When you're in charge of IT for 17 energy plants—each responsible for converting up to 3,000 tons of waste into electricity every day—you don't want each plant to use a different format for critical maintenance data.
But that was the situation four years ago at Wheelabrator Technologies Inc., a $1 billion subsidiary of Waste Management Inc. in Hampton, N.H. The fast-growing company was adding plants rapidly but lacked adequate standardization of data and processes.
"They were all doing things slightly differently," explains Ernie Botte, director of information systems at Wheelabrator. "If I went to look for a furnace grate, it might have different part numbers, so I might not be able to tell what's in the inventory."
That lack of standardization threatened the company's ability to keep furnace downtime to a minimum—which could have hurt its bottom line: "If we're not running our furnaces, we're not making any money," Botte says. So he set out in search of an enterprise asset management, or EAM, system.
EAM combines functions involved in purchasing, maintaining and tracking corporate assets, such as plant equipment, cash registers or delivery trucks. EAM includes maintenance functions, such as scheduling repairs, as well as purchasing activities, such as putting out bids and proposals. It also has analysis tools to track how key numbers—such as emergency repairs per month—are meeting goals. And it provides a unified view of all enterprise assets so that companies with far-flung facilities can centralize and optimize the purchasing, usage and maintenance of those distributed assets. An EAM product may be stand-alone, with loose integration to an ERP, inventory, purchasing or other enterprise application, or it may be tightly integrated with, or even part of, an ERP suite.
In Botte's case, integration with Wheelabrator's J.D. Edwards ERP system was less of a concern than getting features that met Wheelabrator's specific operational needs. For instance, he wanted to create corrective work orders so that when a technician found that a repair was different than specified in the original work order, he could quickly issue a corrective order instead of resubmitting a new one. "There was a host of those kinds of criteria," Botte says. In the end, Wheelabrator chose TabWare from Greenville, S.C.-based AssetPoint.
Then came the challenge of implementation. That's when Botte decided to do something that's becoming more popular at large companies: He opted not to bring the software in-house. Instead, Wheelabrator subscribed to TabWare OnLine, AssetPoint's hosted version. "We have eight people in IT. We don't have the skill sets to run it ourselves," says Botte.
An in-house implementation would require Wheelabrator to hire two additional IT people, as well as purchase Oracle database software to store the TabWare data and pay maintenance fees for the software. "We were probably looking at $2 million upfront," says Botte, with yearly expenses as high as $300,000—compared with the roughly $500,000 he pays annually for hosted EAM.
Today, Wheelabrator uses TabWare to manage all of the parts and tools needed to maintain 24 plants in Florida and elsewhere on the East Coast, as well as in Spokane, Wash. "We rely on it to make sure that all components are in stock, and to keep our inventory to a minimum by sharing components across plants before we buy," he explains. "We'll also monitor metrics—such as inventory valuation, number of [product orders], inventory turns. It will give us performance measurements across the company."
Why Outsource?
Wheelabrator is an example of how some organizations seeking to better manage expensive assets are turning to application service providers (ASP) for help in implementing EAM.
Houghton Leroy, an analyst at ARC Advisory Group Inc. in Dedham, Mass., predicts that one in every four EAM installations will be externally hosted within five years. "ASP hosted solutions are used by all sizes of companies looking to outsource these expensive internal support costs," he says.
There are several reasons why a company might opt for hosted EAM, even if it isn't outsourcing other applications. For instance, it might need to get runaway equipment costs under control. An ASP can help get a system up fast, sometimes as a stopgap measure until EAM can be implemented in-house.
"They may say, 'All my inventories are out of whack, and I need to get this addressed today,' " explains Marc McCluskey, an analyst at AMR Research Inc. in Boston.
Another reason is that EAM is often viewed as a one-off function that's not well supported by internal IT staff. Such was the case at Maritz Inc., a $1.44 billion management and marketing firm in St. Louis. Bill Wright, administrative supervisor in facility services at Maritz, recalls that before he moved to a host-based EAM package in 2002, he served as tech support for his department's stand-alone maintenance management application. "Our IT folks didn't know a lot about the software, so we had to support it on our own," he says.
And when Wright's staff was downsized three years ago, so was his ability to support the software. So Wright went with Datastream Systems Inc.'s 7i software, paying $52,600 for implementation, plus a monthly fee of about $1,200 ($150 per user) for hosting at a data center under contract with Datastream.
Some companies host out their EAM system when the project is simply too large for internal IT to handle. Hanover Compressor Co., a $1.1 billion provider of natural gas compressors and compression services in Houston, acquired more than 40 companies in 10 years, all of which had their own enterprise applications. The company needed to integrate and standardize its systems—and do so quickly, says Stephen York, Hanover's corporate controller and vice president.
"When I came on board in 2002, the company had 68 applications, so it was a bit of a nightmare from an information perspective," York recalls. The asset management system was three separate databases tied to a homegrown asset-tracking application. "It wasn't really EAM, but just a way to keep track of our fleet of compressors," he explains.
York decided to move the entire company to Oracle Corp.'s E-Business Suite, which contains an EAM component. And he opted to have it hosted from Oracle's Austin data center because of the huge scope of the task of unifying dozens of companies in nine international locations on one ERP and EAM platform in 16 months.
"Our staff was busy keeping the old technology running, as well as preparing our network for the change. We didn't have the expertise," York explains.
With a subscription model, a company pays a monthly fee for everything—software, hardware and management. With a traditional hosting arrangement, the customer buys the software but pays a monthly fee for the management. Hosting is generally cheaper on the front end but could be more expensive over the long haul. A key factor is how much of the hardware, software and expertise a company already has.
Durand Glass Manufacturing Co., a Millville, N.J.-based division of Arc International Group, chose in-house implementation of MRO Software Inc.'s Maximo asset management application because Durand already had a Unix server and the Oracle 8i software to host the EAM database. Project manager Fabien Klimsza says that Durand's staff did most of the implementation, with some help from Bedford, Mass.-based MRO. The total costs—training and consulting services, licenses and a Dell Inc. Windows 2000 server—added up to about $300,000.
"We did not incur any real incremental increase, so it would have been difficult to justify the cost of hosting," explains Klimsza.
Giving Up Control
Another trade-off is control over upgrades. A renter has less control than an owner has. Says Botte, "When you buy an application, you can defer an upgrade. But with an ASP, everybody online gets the new version."
Integration may also be a factor. If all a company needs to do is update batches of data, such as new purchases, over to the ERP system, then integration isn't terribly complicated. Wheelabrator, for instance, uses simple file updates to integrate its internal finance and TabWare systems.
But integration is critical if a company has sophisticated, overlapping processes between its EAM and ERP systems. "If you've got a maintenance schedule and need real-time fulfillment of parts and people and you use both EAM and ERP applications [for those processes], then you need tight integration, or you'll be double-purchasing items," says McCluskey.
And then there's the question of downtime. Most ASP and hosting contracts spell out how much downtime is allowed. But, ultimately, it's under an outsider's control. "When you go outside, it introduces another layer of infrastructure," says Botte. "When something goes down, we have to ask if it's my infrastructure or TabWare's, and you just hope the finger-pointing is minimal."
Botte says he's happy with TabWare, and with the assurance that he could also opt to buy the software and implement it in-house in the future. "One of the positives with TabWare was the ability to go either way," he explains.
As with any major IT investment, he says, it's always safest to keep your options open.
Hildreth is a freelance journalist in Waltham, Mass. She can be reached at Sue.Hildreth@comcast.net.
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