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Commentary: Energy crunch spotlights oudated utilities systems

The energy industry's lack of collaborative systems translates into energy shortages and skyrocketing fees borne by the consumer.

3 min read
By Kristian Steenstrup and Daniel Miklovic, Gartner Analysts

The lights may be going out in California, but they wouldn't need to--at least, not as often--if utilities implemented collaboration tools exemplified by next-generation ERP (enterprise resource planning) software.

Rather than blaming the information

See news story:
Power outages strike California for second day
technology industry for its consumption of energy, utilities and regulators should turn to IT as a partial solution to the problem.

Significant electricity shortages have been occurring in California as a result of multiple power plants voluntarily shutting down--due to scheduled maintenance, emissions concerns or breakdowns--without alerting other plants. Utilities' lack of collaboration capabilities has exacerbated California's energy shortage.

Extrapolation of the incremental costs of the energy crisis suggests that consumers will have to pay some $1 billion more this winter than can be accounted for by colder weather alone; those higher payments stem, it seems, from higher costs of operation among utilities. Gartner believes that the energy industry should take immediate steps to update enterprise applications to work in a collaborative environment. Utilities' lack of collaborative systems translates into energy shortages and skyrocketing fees borne by the consumer.

Emerging collaborative systems will help the utilities--and their customers--avoid these maintenance-driven shutdowns at crucial times. Systems running the next generation of ERP, which Gartner calls ERP II, can collaborate so that utility plants can alternate energy coverage in areas where maintenance work is done.

Gartner estimates that, by 2005, ERP II will take the place of today's ERP systems as the primary enabler of internal and inter-enterprise process efficiency. Today's ERP systems will become obsolete. Investing and improving ERP strategies to include outward-facing elements, such as collaborative commerce, will become crucial to the success of enterprises in all industries.

Indeed, the operational challenges of enterprises no longer center on maximizing internal processes. The challenge is to know at any moment exactly what is happening across the entire supply chain. Enterprises and the technologies that drive their operations must be compatible and collaborative. With collaborative commerce, for example, assembly lines will no longer be linear, but rather multidimensional, as suppliers, manufacturers and distribution centers use the new ERP II technologies.

Getting ready for tomorrow
To plan for the evolution to ERP II from today's ERP systems--and to maximize efficiency--enterprises should take immediate steps to implement a continuous improvement program, including the following:

 Identify key areas of pain, especially areas that require immediate attention, such as systems that fail to meet enterprise needs, or customer-facing areas that struggle with ERP and generate the most help-desk calls.

 Identify alternatives to address the pain. When exploring potential solutions, enterprises should consider the following alternatives in this order: retraining requirements; process improvement and change; more standard functions; version upgrades; bolt-on applications and customizations.

 Prioritize based on cost and benefits. Optimize high-impact areas that affect volumes of transactions or users and therefore allow for a fast multiplication of benefits. Optimization planning becomes crucial as return on investment becomes a larger concern.

 Keep the time frame short and focus on results. To maintain user and management commitment, planners should take small but successful steps that truly resolve user concerns.

 Involve the affected consumers. Day-to-day user have the greatest insight into the problems they face, so planners should work with experienced IS staffers to develop systems that reduce the areas of pain they identify.

(For related commentary on ERP II, see TechRepublic.com--free registration required.)

Entire contents, Copyright ? 2001 Gartner Group, Inc. All rights reserved. The information contained herein represents Gartner's initial commentary and analysis and has been obtained from sources believed to be reliable. Positions taken are subject to change as more information becomes available and further analysis is undertaken. Gartner disclaims all warranties as to the accuracy, completeness or adequacy of the information. Gartner shall have no liability for errors, omissions or inadequacies in the information contained herein or for interpretations thereof.