reliability problems, etc. Project Information (PIM) ALM Information (ALIM) Asset Information (AIM) Asset & Project Portfolio Info (APPIM) Information Transfers Require Coordination of All ALM IT Strategies To address these information transfer problems, organizations need one more IT strategy, which ARC calls ALIM. This strategy provides governance of all information transfers in terms of establishing proper guidelines as to the information to be exchanged, its content and form, the timing of all exchanges, the roles and responsibilities of the various parties, etc. Governance of technology decisions is another aspect of a good ALIM strategy as the volume of information exchanged is generally large and enabling efficient electronic exchanges is vital to ensuring that everyone s needs are met. Copyright ARC Advisory Group ARCweb.com 19

20 Standardization Is Fundamental Information sharing is fundamental to good ALM and must be addressed in every ALM Information strategy. This can be as simple as enabling someone to locate and access a data file created by someone else, or as complex as enabling one application to exchange data with another program and take action based upon this information. In the first case, users only need to know how to find the information. In the second, the organization needs to have complete confidence that both sides of the exchange completely understand each other in terms of what asset(s) they are referring to, what the information says about that asset, the context within which the information should be understood and applied, etc. Clearly, the benefits of information sharing are greater for the second than the first, but providing these capabilities entails One challenge owner-operators will have additional time and cost which must be considered. in standardizing the classification of ALM information is that different people think about the facility in different ways. Information sharing should also be viewed as an evolving requirement. As organizations learn to Another challenge will be to identify a work together as ALM teams they will naturally level of granularity in the information classification scheme that will support want to share more information and want to integrate their ALM solutions further to make this everyone s needs. sharing more efficient. An optimal ALM Information strategy will support information sharing that meets current needs and be flexible enough to extend these capabilities as needs change. Synchronizing ALM IT investments with the overall ALM program is also important. ALM Information enables many ALM improvement initiatives and investments in this area are generally needed in anticipation of future plans. Standardization cuts the cost of information sharing and increases productivity, whether it is people accessing information created by others or programs automatically exchanging data files. Thus, every information sharing goal in the organization s ALM Information strategy should consider the benefits of standardization. Standardized Naming Enables Teamwork Standardization in information management is a broad concept, with many different issues and levels. One can standardize the way information ob- 20 Copyright ARC Advisory Group ARCweb.com

21 jects (documents, databases, spreadsheets, etc.) are classified, the way they are structured internally, and the content that they contain. Standardizing the classification of information enables catalogs to be created to help people find information. A typical example of this in ALM is using drawing numbers to relate information to certain areas of a facility and/or certain kinds of equipment. Knowing the area or equipment type allows someone to use the catalog to reduce their search Many people are interested in the time. Geographic Information Systems (GIS), standardization of the content within the which are gaining popularity in many ALM programs, use this same idea when they tie information items being managed. Standards are being developed in information to global coordinates. certain domains, such as ISO for Design & Build and OpenO&M and ISO One challenge owner/operators face in standardizing the classification of ALM information is that for Operations & Maintenance. different people think about the facility in different ways. Physical location may work well for someone in Design & Build, but a system based upon equipment type or systems structure may be more natural for someone in Operations & Maintenance. Standardization at this level must also recognize both the need for multiple classifications and a means to map between many different schemas. Another classification challenge is identifying the level of granularity needed to support everyone s needs. EPCs may only care about a pump set as a single unit to be purchased and installed, an operator may think in terms of the system that contains the pump set, and a maintenance technician may need to access information about every component in the pump set. A current trend in ALM is to use equipment tags as the least common denominator for information classification. This idea has gained significant traction in the Design & Build arena as plant design tools have evolved from drawing packages to object-centric data models. While this approach certainly has significant merit, one caveat is that ALM groups may still disagree as to the definition of what merits an equipment tag and what are the appropriate boundaries for a given tag. Another concern is that this only addresses managing reference data for physical assets. A different strategy may be needed for standardizing the classification of other information and mapping between different schemas to enable people to access all the information they need for their ALM role. Copyright ARC Advisory Group ARCweb.com 21

22 Standard Content Cuts the Cost of Application Integration A second level of standardization relates to the structure and content within the information objects. What data fields are used, what are they called, how is each defined in terms of what it measures, what units of measure are used, etc. While XML can be used to communicate the contents of an individual item, someone still has to standardize each of the fields to enable proper interpretation. This is a particular problem when it comes to applications sharing information and must be addressed in any ALM Information program that aims to enable this level of information sharing. Fortunately, many people are interested in this issue and standards, such as ISO 15926, OpenO&M, and ISO 14224, are being developed for several of the key ALM domains. Information management system designers should familiarize themselves with all of these efforts and consider how they can apply and/or accommodate them in their own strategies. Standardization Should Address the Entire ALM Program There are many other areas where an owner-operator will need to standardize to reap the full benefit of their investments in ALM Information technology. The important thing is to recognize that such efforts are a necessary pre-requisite to effective system Standardization is a necessary prerequisite to effective system implementation. implementation. A final comment on standardization is to remind the reader that every standardization program should be A final comment on standardization is to remind the reader that every viewed from the perspective of the overall ALM program. Too often, organizations will focus attention on standardization program should be viewed from the perspective of the solving a problem within a single ALM process and overall ALM program. miss the opportunity to reap benefits from better collaboration across ALM processes. For example, many of A solution designed by a task force the issues identified in the NIST report are problems that includes representatives from within the Design & Build process, but the largest benefits for owner/operators come from solutions that all ALM processes and has C-Level sponsorship will generate more benefits than a localized program. recognize the needs of later lifecycle stages. A solution designed by a task force that includes representatives from all ALM processes and has C-Level sponsorship will generate more benefits than a localized program. Such a task force can also be used following implementation to govern the program, ensuring that it is used by all relevant parties and that the new processes are sustained across future projects and different ALM teams. 22 Copyright ARC Advisory Group ARCweb.com

23 Analysts: Sid Snitkin, Bob Mick Editor: Paul Miller Distribution: ALM, EAS, and MAS Clients Acronym Reference: For a complete list of industry acronyms, refer to our web page at AIM Asset Information ALIM Asset Lifecycle Information ALM Asset Lifecycle APPIM Asset and Project Portfolio Information APM Asset Performance APPM Asset and Project Portfolio CAPEX Capital Expenditures D&B Design & Build EAM Enterprise Asset EH&S Environmental Health & Safety EPC Engineering Procurement Contractor IT M&I MRO Information Technology Maintain & Improve Maintenance, Repair, and Operations NIST National Institute of Standards and Technology O&M Operations & Maintenance OPEX Operations Expenditure PIM PLM PPM ROA SOA Project Information Product Lifecycle Project Performance Return on Assets Service Oriented Architecture Founded in 1986, ARC Advisory Group has grown to become the Thought Leader in Manufacturing, Energy, and Supply Chain solutions. For even your most complex business issues, our analysts have the expert industry knowledge and firsthand experience to help you find the best answer. We focus on simple, yet critical goals: improving your return on assets, operational performance, total cost of ownership, project time-to-benefit, and shareholder value. ARC Strategies is published monthly by ARC. All information in this report is proprietary to and copyrighted by ARC. No part of it may be reproduced without prior permission from ARC. You can take advantage of ARC's extensive ongoing research plus experience of our staff members through our Advisory Services. ARC s Advisory Services are specifically designed for executives responsible for developing strategies and directions for their organizations. For membership information, please call, fax, or write to: ARC Advisory Group, Three Allied Drive, Dedham, MA USA Tel: , Fax: , info@arcweb.com Visit our web pages at Copyright ARC Advisory Group ARCweb.com 23

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