April 24, 2006

Next-Generation Enterprise Asset Management

by Patrick Connaughton

Helping Business Thrive On Technology Change

MARKET OVERVIEW

MA RK E T O V E R VIE W
April 24, 2006

Next-Generation Enterprise Asset Management

Moving From A Reactive To Predictive State Of Maintenance
by Patrick Connaughton with Noha Tohamy and Elisse Gaynor

EXECUT I V E S U M MA RY
Enterprise Asset Management (EAM) solutions have been on the market for more than two decades and range in sophistication from basic work order generation to predictive analysis of future asset performance. As of late, emerging technologies have sparked a renewed interest in EAM, but, overall, user adoption continues to suer. This is due in part to ongoing challenges like inconsistent data quality and poor usability. While EAM vendors are providing incremental product enhancements to address these immediate issues, they typically fall short when it comes to enabling the next level of asset optimization: Predictive Maintenance (PdM). To achieve a predictive state, rms not only need the technology solution but also a strong foundation of supporting processes. To get there, rms need to conduct a thorough assessment to gauge the strengths and weaknesses of the current processes, especially before taking on system upgrades or new installs. While this is often a daunting task, welldened frameworks like the Reliability Centered Maintenance (RCM) methodology are available to help streamline the project. For those looking to jumpstart these initiatives, Forrester recommends running the business case for employing a full-service outsourcing company to manage the operations.

TABLE O F CO N T E N TS
2 New Technologies Reenergize Enterprise Asset Management 3 Solution Providers Seek To Meet Clients Evolving EAM Needs 5 Reactive Culture Hinders Wide EAM Adoption 5 EAM Solution Providers Focus On Adoption Challenges 6 To Achieve PDM, EAM Solutions Need To Move Upstream
RECOMMENDATIONS

N OT E S & R E S O U R C E S
Forrester interviewed 12 vendor companies: ABB, AssetPoint, Datastream, Indus International, IFS, Intentia, IVARA, MRO Software, Oracle, Ramco Systems, SAP, and Sunower Systems. We also included end user feedback from client inquiries and vendor customer references. Related Research Documents ERP Vendors Are Marketing EAM June 30, 2004, Quick Take Predicting When Machines Are About To Fail November 17, 2003, Brief Series 2003: Firms Spend To Maximize Asset Protability August 4, 2003, Brief Series How Firms Can Get Value From Physical Assets July 28, 2003, Brief Series

8 Reliability-Centered Maintenance: The First Step In EAM Transformation

WHAT IT MEANS

9 Maintenance Outsourcing Can Expedite The Asset Management Transformation

2006, Forrester Research, Inc. All rights reserved. Forrester, Forrester Wave, Forresters Ultimate Consumer Panel, WholeView 2, Technographics, and Total Economic Impact are trademarks of Forrester Research, Inc. All other trademarks are the property of their respective companies. Forrester clients may make one attributed copy or slide of each gure contained herein. Additional reproduction is strictly prohibited. For additional reproduction rights and usage information, go to www.forrester.com. Information is based on best available resources. Opinions reect judgment at the time and are subject to change. To purchase reprints of this document, please email resourcecenter@forrester.com.

Market Overview | Next-Generation Enterprise Asset Management

NEW TECHNOLOGIES REENERGIZE ENTERPRISE ASSET MANAGEMENT In order to yield the maximum return on major investments like manufacturing equipment, utilities infrastructure, and transportation eets, rms are continuously looking for ways to optimize their assets reliability, utilization rate, and lifespan while reducing maintenance and spare parts inventory costs. Enterprise asset management is hardly a new concept. Software solutions have been in play for more than two decades, with most tools oering similar core functionality. For solution providers, selling better architected, more user-friendly EAM tools to their existing customer base has become the primary growth driver. Datastream, for example, reports that more than 40% of its new installations is from existing customers upgrading their legacy client server solution to a Web-enabled one. Recently, emerging technologies like the X Internet are also generating a renewed interest in the space.1 For example, technologies like:

RFID and GPS enable mobile asset tracking. An active RFID tag can store and transmit asset

information up to 30 feet away. GPS antennae and satellites can report location details anywhere in the world. Mobile assets can include anything from a eet of trucks, trailers, and containers to a hospitals movable medical devices. Tracking these assets continues to get a good deal of market attention as security issues remain on the forefront of every rms agenda.2 For example, a company like JR Freight, a Japanese railway transportation company, can pinpoint the exact location of a shipping container among the thousands in its yard by mounting a GPS antenna and RFID reader to the forklift, reading the tag details when the container is stacked, linking it to the GPS coordinates received on the forklift, and sending it to the master tracking software. This not only reduces the time it takes to locate an asset but also improves overall visibility throughout the supply chain.

GIS make it possible to view asset details geographically. Geographic Information Systems

(GIS) tools use location data to display assets on a computerized map. From the asset icon on the map, users can typically drill down to more information like open work orders and maintenance history in a tabular format. This functionality is especially useful for utilities eld service workers. For example, using GIS technology, utility workers for a company like Southern Company, one of the largest utility companies in the US, can answer questions in the eld like Are there other open work orders within a two-mile radius of a utility? or What is the quickest driving route to my next work order? This streamlines the eld service workers job and puts the information at their ngertips to make them more ecient.

Wireless rugged PCs and handheld devices enable automated data entry. Wireless rugged

PCs and handheld devices continue to emerge in support of the distributed and disconnected workforce.3 EAM eld workers stand to benet from this technology by automating much of the currently manual data entry required when completing a work request. Within the facility, parts management clerks can signicantly improve inventory accuracy by using handheld bar-code

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Market Overview | Next-Generation Enterprise Asset Management

scanners instead of manually entering data. For example, Pratt & Whitney has implemented a wireless bar-code-based data collection system using Intermecs mobile computers with integrated bar-code scanners, signicantly improving parts inventory data accuracy and streamlining the receiving process into the warehouse.

Ultrasound, thermal imaging, and wireless sensors enable condition monitoring. Condition

monitoring technologies track key asset health indicators like temperature, pressure, and vibration levels. An emerging trend in condition monitoring is the use of embedded sensors that wirelessly transmit condition and diagnostic data to the main EAM system for real-time analysis. This is especially useful for monitoring assets in hard-to-reach or hazardous environments. A company like Chevron, for example, can use wireless sensors to monitor remote, oshore oil wells, helping to pinpoint problems early and avoid costly repairs to the infrastructure.

Fueled by these technology advances, EAM solutions are continually expanding into a much larger solution footprint, adding areas like performance monitoring, PdM, and business intelligence analytics (see Figure 1). SOLUTION PROVIDERS SEEK TO MEET CLIENTS EVOLVING EAM NEEDS The EAM solution market is highly fragmented, with literally hundreds of niche vendors. But Forrester has identied two major categories in the vendor base: best-of-breed and ERP (see Figure 2). Best-of-breed vendors like MRO Software, Datastream, and Indus International oer standalone solutions with out-of-the-box ERP integration points. ERP suites like SAP, IFS, Intentia, and Oracle all have EAM solutions within their larger ERP oerings. As rms move to reduce the number of vendors they have to work with and standardize their technology stacks, many are looking to their existing ERP solutions to provide the needed EAM functions. ERP vendors that do not have an EAM tool are working to ll that functional gap. A recent example of this was the March 2006 acquisition of best-of-breed EAM provider Datastream by ERP vendor Infor.
Figure 1 The Expanding EAM Functional Footprint
Role-based analytics and reporting

Asset registry HR skills registry

Requisition and Purchasing eCommerce Warranty management

Event management and Alerting Workforce management

Spare parts management Work order management

Financial reporting Preventive scheduling

Reliability Centered Maintenance (RCM)

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Predictive Maintenance (PdM)

Source: Forrester Research, Inc.

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Market Overview | Next-Generation Enterprise Asset Management

Figure 2 EAM Software Vendor Landscape

Vendor
Integrys Asset Point DataStream

EAM Products
TabWare EFx DataStream 7i

Comments
AssetPoints Tabware EFx dierentiates itself with a hosted solution and Windows XP look and feel. DataStream 7i is a best-of-breed EAM that dierentiates itself with its J2EE Web-based architecture, commitment to SOA, Cognos-powered analytics, and embedded GIS capability. Indus dierentiates itself by oering EAM as part of their Service Delivery Management suite (complementing EAM with CIS/billing and eld service solutions) as well as their SOA architecture, deep vertical focus, and a data model that support multiple asset ownership and location tracking. IFS dierentiates itself with its long-standing component-based architecture, clean integration with asset monitoring tools, vertical focus, and embedded plant design feature. Intentia dierentiates itself with a completely integrated RCM module, an integrated advanced production planning tool, and two-way MS Project integration. MRO Software is the revenue leader in the best-of-breed EAM category, and its solution set has a wide breath of functionality across vertical markets and asset types. Given MRO Softwares leadership position, it should be on every vendor assessment short list. Mincom dierentiates itself with an ERP solution that caters specically to asset-intensive industries. Forrester was not briefed by this vendor for this report. Oracles EAM solution dierentiates itself with its Web-based architecture, exible data model, single sign-on with the ERP solution, and embedded analytics. Oracle is committed to continuing support of the JD Edwards EAM product in the short-term and is actively selling this solution in the SMB and global markets. This solution dierentiates itself with its Web-based, precongured software and Key Performance Indicator (KPI) functionality.

Indus

Asset Suite

IFS

EAM

Intentia

EAM

MRO Software

Maximo Enterprise Suite

Mincom

Ellipse

Oracle

E-Business Suite EAM EnterpriseOne ALM

Oracle JD Edwards

SAP

Service and Asset SAPs EAM module runs as part of the mySAP Business Suite, and it Management dierentiates itself with its integrated suite of products for managing the complete life cycle of an asset, eliminating the need for point-to-point interfaces.
Source: Forrester Research, Inc.

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Market Overview | Next-Generation Enterprise Asset Management

REACTIVE CULTURE HINDERS WIDE EAM ADOPTION Based on Forresters interviews, we found that many rms are still struggling with the day-to-day reactive issues. Because of this reghting state, they are not able to make program improvements or move to a predictive strategy in maintaining their assets. The three most commonly reported issues are:

Bad data and low user adoption of EAM applications. EAM users have reported that

inaccurate and incomplete data is the most persistent problem rms face. This problem results in a lack of faith in the system as well as low adoption rates, both of which compound the issue even more. Some rms attribute the problems to their existing processes or the lack of a dedicated owner/administrator of the data. Others point to their systems poor usability and tedious data entry requirements.

Poor inventory management of service parts. To keep operations up and running and to

avoid disruptive events like a plant shutdown, many maintenance managers opt to hedge in their requirements for parts safety stocks. Additionally, many facilities have yet to adopt robust management processes, like bar-code-enabled receipt, stocking, and picking. This means that the EAM tools cannot rely on an accurate picture of which parts are really available, and many rms are incurring higher inventory carrying costs with excess on hand.

Inability to create proper work schedules. Users also reported that allocating their ever-

shrinking labor pool between reactive, scheduled, and preventative maintenance is one of their biggest challenges. The simple question of what work to do at the right time remains unanswered. When in a reactive state, it becomes extremely dicult to plan for PdM. On the other hand, some companies opt to overmaintain their assets to avoid machine failure or plant shutdown. Over time, this practice ends up being as expensive as the cost of recovering from that same disruptive event.

EAM SOLUTION PROVIDERS FOCUS ON ADOPTION CHALLENGES In order to address the above challenges, EAM solution providers have worked with their customers to enhance functionality, oering incremental improvements over legacy tools. Specically, they have:

Automated data entry and rened validation rules to address integrity issues. Best-of-breed
applications can now run on mobile devices like Symbols rugged MC70 or MC9000 Series handheld computers and bar-code scanners. This allows workers to complete work order details in the eld or reference key asset information when making a repair. Bar-code-enabled scanners are used to quickly identify an asset and bring up the relevant work order. This helps to eliminate the need for a clipboard and avoid manual entry, improving the quality of the

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Market Overview | Next-Generation Enterprise Asset Management

input needed by the EAM solution. Additionally, solution providers have embedded data cleansing and validation utilities in an eort to address data errors. IFS, for example, has built-in validation rules that dictate that imported or manually entered records are checked for possible errors and duplicates. If the record violates any business rules, the tool alerts the user of the potential problem and does not update the production data until it is resolved.

Applied supply chain best practices to improve spare parts inventory management. To

build eciency gains by having the right part on hand for the needed maintenance, EAM providers now oer many inventory management features such as eCommerce cataloging and purchasing inventory tolerance levels that trigger auto-requisitions, and bar-code label generation for receipt and cycle counting. MRO Softwares Maximo Enterprise Suite solution, for example, has a built-in procurement module that oers automated materials requisitions based on maintenance schedules to ensure that the right parts are ordered at the right time. Providers also work with their clients to implement other inventory management best practices, such as setting up the standard parts taxonomy and naming conventions as well as the use of numbered inventory racks.

Added business logic to facilitate optimal maintenance scheduling. To help users build

maintenance work plans based on factual assessment of priorities, EAM solution providers have focused on oering easy-to-use scheduling functionality like a graphical calendar display or integration into third-party scheduling tools. Datastream 7i, for example, includes a built-in Microsoft Project interface that enables planning the schedule in Project using labor and task data from the EAM solution without having to manually export and import the data each time. In order to prioritize tasks, solutions rely on past asset performance information to simulate a failure point. Based on this simulation, the tool can then recommend the timing of the maintenance using the overall asset criticality and resource availability.

TO ACHIEVE PDM, EAM SOLUTIONS NEED TO MOVE UPSTREAM Although EAM solutions have made progress in areas like usability and data validation, they still fall short of helping clients optimize their asset utilization. In order to do that, rms need tools to help them not only react to actual failure points but predict future failure points and proactively recommend remediation. Forrester believes that this can be achieved by establishing a greater interoperability between asset monitoring/diagnostics solutions and EAM tools. In order to understand the total cost and ramications of a scheduling decision, planners need access to a consolidated view of EAM data, including labor, parts, and downtime cost in conjunction with asset monitoring trends and predictions all in one application. The integration of these systems not only oers the advance identication of a required work order but manages the creation and scheduling of that order based on all the information available in EAM, including previously completed maintenance and other task priorities.

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Market Overview | Next-Generation Enterprise Asset Management

Historically, the data captured by the condition monitoring/diagnostic system has not been used within the EAM system for failure trend analysis or predictive scheduling. When these two systems are integrated, it is typically only to import a predened work order task from the diagnostic system to the EAM tool. The shortcoming of this approach is that this task is created in a silo, based on the asset monitoring data and not on the priority or cost considerations stored within the EAM application. To combine these applications is not a simple undertaking. It would take a tremendous amount of work to rationalize all the data across these proprietary applications, import it into the EAM, analyze it, and report on it. Because of this, one consolidated suite including EAM and PdM may not be in the cards in the near future. The next-best option is to renew the focus on open messaging standards between the two applications. There are a number of initiatives leading the way for open standards today, including MIMOSA and the Open O&M program.4 The issue with this is that pointto-point interfaces would still be required, adding to the overall cost of ownership and complexity. To counter this, vendors are committing to building service-oriented architecture (SOA) that would provide a central data exchange, reducing the need for point-to-point interfaces.5 In conjunction with SOA and open standards initiatives, the EAM solutions need to extend their oerings to include utilizing the raw condition monitoring data within the analytics and business intelligence modules to enable enterprisewide benchmarking and optimal scheduling recommendations. When EAM analytics include the raw monitoring and diagnostics data, rms can benet from:

Real-time performance management and enterprise-level analytics. The wealth of data these
two systems create can be combined to provide a holistic view of trends across an enterprise, enabling users to make better decisions and benchmark against other facilities. Using the alerts and monitoring data from the monitoring system, the EAM will also provide a dashboard view of the current state of health across all of a rms assets, including asset and work order status, performance measurements, and KPIs. This provides a window for management teams into high-performing areas that can potentially be leveraged for best practices, as well as a measurable way for rms to make continuous improvements to their programs.

Increased eciency in labor management. By performing this analysis, teams can make better
decisions on where to focus constrained repair resources. Too much maintenance can be as costly as not enough, and the only way to strike the balance is to combine the predictive data with the EAM labor, parts, and downtime costs to make better decisions. For example, run to failure analysis uses the diagnostic data from the condition monitoring software and the labor, parts, and downtime costs from the EAM solution to assess whether it would be less expensive to run the asset until it breaks rather than address the issue.

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Market Overview | Next-Generation Enterprise Asset Management

Closer ties between the diagnostics and remediation task. One of the biggest issues with

diagnostics and assessments results is that often times no remediation action is being taken and the feedback loop is never being closed. By embedding the diagnostics, tolerances, remediation work management, and KPIs within the EAM solution, there is a much greater likelihood that the events will be noticed and action will be taken. If action is not taken, at least all of the information is in one place to catch and generate alerts and manage the resolution workow.

R E C O M M E N D AT I O N S

RELIABILITY-CENTERED MAINTENANCE: THE FIRST STEP IN EAM TRANSFORMATION

Facing new business requirements, such as higher service-level agreements or further decentralization of their operations, rms are looking to revamp their asset management practices. As in all process re-engineering eorts, the rst challenge is to gain an accurate understanding of the strengths and weaknesses of their current practices. This is especially relevant for companies that have grown through acquisition, inheriting new facilities and manufacturing operations with dierent processes and systems. Practices that assumed a highly centralized organization might now be unsuitable to a distributed, loosely coupled operation. Without gauging the eectiveness of the as-is state, companies lack the foundation to dene and detail the road map to the desired to-be state. The challenge is that benchmarking eorts are often overwhelming to rms with already stretched maintenance budgets and limited personnel bandwidth. The good news is that there are a number of well-dened methodologies and tools to help teams streamline the process namely, the Reliability Centered Maintenance (RCM) assessment methodology, which can provide an excellent framework for the rst steps in process re-engineering eorts. RCM helps dene the key performance metrics for the asset under review as well as the reasons, likelihood and impact of possible failures. RCM can also help map out the preventative tasks that can minimize the likelihood of each failure. Importantly, RCM assessments are benecial to asset management transformation only if rms translate the assessment ndings into action-oriented recommendations and work orders within the EAM system. Specically, rms must use insights from RCM assessments to gauge the eectiveness of their current maintenance practices and ensure that the new processes set up in the EAM system will only improve their overall return on assets. If the old EAM data is simply exported into the new system without this assessment, all of the inaccurate and improperly prioritized tasks come with it. In the newly engineered process, rms must allocate resources proportionate to the cost and yield of each maintenance task. By completing this exercise, they are a step closer to ensuring that the right tasks are performed at the right time. Forrester recommends that rms take the opportunity before system upgrades or new installs to conduct a complete RCM assessment and use the results to drive the new system requirements.

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Market Overview | Next-Generation Enterprise Asset Management

Once the system is live in production, it becomes exponentially more dicult to make changes from both process and application perspectives. Many RCM assessments fall short today because the recommendations for making improvements are not translated into action-oriented tasks within the production system. However, if this analysis is completed on the front end of the implementation cycle as a precursor to setting up the system, the odds of success are increased signicantly.
W H AT I T M E A N S

MAINTENANCE OUTSOURCING CAN EXPEDITE THE ASSET MANAGEMENT TRANSFORMATION

Most companies realized long ago that maintenance cannot be treated merely as a cost center. Asset management improvements directly result in better asset utilization, reliability, and return on capital investment. But many rms, strapped for resources, cannot realistically make the upfront investments needed to re-engineer their maintenance processes. To make the necessary changes to maintenance functions and the required investments in technology solutions, rms need to take a holistic approach across condition monitoring, work scheduling, and parts management. To achieve this, some are looking for service providers that can help improve their maintenance function without signicant capital investments. A third party willing to take over operations and contractually commit to cost optimization can expedite the transformation of asset management. For example, a pulp and paper mill struggling to compete against increasing competition can turn to a service provider like ABB for an outsourced maintenance program that contractually commits to plant productivity improvement as well as cost optimization. In addition to full maintenance services, ABB can guide a company to benchmark its maintenance practices against industry best practices. Employing a provider like this, rms can embark on an asset management transformation eort, leveraging the providers investments and scale. The provider can also help rms map out their asset management strategy, which could range from process reengineering to a systematic approach to improving asset reliability, while sharing the project risk on a pay-for-performance basis.

ENDNOTES
1

The Extended Internet (what Forrester calls the X Internet) connects information systems to physical assets, products, devices, and even people. The emerging architecture, business applications, and technologies like RFID, sensors, telematics, mobile networks, and biometrics are all encompassed by the term X Internet. See the April 4, 2006, Topic Overview Topic Overview: The Extended Internet. Supply chain development continues to be driven by globalization and outsourcing. As a result, supply chains become even more distributed. The inevitable drawback to this increase in links is greater vulnerability from a functional, process-oriented, and security standpoint. In the wake of 9/11 and more recent US homeland security initiatives, the security of global supply chains has garnered much attention

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Market Overview | Next-Generation Enterprise Asset Management

and scrutiny from both the public and private sectors. See the October 18, 2004, Best Practices Are Our Supply Chains Less Vulnerable Now?
3

With an average of 22% of the workforce leveraging mobile applications for greater access to pertinent information and data, mobile applications have nally found traction in todays enterprise. See the March 15, 2006, Topic Overview Topic Overview: Enterprise Mobility. The Machinery Information Management Open Systems Alliance (MIMOSA) is leading the way in dening open standards for integration between condition monitoring and EAM applications. One of its core objectives is to publish open specications for robust Enterprise Application Integration (EAI) and Condition-based Maintenance (CBM). These XML-based specications will enable end-to-end, vertical, and horizontal information integration. Source: http://www.mimosa.org. The style of design, deployment, and management of software infrastructure and applications to create a more exible digital embodiment of any business are the major tenants of service-oriented architecture and allow rms to reduce system complexities and increase exibility in their digital environments. See the December 22, 2005, Topic Overview, Topic Overview: Service-Oriented Architecture.

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H e l p i n g B u s i n e s s T h r i v e O n Te c h n o l o g y C h a n g e
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