LEAN AND MEAN
Process Industry Places Intense Scrutiny on New Technology
Investments
Implore Suppliers to Pay More Attention to Work Processes,
Legacy Data and Migration Issues
By Daratech Research Staff
In many cases, the value of strategic business processes has surpassed the gains realized by technology advances alone. Will a new generation of intelligent asset lifecycle solutions reverse the trend?
Owner/operators and EPCs are exploring the merits of asset lifecycle management
strategies in their ongoing efforts to compress schedules, reduce costs and
enhance quality. But owner/operators and EPCs are facing a difficult environment
where cutting costs is of primary importance—staff layoffs, increased
outsourcing, and the reengineering of internal engineering departments to
assume more work and create more cost certainty are today’s realities.
At the same time, software vendors have begun developing software that is
far more advanced than anything the market has seen, and these new solutions
have the potential to restructure work processes by cutting out inefficiencies
and facilitating better overall project control. But while the concept of
a coherent asset lifecycle management strategy is difficult to refute, the
gap between what is promised and what is actually available remains wide.
Additionally, technology investments are at a low point. How can companies
justify the cost of a new system, or even a new version of current software
with all its costs—implementation, integration, training, maintenance,
etc.—when its short- and long-term benefits, while promising, remain
unclear?
Owner/Operators are from
Mars, EPCs are from Venus
The goals of owner/operators and EPCs in the process industries
have always been somewhat different. Sure, each wants the project completed
quickly, safely and cost effectively, but the methods of achieving these
goals are where the two part ways. Owner/operators say that EPCs handle data
in a way that suits their own needs. But owner/operators admittedly do not
want to invest large amounts of money in IT systems, yet they need to ensure
data coming out of the EPC’s design tools are readable, translatable,
and ultimately usable without the need for re-creation. They want their EPC
partners to use the same tools they are, but they don’t want to pay
for it. An owner/operator told Daratech, “The data integration area
[with the EPC] is huge. The tools they use and the data they output is always
low on the priority list of the project. So now we have our plant and everything
is in one format and what I need is in another format. For example we didn’t
want to pay an EPC to switch to our tool recently and all the data came to
us in another format—which we don’t use—so we had to install
a desk [of the EPC’s tool] just to get at the data.”
EPCs, helpless to the lack of readiness on the owner/operators
part to invest in the required solutions, have to still satisfy the owner/operators
but also have other technical considerations to worry about. Said an EPC,
“The biggest issue is systems integration—the lack of a common
data platform is at the heart of so many of our current challenges. Everyone
has proprietary systems and proprietary workflows. It’s just really
hard to share data. Data integration is probably the number one issue. Now
that we have the knowledge and the ability to capture the intelligence, we
find that it’s really hard to move it around.”
Part of the difficulty, according to EPCs we’ve
recently spoken with, is that owner/operators have typically been less concerned
with robust IT systems. Though today, owner/operators are increasingly realizing
that a more sophisticated IT architecture, while costly up-front, can potentially
pay dividends throughout the asset lifecycle, particularly in the areas of
operations and maintenance, as well as in future expansion projects and decommissioning.
But that is easier said than done. Owner/operators are juggling the very
clear mandate to keep costs down with the knowledge that some of today’s
advancing technologies can ultimately provide savings down the road.
Shrinking Budgets
Many owner/operators and EPCs simply can not afford the
risk of an expensive and lengthy IT investment and implementation. Said one
owner/operator, “Spending in general has ground to a halt. For now,
the deal is making due with what you have. But there are always internal
processes that need to be reworked. A lot of efficiency can be gained just
by doing things in a better way.”
Another owner/operator we spoke with said they used to
employ a system whereby IT budgets for projects were judged on things such
as improved efficiency, or improved effectiveness. But now the pressure is
intense to prove real financial or time gains for all IT investment. He is
required to prove approximately a 25%-35% reduction in people or a 25%-35%
reduction in cost
before he can implement anything new. “I’d like to see some hard
metrics for investing in tools. How do you justify theses investments?”
And how can owner/operators make a truly informed IT decision when, as one
told us, “In the course of building a new plant, the process technology
investment decision is made within the first three to six months.”
Consequently, it is incumbent upon the solutions providers to facilitate
an infrastructure that allows these decisions to be made more readily.
Asset Lifecycle Management
Solutions: Problems Solved?
Not really. Solution providers sell a vision of an integrated
system with interconnected tools that automatically update throughout the
value chain when information is added, deleted or changed, notifying one
and all. In this vision, data reentry is minimized and interoperability issues
are mitigated. But with the length of these capital projects spanning years,
what do contractors do about their legacy data? And what about software upgrades?
As one EPC told Daratech, “We create information that lives for 30
years-plus and there is constant change in the applications, constant upgrades.”
To make matters worse, according to this EPC, “The vendors are not
paying enough attention to data migration issues. At the same time, we are
being squeezed in project time lines by the owners, we are being squeezed
to meet tight schedules, and everything is happening too quickly for us to
adapt to these new systems.” The problem? “There is a communication
break-down with the vendors. They are not paying enough attention to upward
migration because there is too little margin in it for them. They will create
a path from one version to the next, but if you fall two versions behind,
or three versions behind, there is no path from your old version to the new
version and they have no interest in creating this path.”
He continued, “To stay competitive, we need to maintain
and enhance our models, and this is what we’re dealing with. The changing
applications are a constant challenge. And of course, the more complicated
your data model, the bigger this issue becomes.”
Another EPC explained the IT difficulties his company
runs into over the course of a long project. “With one client, we are
expanding their existing plant, an extensive project that spans a long time
frame—and as the project moves forward, software keeps changing, forcing
us to develop new processes.” The first phase of this project occurred
over several years. His company is about to begin phase two, which could
take up to ten years to complete. Since it is an expansion project, the plant
is actually running while the EPC is working on the expansion. He continued,
“All the old legacy systems will have to work with the new systems
when things are complete. But things are moving so quickly we’re already
making changes to plans. At least three to four times during a project this
big you have to ask yourself if you need to upgrade your tools. Every time
that happens, you have to do a risk-reward assessment—do you take on
the risk of updating the software or do you wait just a bit longer to see
what’s coming down the pike. If you go for the update you have to deal
with updating all the legacy data in your existing platform and hope the
new system lives up to its promises. The trouble with this is that if you
are changing data in one place you better understand how it connects to all
other places.”
So it's Hopeless?
Again, not really. Many, including Daratech, believe the
vision for asset lifecycle management is very compelling. The technology
that could support this vision would potentially be a vast improvement over
current systems. As one EPC told us, “Asset lifecycle management, or
data centric solutions put another way, falls right in line with what we
are trying to accomplish.” He envisions “an environment where
data can be captured one time and used by everyone.”
Still others remain skeptical that they will lose control
over their work processes. To them, the idea of one master model is fraught
with problems of access, control, timing and authority. Said one, “I
know that a lot of this works, but what I really want to know is, ‘how
does it fit into my work processes?’”
Asset lifecycle management components include data-centric
systems, information backbones, PPO data management, assorted data-centric
applications, intelligent owner/operator-oriented P&ID systems and more.
In all, most have come to accept the reality that there will never be one
technological panacea and that there will always be new software and upgrades,
however disruptive, both as a means to improve upon what exists and as a
way to keep software suppliers in business. A system that alleviates some
of the data translation and integration challenges will be most welcome to
owner/operators and EPCs alike.
Time to Regroup
Clearly, priorities for both the owner/operators and the
EPCs have shifted dramatically. Challenging economic times have made cutting
costs the number one priority of almost everyone in the industry. While some,
principally in the oil and gas sector, continue to invest in big projects,
most are cutting costs by upgrading or optimizing existing facilities, especially
where there is an opportunity to get quick returns for relatively small up-front
investments. Re-engineering engineering, that is to say restructuring engineering
departments, has started to take hold. While some are drastically trimming
head-counts and sending more and more work outside, others are organizing
their engineering departments into wholly owned subsidiaries that have to
compete with outside EPCs. The engineering function at owner/operators is
in transition with many new lessons to be learned and new pitfalls to avoid.
Meanwhile, with spending for new construction and major revamps down, EPCs
are adjusting their offerings and turning elsewhere for work.
And emerging from all quarters are ideas for reducing
the total installed cost of both new and revamped production assets while
controlling project execution risks and compressing time-to-revenue. For
petrochemicals, pharmaceuticals, life sciences, power, chemicals, offshore
and shipbuilding owner/operators and EPCs, recognizing which is which and
understanding the relevance, cost/benefits, justification metrics, strategic
underpinnings and drawbacks of great ideas with promise is of critical importance,
as are best practices for implementing them and creating the IT infrastructure
necessary to support them.
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