For an entire generation the utility companies have been the least effective of all big businesses at winkling out operational and cost efficiencies from key information systems. ACTEW deputy CEO Paul Perkins, a leading player in public utility reform in Australia, is confident he not only knows why, but also just what to do about it. It's a confidence that sits well on the deputy head of the Canberra-based electricity and water utility, the first multi-utility established in Australia. At a time when competition and price regulation are looming clouds on ACTEW's horizon, and pressure to maximise profits and cut costs is attaining fresh urgency, the utility is achieving the levels of operational efficiency the banks routinely get, and without throwing out a single legacy system.
It's done so by forcing an investment discipline on the process, by riding the waves of emotion that inevitably follow attempts to extract greater value from packaged systems, and by using integrated analytical tools to inject rigour into its infrastructure analysis. Together, those initiatives have helped ACTEW avoid having to spend upwards of $50 million to upgrade its infrastructure to cope with a host of new competitive realities, and allowed it to start turning its existing systems into "cash cows" for the organisation. ACTEW has stretched both its systems and its infrastructure well beyond what was perceived to be their capacity, and achieved the operational efficiency it required for a finely integrated set of systems. Not bad for a smallish utility with big ambitions to make its mark on the world.
ACTEW Corporation provides electricity, water and wastewater services to 120,000 customers in the ACT and sells energy to customers outside the ACT as part of the national electricity market. Australia's largest combined energy and water utility, it was formed in 1988 by the amalgamation of the ACT's water and electricity authorities and became a corporation on July 1, 1995. Perkins says the amalgamation was almost a generational change for the organisation, which had to work hard to develop the synergies and efficiencies required from the creation of a multi-utility.
ACTEW's silver spoon was a range of inherited systems. These included one of the cleverest online systems for customer billing then available and a world benchmark system for operational control in providing electricity, considered one of the technical wonders of the world when it was installed in the early 1980s. There were also some clever Fortran programs for power systems engineering. In addition, ACTEW inherited a part-completed geographic information system (GIS) -- its predecessor had just become one of the first organisations in the world to begin a GIS project, which started strongly before running into difficulties.
Forming the new body forced a concentration of the inherited commercial systems. Perkins, overseeing the process, decided the main priority was to consider the exercise an investment in the business, a theme ACTEW has held ever since. For that reason he decided to give water revenue processing to Bankstown City Council to run on a bureau basis. The decision gave ACTEW immediate control of its cash flow and reduced any pressure to bring over administrative and management staff for water from the ACT government, leading to a "huge administrative saving".
"We used the difference for an excellent little thing," Perkins says. "We actually revalued our assets on the same day, and then we were able to keep the profit and loss system in the new system going forward without a [jump] in prices. The cost reduction in operation from not taking any administrative staff gave us a one-time gain. That enabled us to proceed for 10 years without any external borrowings.
"But while we'd taken an early advantage which was good value corporately, it also meant we were proceeding on two systems for the core of the business: the customer information management systems. And that presented us with some operational problems from day one."Having good staff overcame some of the operational problems, but couldn't address the increasing difficulties in analysing data caused by running separate systems. For instance, ACTEW had to use two separate databases to analyse the figures, when it discovered there were many thousands of people who had never had their water metered. So although ACTEW upgraded its internal systems to include necessary interfaces through the early 1990s, it remained apparent IT would have to quickly go to a new platform to help ACTEW confront the real competition it knew it would face at the end of the decade.
In 1994 it began a process of welding its systems together. Knowing it was too small to compete with the investment per capita of the big utilities, ACTEW chose Sanderson's GenTrack, a comprehensive suite of software for managing all administrative, billing and marketing activities of electricity, telecommunications, water and gas distribution companies. Buying off the shelf let the utility quickly roll out the package platform and bring all the water and wastewater functions in-house, overcoming as well its difficulties with data analysis.
But before the system was even bedded down, ACTEW was confronting some business challenges as the sands shifted in the entire utility marketplace. Suddenly, from being a monopoly, it was facing competition from 24 active players all keen to cut a slice of its traditional electricity market. It was also embarking on the ambitious TransAct project, which will give all Canberrans access by 2002 to services like high-speed Internet and video on demand over ACTEW's high bandwidth premium IP network.
"Our Transact broadband telecommunications for Canberra would, of course, add another dimension to our billing system; and so, taking an investment approach, we says we are going to stretch this system beyond its capacity," Perkins says.
"More than that, we were stretching our own infrastructure management beyond its capacity. An organisation that traditionally had been able to manage half a dozen separate suites of technical systems, and two or three separate suites of financial or commercial systems, really wasn't geared for what I call the operational efficiency required for a finely integrated set of systems.
"So when we started really trying to extract the value from the integrated systems, we were finding that our night-time backups, our database administration and so on -- not just in CIMS (Customer Information Management System) but in all our other applications -- were actually degrading in terms of performance. Now that, as you know, is untenable, because not only is it functionally important, but that's where you get your operating efficiencies."Perkins admits ACTEW was somewhat over-ambitious in its efforts to push the GenTrack system to the max. As a result it found it had to run 24-hour-a-day shifts so the computer shop could keep up with the competing demands. "We were pushing to go to a level of efficiency that the banks get, and we didn't have our ducks in a line in terms of our support or our thinking about operational efficiency, recognising that we were always going to be using legacy systems," Perkins says. "Some techno-heads blamed the software and said if we'd done it in-house we wouldn't have these problems. Some blamed the financial systems.
Traditionally, the answer would have been to start all over again. We couldn't afford that."Instead ACTEW achieved "surprising success" by introducing two initiatives simultaneously: it brought in independent project managers to work directly with Perkins to address the overall strategic approach; and it purchased Computer Associates' Unicenter TNG so it could inject some rigour into infrastructure analysis. Perkins says his aim was to move from having to analyse systems on an intuitive, "touch and feel and spin the wheel" basis to where ACTEW could conduct some real analytical work to help it optimise systems. It also invested resources and energy into "handholding" for staff forced to undergo the ensuing cultural change.
Rolled out across ACTEW's IT systems over a six-month period, Unicenter TNG manages the corporation's client/server infrastructure, which includes a total of 50 servers (30 NT and 20 Unix boxes) and 900 PCs, as well as Digital VAXs. In addition to the billing functions, it also manages Oracle Financials, Aurion Human Resources and a Works Management System, plus standard workstation applications including Microsoft Office and utility-centric products. Unicenter TNG plays a critical role in warning of imminent failures and shortages. It's also helping IT directly influence the business bottom line.
Perkins says Unicenter has started to revolutionise the optimisation of the IT infrastructure. "We've done a wonderful job of setting up our LAN and our WAN and truck mobile radio systems and data systems and whatever, but it's all technically driven, not investment driven. And like all of these systems there's a need to extract value from them. Here was a glorious opportunity to squeeze performance. I spent too many years sitting around tables where there's a lot of subjective discussion and no hard data with which to analyse it." Unicenter TNG has helped ACTEW optimise its night-time processing runs and helped it to interface the systems and minimise the cost of support of the various systems, which it freely admits it was trying to integrate too fast.
The tool began working quickly to minimise extra costs, particularly by stopping dead the failures that used to require people to come in off-shift to resolve them. Perkins says that alone shows the power of a tool that can perform diagnostics and analysis and provide early warnings.
It's also been of tremendous help in cleaning up the databases and moving them to a process-oriented mode. "That adds two values," Perkins says. "One, it tidies up the whole back room situation, but it also helps with performance of the systems, particularly where they're interfacing with other systems. And that's a value for operational efficiency; that is how efficiently the systems are working, sub-second response, no delays, no nothing."A year or more after that process began, ACTEW is embarking on an audit of Unicenter TNG use, to obtain information to be used in the next phase of extrapolating value throughout the organisation.
That next stage will see ACTEW using e-commerce to keep extracting value from legacy systems, says Perkins, who spent three months at the Harvard Business School in the US last year studying ways to interface e-commerce with legacy systems in ways that will be transparent to ACTEW's customers. If utilities have failed to get cost efficiencies out of big information systems for a generation, it's because they haven't recognised either the need to achieve operating efficiencies or to use integrated analytical tools for marketing as well as diagnostics, Perkins says.
"Now, our judgement is that rather than keep playing with the newest and biggest tool, and then having a cycle time which is too long for your market, we think you need to make sure you take all the value you can from your legacy system. [However, you] build over the top of it using the power of new technology. That's got to be e-commerce," he says. As a first-generation tool Unicenter TNG is "not nearly good enough" to help with this, Perkins says, so ACTEW is working with Computer Associates on development of Neugents, CA's neural network-based solution for predictive enterprise management (see, "The Sweet Smell of Opportunity").
"I think there are two elements to e-commerce that I am talking about here," Perkins says, "and they probably only make sense to a merchant banker or somebody looking for operational efficiencies. Effectively the e-commerce that most people talk about includes the visible things where somebody can phone up and look at their account, [and] that sort of thing, or the consultants and the OEMs, who see the firewalls and things which they can sell in the middle.
"I think there's a tremendous potential to do those, but get an order of magnitude more value by using them as the IOs [inputs/outputs] for all the legacy systems. In other words, to run the legacy systems as they are, but build part of the bus through your system to be Internet-enabled."From an investment point of view the beauty of such an approach is that instead of seeking to justify an investment in building systems on functionality alone, you can justify it on both functionality and avoiding having to rebuild numbers of legacy systems. In that way ACTEW expects to make "cash cows" of its investment systems.
Customer information management systems are the biggest of these, but just behind those are the GIS asset management systems. In a business like ACTEW's, where there are three big asset systems, there's a tremendous dividend available from making e-commerce work, Perkins says. "For us it works not only by allowing analysis internally, but it also works for our customers, our contractors, all sorts of people. That's a pretty powerful investment strategy," he says.
Integration of various different components of billing for the new electricity marketplace is almost complete. Now ACTEW is ready to begin the first logical design stage for the e-commerce scheme, which will embrace a series of separate projects. While the board has agreed to the overall scheme, individual investment decisions will be based on individual modules.
The project will seek to gain some efficiencies out of ACTEW's electronic payments system and to link that to customers. A second aspect of the same project will make document repositories accessible to staff dealing with customers in that area. "Now the banks have already done this, so there's nothing groundbreaking in it," Perkins says. "What is important to us is to get all of our people in the technical areas, the operational areas and the business areas comfortable in those first projects, [and understanding] the potential right across the board," Perkins says. "The work that's been done to date with electronic payment and form payment on the Web doesn't give our people the understanding of the power of it."In the interests of turning on staff to e-commerce the implementation strategy calls for the first module to be completed quickly, and in such a way that all ACTEW staff will be exposed to its potential. "It's got to be integrated or [able to be integrated], and it's got to be to the new standard -- the new standard being Internet-enabled. We're working on that right now and headhunting for some specialist skills in that area. We think this is an investment of such strategic importance to a small utility [that] those skills are something we must have," he says.
The Sweet Smell of Opportunity
According to CA, Jasmine TND Neugents can detect complex, otherwise unseen patterns in huge volumes of data and enable a new generation of business applications that can not only analyse conditions in business markets and technical environments, but can also predict changes in those conditions. It also can suggest courses of action to proactively capitalise on opportunities and/or avoid potential problems.
Paul Mason, US vice president of Infrastructure Software Research for market researcher IDC, says: "CA's Neugents technology represents an important development in enterprise management. For the first time organisations will be able to predict system performance and availability problems before they ever occur -- thus providing truly proactive management. Unicenter TNG Neugents will also make implementation simpler by permitting the detection of unusual system operation without the time-consuming task of manual policy-definition."