ISACA – Strategic Application of

Information Technology
We Energies Case
February 12, 2014
Introduction
Marge Vanderbok
 Marquette MBA, UWM Psychology
 We Energies 17 years, Consulting, Small Business
 Process Engineering, PMO, Analyst, Programmer
 IT Application and Strategic Use
 5 Year Technology Plan Owner
 Volunteer, Runner, Cyclist, Sport Shooting Enthusiast

2
Applied Technology and Strategic
Planning Processes

Weill, P. and Ross, J. IT Savvy, Harvard

Business Press, 2009, ISBN-10: 1422181014 or
-13: 9781422181010
Luftman, J.N. Managing the Information
Technology Resource: Leadership in the
Information Age, Prentice Hall, 2004, ISBN: 0-
13-035126-1
IT Strategy (INTE-6150) Marquette University
Graduate School of Management
3
IT Structures
IT Structures
 Federated, Centralized, Decentralized
 Based upon Operating Model
Staffing
 Retention can be challenging
 Skill specific
 STEM issue, or simply IT?
IT Alignment Challenges

5
The Usual Result of Poor Alignment-
Unplanned Proliferation of
Technology
Corporate Data

Data

Applications

Technology
Platforms

Source: IT Savvy: What Top Executives Must Know to Go from Pain to Gain, P. Weill and J. Ross,
Harvard Business School Press, 2009.
The Role of Architecture
Architecture – Building a Digital Platform that
matches an Operating Model
 Standardization and Innovation have a paradoxical
curve
 Maturity of architecture and governance can be seen
in a Maturity Matrix or Business Agility
Security, BCP, Privacy – Necessary components
to protect the integrity of relationships and data
Four operating models
Coordination Unification
 Unique business units with a need  Single business with global process
Business Process Integration
High to know each other’s transactions standards and global data access
 Examples: Commonwealth Bank  Examples: Southwest Airlines, Dow
of Australia, MetLife, Aetna Chemical, UPS Package Delivery
 Key IT capability: access to shared  Key IT capability: enterprise systems
data, through standard technology reinforcing standard processes and
interfaces providing global data access

Diversification
 Independent business units with
different customers and expertise
Examples: Johnson & Johnson, Pacific
Low
Replication
 Independent but similar business
units sharing best practice
Examples: Marriott, 7-Eleven Japan, ING

 
Life, ING DIRECT
 Key IT capability: provide economies  Key IT capability: provide standard
of scale without limiting independence infrastructure and application
components for global efficiencies

Low High
Business Process Standardization

Source: Enterprise Architecture as Strategy: Creating a Foundation for Business Execution, J. Ross, P.
Weill, D. Robertson, HBS Press, 2006.
A Digital Platform

The Digitized Platform

 Standardized technology, processes and data

 Accurate, predictable, world class
Innovation and agility present tradeoffs
Architecture
The Digitized Platform

Innovation  Standardized technology, processes and data

 Accurate, predictable, world class Agility

 Adding business value  Rapid response to

by doing something market opportunity
new with IT
 Reuse of existing
capability
The Business Agility Journey Involves a
Transformation
Business Standardized Optimized Business
Silos Technology Core Modularity

Local Enterprise
Flexibility Agility

100% 84% 92% 145%

IT Budget

Source: Enterprise Architecture as Strategy: Creating a Foundation for Business Execution, J. Ross,
P. Weill, D. Robertson, HBS Press, 2006.
Enterprise Architecture Builds Agility Over
Time
Business Standardized Optimized Business
Silos Technology Core Modularity
Strategic
Business
Value

Standard
Interfaces
and Business
Componentization

Enterprise-Wide
Technology Standardized
Standards Enterprise
Processes/Data

Locally Optimal
Business Solutions

25% 46% 27% 2% % of Firms

Source: Enterprise Architecture as Strategy: Creating a Foundation for Business Execution, J. Ross,
P. Weill, D. Robertson, HBS Press, 2006.
Percentage of firms in each stage updated based on a survey of 1508 IT executives.
Enterprise Architecture Maturity Promotes
All Four Objectives of Agility
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CIO Rating of Agility

Business Efficiency Agility (1)

4 Business Model Agility (2)

New Product Agility
Boundary Spanning Agility (3)

(1) Process improvements and

3 scalability
(2) Process change and
organizational redesign
(3) Partnership and acquisition

1
Business Silos Standardized Optimized Business
Technology Core Modularity
Architecture Stage
In a survey of 65 IT executives, all four types of agility were statistically significantly correlated with
enterprise architecture maturity.
Setting the Stage for Planning
Strategic Planning considers all these
components in the context of business
drivers
Strategic Planning is cooperative and
collaborative between IT and BU, at times
high value projects need consideration
even though counter to the interest of the
individual business line head
The ‘Next Phase’ and Result
These natural frictions set the stage for
Governance and Project Management
discipline
Technology Planning Challenges
 Target architecture evolves
 Influences- vendors, standards-setting
boards, trading partners
 Unexpected roadblocks
Technology Roadmap
 Collective vision of how technology can
serve business

 Mechanism to enhance business

performance
 Identification
 Justification
 Planned evolution
 Orchestration
Technology Roadmap Process
Guiding Principles
Current Technology
Gap Analysis
Technology Landscape
Future Technology
Migration Strategy
Governance
IT Value Framework
Business Governance

IT Governance

Change Mgmt Capability Building Measurement

People Funding

Risk Management
Architecture

Business Business Business

Process Process Process

Applications
Infrastructure

Operating Model
A Note About Standardization --
Application of the Model
Why should companies adopt a streamlined
standardized technology solution set?
It will:
 Lower yearly expense
 Easier to maintain
 Lower maintenance burdens in total
 Reduce operational complexity
 Enable innovation
 Enable adherence to corporate financial tactics
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Recall from Ross and Weill…
Standardization and Innovation have a
paradoxical curve
Maturity of architecture and governance
can be seen in a Maturity Matrix or
Business Agility

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High Chaos = High Cost

Corporate Data

Data

Applications

Technology
Platforms

Source: IT Savvy: What Top Executives Must Know to Go from Pain to Gain, P. Weill
and J. Ross, Harvard Business School Press, 2009.
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Simplification Eases Sustainment

 Standardized technology, processes and data

 Accurate, predictable, world class

Source: IT Savvy: What Top Executives Must Know to Go from

23 Pain to Gain, P. Weill and J. Ross, Harvard Business School
Press, 2009.
 Innovation Enabled
Business Standardized Optimized Business
Silos Technology Core Modularity

Local Enterprise
Flexibility Agility

100% 84% 92% 145%

Technology Budget

Source: IT Savvy: What Top Executives Must Know to Go from Pain to Gain, P.
24J. Ross, Harvard Business School Press, 2009.
Weill and
Financial Tactics
How does the firm wish to recognize
technology costs?
 Leveling O&M impacts over the life of the
asset
 Return on equity
 Lowering tax burdens through O&M spend
 Hosting, SaaS, etc.

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We Energies
We Energies is the trade name of Wisconsin Electric Power Co. and Wisconsin Gas LLC,
principal utility subsidiaries of Wisconsin Energy Corporation. We Energies provides
electric service to customers in portions of Wisconsin and Michigan’s Upper Peninsula.
We Energies also serves natural gas customers in Wisconsin and steam customers in
downtown Milwaukee.

Formed in 1896, We Energies originally was named The Milwaukee Electric Railway and
Light Co. In addition to electric and steam service, in its early years the company also
operated streetcars and an interurban railway. The company’s Lakeside Power Plant was
the world’s first plant built to burn only pulverized coal. Distribution of natural gas dates to
the 1850s through Milwaukee Gas Light, predecessor of Wisconsin Gas. In 1923, the
company acquired the Wisconsin Traction, Light, Heat & Power Co., which served the
Fox Valley area, and added Peninsular Power Co. in 1924. WTLH&P and Peninsular
were merged in 1927 to form Wisconsin Michigan Power Co., which was merged with
Wisconsin Electric in 1978. On Jan. 1, 1996, Wisconsin Electric merged with Wisconsin
Natural Gas Co., another affiliate of Wisconsin Energy Corp., to become a total energy
provider of electricity, natural gas and steam. WICOR, the Milwaukee-based holding
company of Wisconsin Gas Co., became part of Wisconsin Energy Corp. in 2000,
creating the largest electric and natural gas provider in Wisconsin. On April 12, 2002,
Wisconsin Electric-Wisconsin Gas started doing business as We Energies.
We Energies Service Territory
Customers
Accounts for August 2013:
Total accounts: 2,212,373
• Electric accounts: 1,140,371
• Natural gas accounts: 1,071,566
• Wisconsin Electric Gas Operations: 469,526
• Wisconsin Gas LLC: 602,040
• Steam accounts: 436
• Residential accounts: 1,991,597
• Commercial and Industrial accounts: 220,776
• Combined electric and gas customers: 790,434
• Not combined electric, natural gas and steam customers: 631,505
• Wisconsin customers: 2,183,942
• Michigan customers: 28,431
Distribution
Electric distribution lines: 45,420 miles
• overhead: 22,210 • underground: 23,210
Substations: 353
ATC-owned transmission lines: 2,855 mi.
Peak natural gas send-out:
• WEGO: 7,180,457 therms on 01/22/03
• WG LLC: 10,739,390 therms on 01/15/09
• We Energies (combined): 17,887,420 therms on 01/15/09

Gas main: 20,155 mi. Peak steam demand:

• Wisconsin Electric Gas Operations: 9,361 • Milwaukee: 1,081,000 lbs./hr. on 01/18/95
• Wisconsin Gas LLC: 10,794 • Wauwatosa : 285,000 lbs./hr. on 01/10/08

High/low pressure steam piping:

• Milwaukee : 13 mi. • Wauwatosa: 3 mi.

Peak electric demand (We Energies + Edison Sault*):

• Summer: 6,505 MW on 07/31/06
• Winter: 5,066 MW on 12/22/04
* Edison Sault Electric was sold in May 2010

Record load demand for a 24-hour period:

• 134,939 MWh on 08/01/06
Generation

Electric Energy Mix (2013 forecast)

MWh %

• Coal 18,754,560 55.9

• Natural Gas 2,529,642 7.6

• Oil 0 0.0

• Purchased - Nuclear 8,230,781 24.6

• Purchased - Non-Nuclear 1,444,032 4.3

• Renewables 2,543,030 7.6

Total: 33,502,046 100.0

Financial
WEC Financial Statistics for year-end 2012
• Operating revenues: $4.2 billion
• Operating income: $1.0 billion
• Net income from continuing operations: $546.3 million
• Diluted earnings per share from continuing operations: $2.35
As of Dec. 31, 2012:
• Quarterly dividend/share common stock: $0.34, declared in
January 2013*
• Common registered stockholders: 41,300
• Common shares outstanding (basic): 229.0 million

*From the 10-K: In accordance with that policy, on Jan. 17, 2013, the board of directors
increased the quarterly dividend to $0.34 per share effective with the first quarter 2013
dividend payment, which would result in annual dividends of $1.36 per share.
Wholesale Energy and Fuels: Business Model

Oversight
Federal Regulatory and Policy, Legal

Procurement Coal Short Term

Natural Gas Ops, Planning
Long Term Real Time Financial
Integrated Hedging, Market
Planning Operations Settlement
Contract Operations
Administration (MISO, PJM)

System Int Hedge Tools Forecasting, Market Ops Business Financial

Model, Decision Decision Energy Mgmt Sys, Intelligence Shadow
Unit Support, Support Situational, and Analysis and Storage
Parameters Market Assessment
WEaF – Current Focus
Cross Section of Commodity Management, Planning and
Operational Activities
Midwest Independent System Operators
 10 year old market
 During Start-Up, technology focus had been on tools to support
bid and offer strategies and communicate to the market
Analytics and Analysis
 Utilize stored data for performance metrics and forecast
Process Improvements
WEaF – Emerging Focus
Information Storage and Integration
Historical Analysis
Business / Market Intelligence
Improved Operational and Long Term
Decision Making
Forecasting
Improved Process Flow and Efficiency
Compliance
Process & Technology Evolution
• 2008-2010 – Slaying Spreadsheets
– Conform, Consolidate and Clarify

• The right information to the right person in the right form

• 2010-2012 – Decision Support

– Investigate, Integrate and Inform

• Leverage all available data, both inside and outside of WEAF for decision making

• No custom development has occurred since 2010

• 2013-2017 - Investing for the Long Term

– Strategize and Optimize

• Approach technology and process decisions with a long term view. Use specific human resource and financial
strategies. Consider total cost of ownership within the context of Generation BU as a whole.

• 2017 and beyond – Sophisticated Capabilities

Maturity Study results:

• 2006 Ad Hoc

• 2010 Managed

Goal should be movement toward Optimized or ‘Continuous Improvers’

Major Functional Areas
Commodity Mgmt
 Purchase and Sales (Gas, Electric and Environmental Allowance)
 Contract Management
 Fuel Transportation
 Hedging

Planning
 Commodity Forecasting
 Market Forecasting, Simulation and Analytics
 Mining, Analyzing and Reporting

Operating
 Purchase and Sales (Gas and Electric)
Measure
 Financial Settlement and Reconciliation
 Current Landscape – Risk Perspective
The current landscape features a number of challenges: custom applications and data sources, and lack of
integration; key applications nearing end of life and inflexibility for change.

Trading
Fuel Rate
Acct

Gas Forecast Forecast Forecast Energy

Acct Mgmt

Forecast Forecast

Hedge
Trans
Pipeline
Historian
For Example:
Commodity Mgmt Strategy
• 2013
– Implement Natural Gas Accounting Phases I and II
• 2014
– Implement Gas Accounting Credit and Risk Q3-Q4
• Eliminate custom Risk reporting, spreadsheets and vended package

- Plan the replacement of the pipeline application and ancillary customs

• 2015-2016
– Migrate Fuel Management and Rail Management to consolidated,
updated platform
– Integrate end to end with inventory processes with Power Generation through the storage of
PLC data

• Eliminate custom spreadsheets for fuel inventory management and enable better
accuracy
Integration Strategy
Ongoing
 Continue to leverage the known integration
points:
 Environmental – Environmental specific data
 Power Generation – Physical data
 Finance - Financial forecast data
 All – Document Management (including workflow)
Roadmap

Blueprint will develop the requirements and plan for the following 5-6 years. Wholesale Energy and Fuels will be
ready to meet the evolving market conditions within the constraints of organizational, economic and regulatory
conditions.

2012 2013 2014 2015 2016 2017 2018

FAST

Gas Mgmt Phase I

A fully
Gas Mgmt Phase II integrate
d
Risk and Credit Mgmt portfolio
to
Fuel Acct Migration address
future
Gas Scheduling challenge
s
Commodity and Market Forecasting and Simulation

Asset Optimization

Predictive Analytics
Questions?

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