White Paper. Controlling Obsolescence: Overcoming Common Barriers to Modernization. What s Inside:

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1 White Paper Controlling Obsolescence: Overcoming Common Barriers to Modernization Authors: David Gaertner, North American Modernization Director, Invensys Operations Management Mike Hull, Computer Controls Supervisor, Salt River Project What s Inside: 1. Introduction 2. Common Barriers to Modernization 3. Overcoming the Barriers 4. Partnering for Success

2 1. Introduction The majority of the process industries are using a host of aging assets as part of their production. This holds true for the automation and production systems where many of the companies have exceeded the intended life of the systems. Despite this, few have plans in place to counter this inevitable aging. It is critical that business assets are maintained and enhanced like any other valuable resource. A major US fossil fuel power generating facility, Navajo Generating Station (managed by Salt River Project), acknowledged the problems presented by aging systems and the need for modernization. However, they also faced very real barriers to getting such initiatives off the ground, which included: justification, risk, status quo, and planning. These barriers were corroborated by executives from several major US-based private, public, and government institutions during an ARC forum meeting on modernization in 2012 and by Invensys Modernization practice. While these barriers can be significant, business growth, and even survival, depends on overcoming them. Modernization should be viewed as an ongoing, transformational process and integral part of a plant s effort to continually improve not a onetime project. The good news is that there are specific first steps that can lay the foundation for a modernization process and make these endeavors more efficient, effective, and successful. 2. Common Barriers to Modernization Justification Modernization is rarely a recurring budget line item but one that must compete for funds every year within the overall budgeting process. Obtaining those monies is the number one challenge facing managers. In fact, many executives express frustration at their inability to show business value or return on investment (ROI) from modernization initiatives. For example, arguments related to technical capabilities and toolsets or addressing the shrinking pool of staff skills are viewed as isolated problems and, therefore, are approached in a piecemeal fashion. Furthermore, there is a notion that legacy systems are paid for with operating maintenance their only cost. Combine that with the perception that modernization projects simply maintain the status quo and do not deliver new value and it is easy to see why there is difficulty in funding projects to upgrade legacy systems. What is lacking is a concrete analysis of the current business value of the supporting system or asset and infrastructure, the future business value of modern, agile systems, and the financial and risk implications of delaying modernization work. Executives need ways to make a stronger connection between modernization and operational goals, such as improved competitive advantage, increased revenue, and regulatory compliance in order to get the needed funds. Risk Executives may be resistant to modernizing systems that are essential to the business because they are perceived to be running well due to the attention and maintenance they receive. Downtime is not an option with these systems, and trying to modernize without jeopardizing current operations creates another layer of risk. Moreover, any change to core capabilities introduces significant business risk that can be very hard to justify. Without a sound business case for modernization, there is little reward for that risk, particularly when compared to doing nothing at all. However, leaving well enough alone and delaying modernization delays the inevitable and puts executives in the uncomfortable position of having to be reactive rather than proactive. Aging equipment will become obsolete and obtaining spare parts from suppliers will prove to be difficult. The inability to get these spare parts can impact production and may lead to loss of revenue. A clearer understanding of the risks from inaction is necessary to make a good case for modernization. Status Quo For many executives today, there is no clear reward for modernization; and, that is particularly true in situations where the end result simply maintains the status quo functionality, albeit on a more current technology platform. Page 1

3 In fact, there is a strong disincentive to take on projects to update legacy systems and assets. Departments have competing work on their task lists, creating yet another barrier to modernization. It is easier to do nothing than to start a modernization effort, especially when the benefits and risks are not clear. Many people will keep a car as long as it is running, even past the point where the cost to keep it running outweighs the benefit, or do not think about being stranded when it fails. Companies need to make the effort to assess the pros and cons involved in modernization, using real economic measures. Planning Another common impediment to modernization is the perception that timelines for such projects are inordinately long and that any benefits are too far off in the future to make an impact. Of course, these projects are complex and require considerable planning and validation time, in addition to performing the actual upgrade work. However, as with any project, the longer the timeline, the more it is at risk that it will be interrupted, suspended, or even cancelled. Furthermore, for many, the term modernization raises more concerns and questions than answers. Questions that arise include: How do I align my plans with suppliers technology releases? Where to start? What are the priorities? Given the complexity and breadth of these systems it is difficult for executives to make the right decision about modernization approaches and methodologies. There are many vendors promoting products and services and little independent information to help organizations make the smart investment for their particular environments. There is a real fear of being locked into an approach and technologies that do not easily adapt as the industry changes. That is understandable because modernization projects are hard enough to get off the ground without having to worry that they are going down the wrong path. Organizations need to find ways to define an overall modernization roadmap, deliver it in smaller, incremental steps, update the plans as business and needs change, and show progress and benefits along the way. 3. Overcoming the Barriers Lasting success comes from a more holistic approach one that looks into all levels, from strategy to processes to systems and, finally, infrastructure. Following such a modernization approach provides the ability for business priorities to drive the process, rather than technology changes. Knowledge is at the core of successful modernization initiatives. Gathering the information on the company s business objectives, current assets and business processes is the knowledge required. This approach allows the development of strategic modernization plans based on facts that align to strategic goals while minimizing costs and risks. The ideal place to begin a plan is by developing a comprehensive understanding of the strategic business objectives, goals, business challenges and problems that are driving the need for modernization. It is critical to follow a structured methodology for discovery, documentation and analysis. Once the business objectives are well understood, the next step is to create a modernization plan that takes under consideration a plant s resources including: time, people and money. It is critical to consider and review the following when starting your journey toward modernization: Visibility into all current assets Insight into what can and should be preserved and reused Identification of mismatches between capabilities and business processes Page 2

4 Many organizations believe they have a good understanding of their portfolio of systems and assets, but it would be wrong to discount the value of a thorough, systematic evaluation. More often than not it reveals some unpleasant surprises, both in terms of cost and resource constraints. To accomplish this objective requires meeting all the stakeholders and having an open discussion on the assets, issues, needs, constraints and dependencies. These discussions should go beyond the envelope of the systems in question and look to identify areas that could take advantage of an updated system. As problem areas are discussed and identified, potential benefits from improvements should also be discussed. These can be hard benefits such as improving uptime or product quality as well as soft benefits such as improving productivity. In most cases there will be a one-to-many correlation between an improvement and benefits areas. The result is a grid that can now be used in the modernization planning. The key value of this process is that there is buy-in from different aspects of the organization since it was their input that shaped the results. This is critical to ensure everyone is on the same page. Finally, budgetary costs should be developed for implementing the improvements. At this point there is a clear understanding of the business objectives, a preliminary idea of key modernization areas and improvements, the potential benefits and associated costs. With this information, a comprehensive plan can be built which can identify low hanging fruit to start generating benefits early and help fund the rest of the modernization effort. The first two to three years should contain enough detail that the benefit case can withstand challenge, with the remaining years presented as high level estimates. A cash flow analysis can then be developed along with a risk assessment. This approach allows organizations to: Systematically develop and prioritize modernization efforts Build a solid case for modernization that supports overall business goals and strategies Reduce the cycle time for decision making Manage system or asset as the valuable assets they truly are This approach helps organizations: Reduce the effort, cost, and risk associated with modernizing legacy systems Discover, preserve, and reuse existing assets Increase competitive agility by improving their ability to leverage existing assets in new ways and into modern environments Summary In summary, the barriers to modernization are significant and, for many organizations, it is only when a failure occurs or the system can no longer perform as intended that any action is taken and at great pain and cost including being forced to modernize without careful thought or planning. On the other hand, a proactive approach that introduces incremental changes over time offers a much more effective roadmap forward as well as a better chance to overcome barriers to modernization and make it an integral part of an organization s program. It is essential to break down such modernization barriers as justification, risk, status quo, and more. Together, they help organizations establish a roadmap for an incremental, ongoing, proactive modernization program. By doing so, leaders are better equipped to manage operational risk and contribute to longer term success. 4. Partnering for Success To get the maximum value in the shortest period of time, many organizations find it helpful to partner with an experienced vendor who can help jumpstart their modernization initiative. Beyond the benefit of having an independent advisor to help broker discussions with client stakeholders, consultants can provide invaluable expertise in asking the right questions, probing for further data, and traversing a complex business and infrastructure and also offer specialized tools to help collect, manage, and analyze information. Page 3

5 The ideal modernization service vendor: Has the ability to create visibility across all levels of the organization (from strategy to processes to system or asset to infrastructure) that reveals the cause and effect of decisions before they are made Offers a willingness to create the right solution for each organization and every asset based on a wide range of modernization approaches, technology platforms, and development toolsets Possesses deep industry, business, process, and architecture expertise Does more than plan; can help execute and even manage once deployed Conclusion Justification, risk, status quo, time and planning. While these barriers to modernization are significant, the consequences of inaction are even more so. Now is the time to invest in modernization. A skills challenge is looming as baby boomers with long experience near retirement. Many organizations have been feeling the negative impact of inaction for years but have lacked the ability to make a compelling argument for change. Every organization must create its own, individual roadmap to modernization one that is based on current operations, as well as future strategies and objectives. An experienced vendor of modernization services can be the ideal partner to help ensure success, bringing invaluable industry expertise, methodologies, tools, and an independent view to the process. Invensys Modernization Services Invensys Operations Management is a leading provider of automation and information technologies, systems, software solutions, services and consulting to global manufacturing and infrastructure industries. Our solutions, which are used by more than 40,000 clients in over 200,000 plants and facilities around the world, include control and measurement instrumentation; safety, critical and distributed control systems; a wide range of real-time operations management software; and services. To help organizations get started with their modernization initiatives, Invensys has developed two key service offerings: Modernization Assessment: This assessment helps organizations assess their current state, prioritize their business needs and establish ROI. Multi-year Modernization Engagement: This engagement executes against a prioritized plan with highly-qualified resources including PMP-certified project managers and engineers who have performed hundreds of modernization projects across the globe. For more information, contact your Invensys Client Sales Executive. Invensys Operations Management Equity Drive, Houston, TX Tel: (713) Fax: (713) iom.invensys.com Invensys, the Invensys logo, ArchestrA, Avantis, Eurotherm, Foxboro, IMServ, InFusion, SimSci-Esscor, Skelta, Triconex, and Wonderware are trademarks of Invensys plc, its subsidiaries or affiliates. All other brands and product names may be the trademarks or service marks of their representative owners Invensys Systems, Inc. All rights reserved. No part of the material protected by this copyright may be reproduced or utilized in any form or by any means, electronic or mechanical, including photocopying, recording, broadcasting, or by any information storage and retrieval system, without permission in writing from Invensys Systems, Inc. Rel. 08/12 PN IN-0230 Page 4