Coal

E-Business: Converting Hype into Reality

Issue 10 and Volume 105.

By Steve Blankinship, Associate Editor

The promise of e-Business beckoned all enterprises with the potential to generate revenue faster, more economically, and in far greater abundance than ever before possible. Like any revolutionary trend, the promise has rewarded and disappointed many while destroying a few.

Yet those whose hopes have not been fulfilled would do well to recall that disruptive technological and economic breakthroughs have always created winners who later lost and losers who later won. Now that the first few phases of the e-Business saga have played out, those who have made it their business to study the success and failure of e-Business endeavors have more than mere speculation upon which to base future projections.

This year’s POWER-GEN International Conference in Las Vegas, Nev. will feature a panel discussion among e-Business veterans whose focus has been on the power generation industry. The e-Electricity Business Panel Discussion will target what is working and what isn’t, examine why, and provide direction for future success. Chaired by Gary McAuliffe of Lockwood Greene, and co-chaired by Gary Hilberg of P2 Energy, the session will be composed of five panelists who have engaged in various aspects of e-Business strategy, development and implementation for the electric power industry.

The panelists will be David Brantner, director of e-Business for Pratt & Whitney, responsible for directing and leading all of the company’s e-Business initiatives and operations; Don Duquette, executive vice president and chief operating officer for GP e Learning Technologies, Inc; Dan Senatro, vice president of information technology for ALSTOM North America; David Gallaspy, vice president of eBusiness for Mirant where he is responsible for e-Business initiatives including online trading, enterprise portals, and supply chain integration; and Jason Makansi, president of Pearl Street, Inc., former director of power plant business for Myplant.com., and who has helped develop several early e-Businesses, including Power Pools for Plant Managers.

“I’m excited about our e-Electricity Business session and in particular those who will be leading the discussion,” says panel chair McAuliffe. “In searching for the panelists, we found experienced business leaders with diverse backgrounds in power generation equipment sales and service, training, publishing, project development, business processes, financing, operations and consulting. All five are actively participating in the midst of the e-Business world with a specific and strong focus on power generation. We think they will bring an interesting and realistic perspective to e-Business issues and we hope to attract a wide range of people who want to share the dialogue.”

One thing everyone wants to know is what are the most promising applications for e-Business for those who build, buy, operate and maintain power generating equipment and infrastructure.

“In general, I believe the most promising applications will be those developed by experienced power plant engineers and managers who truly understand the function and simply see the software and the Internet as a platform for a better, faster, cheaper way to do things,” says Makansi. “Right now, I think one of the most well thought-out web-enabled applications is an environmental compliance package developed by a former power plant environmental manager in his basement.”

That said, more routine applications are providing revenue to their providers 24/7. Mirant’s Gallaspy says successes in the businesses he knows the most about generally include energy trading platforms, which are emerging as essential tools for merchant power generation companies. He cites as examples Enron Online and InterContinental Exchange (ICE). “Mirant trades on both platforms, but is also an investor in ICE,” says Gallaspy. “These two exchanges have gotten it right by providing efficient web-based interfaces that work reliably, allow easy launching of new products, and have features that make it desirable to use the exchanges. More importantly, strong bricks-and-mortar companies or consortiums that have invested financially and in terms of participation have backed both exchanges.”

Among those who haven’t done it right, Gallaspy cites utility.com, a pure Internet utility that went into bankruptcy in 2001. “They did a number of things wrong. They didn’t have the financial strength to manage the commodity risk that they incurred. Their software solutions were behind schedule and not industrial strength. They had difficulty in making their business model pay.”

Makansi believes the most appropriate products and services delivered via the Internet will be those that need support by faster speed and greater collaboration. He also thinks the Internet can potentially ease paperwork, thereby making commodity buys less expensive and difficult. “Engineered parts and components will still have to be looked at,” he says. “Due diligence for stuff above a certain dollar threshold will require kicking the tires.”

More Training Will Require More PCs

Training has been perceived as one of the most potentially applicable uses for e-Business, hypothetically with enormous potential to dramatically reduce travel expenditures.

“The greatest opportunity is the ability to provide training whenever and wherever it is needed,” says Duquette of GP e Learning. “In the power generation industry, this is especially important where shift work is a way of life and training is typically scheduled during the day. It’s difficult for the backshift workers to attend training. When e-Learning is used, the only equipment required to conduct training is a PC.”

That brings up an important point for Duquette. “In order to fulfill the e-Learning potential in the power industry we need to provide everyone access to a PC. Today most management employees have a computer on their desktop. However this cannot be said for the typical maintenance worker. E-Learning labs need to be set up so workers can access the training on-line when they need it.”

Broad-based indoctrination for nuclear plant employees is one highly effective training niche. “In the nuclear industry, all workers are required to take a general employee training class prior to receiving access to the site, and e-Learning has sped up the process considerably,” notes Duquette. “Before we had online learning, utilities had to add temporary instructional staff and temporary classrooms just prior to a plant outage in order to train the large craft workforce. Today workers can access the training on-line and not have to wait for a class to be scheduled.”

Still, some panelists see limitations. “I would say e-Business can provide alternative delivery mechanisms to classroom instruction, but they have their drawbacks,” says Pratt & Whitney’s Brantner. “Students can potentially have many problems coordinating their particular hardware to receive complex media. This has driven a lot of online training to more basic forms less able to retain students’ attention. There’s also the problem of learning styles. Individuals process text, images and sound in varying degrees. Some folks simply need face to face.”

Makansi concurs. “I’m not sure training is the killer function for e-Commerce some people think it is. Training is difficult to automate. And things that are easy to automate are things that make great e-Commerce functions.”

Brantner does, however, see some very valuable ancillary training applications. “Training registration and record keeping are ideal for leveraging e-Business tools,” he says. “Tracking student progress over time and recording detailed data about topic expertise can help firms find gaps and improve training. Of course, you don’t need the Web to do this, but it opens the possibility to having a third party provide the service and deliver it efficiently. It also makes it easier to reach worldwide units.”

“Mirant utilizes e-Learning pretty effectively,” says Gallaspy. “It is important to understand when classroom training is required and when you can train online. Online training has to be designed for the Internet medium to realize its full potential. As rich media becomes more available, Internet-based training will surpass conventional modes of training in interactivity, customization, and metrics.”

Gallaspy also believes customization is essential for e-training. “Classroom environments cannot readily adapt the pace and content of training to each individual user – but Internet-based training can. Even in the classroom environment, we already see significant impact of real time demonstrations and simulations via Internet services.”

More Buyer Support Can Increase Sales

Buying and selling things, either directly or indirectly, is clearly at the heart of all e-Commerce. “Matching buyers and sellers has been very successful on the Internet,” says Pratt & Whitney’s Brantner. “You can’t beat the reach with any other medium.”

“Supply chain integration is a very important application,” adds Gallaspy. “Companies such as ours spend billions of dollars annually in direct and indirect materials for power generation. E-procurement and strategic sourcing not only saves on this spending, maybe as much as 10 percent, but also lets you see inventory across multiple plants. It lets you standardize data on suppliers and commodities, automate purchasing processes, and reduce transaction costs. It lets us see operating information and market information together so we can extract the highest possible value from generation assets.”

Yet ALSTOM’s Senatro views services that are supplemental to e-Commerce – versus actual buying and selling – as the big value for sales. “Most customers seem willing to come onto a supplier site to get product info and updates,” says Senatro. “They also want to see the status of current orders, quotes, and contracts. In the past they would call supplier reps for this data and wait up to hours for a reply. Now they can get the answer immediately.”

Senatro notes that receiving training on the operation and maintenance of supplier equipment is an area where both supplier and customer can save time and money. And using the Internet to transfer documents and drawings on major projects is becoming the norm. Third parties are making it possible to have customers and suppliers securely route documents and status on complex projects.

Lack of Standardization is Stalling Progress

“We have found through customer interviews that doing full B-to-B business is not on most companies’ immediate horizon,” says Senatro. The dilemma, he says, is that if all major suppliers have ordering capability, they would have to learn to do business many ways and at the same time book each order into their own enterprise resource planning system. He notes that many customers are forming consortiums as an aid.

“Unfortunately they are not all going with the same consortium partner. The dilemma for the supplier is to integrate with multiple consortiums as well as a few customers who want us to do business across their own custom web site,” he says. “On top of all this, no standard for communicating forms has been adopted across the power industry such as we had with electronic data exchange.

Yet Senatro views such obstacles as temporary. “Once the hurdle of communicating through standards is achieved, like in the banking industry, a multitude of opportunities open up,” he says. He foresees all transactions for quotes, order and status to become simplified, done faster and more economically.

“With these standards customers and suppliers can share mutual interest information. An example would be plant operational data that then a supplier could make recommendations for improving operational performance or the need for replacement parts. Some of this has begun already but again through custom solutions. The power industry needs to step up and recognize that all benefit through the adoption of standards across our computer systems. It was done with EDI why not again?”

Brantner too thinks customer support currently offers one of the best routes toward boosting sales. “Access to technical information, benchmarks and product information is a great supplement to trading phone calls.”

Personnel/Recruiting

Because of the concern of finding the right people needed to build the new generating capacity projected over the next decade, the five panelists were asked about the value of e-Commerce in locating enough people with the right credentials.

“A couple of things come to mind,” says Gallaspy. “Obviously, the Internet can help construction companies recruit personnel at the expense of others. But more importantly, e-Business tools such as collaboration, online sourcing, and online project management can make the interaction among designers, owners and constructors more productive so that fewer people can handle more work. There are still substantial productivity gains to be made.”

Makansi doesn’t think the Internet will be of much value in dealing with the critical shortage of engineers needed to build the staggering amount of new generation projected for the next decade. “I don’t think e-Business will have much to do with the shortage of engineers. Would you hire someone from an Internet Job Board without interviewing them?”

Yet GP e Learning’s Duquette points to a convergence of recruitment and training. “Our company can provide trained workers quickly,” he says. “Today if we need 100 trained workers and can only train 10 at a time in the classroom, I will need to schedule 10 classes. With e-Learning, all the workers can get on-line and train all at once and at their own pace.”

Has e-Business Lived Up to the Promise?

When it comes to hype, nothing in recent memory can top the enthusiasm that e-Business has generated. Do the panelists think the Internet’s value for business has been oversold?

“Definitely not,” says Gallaspy. “Some might see the dot.com disaster of last year as a swan song. However, the truth is that the Internet continues to revolutionize the business of energy companies. Mirant’s internal IT infrastructure is based on Internet protocols, similar to a Cisco’s. This means that we are poised to integrate our business processes with any similar architecture through the web. So we continue to find opportunities to automate processes and improve information flow that supports our core business. As bandwidth improves, standards emerge, and behavior changes, the whole industry will be marching to the sound of a new drummer.”

“There was big hype early,” says Brantner. “Most large companies stuck with the business process focus. We are still grinding out small successes. The impact of an e project is only as good as the underlying business process. Unfortunately, this means the stories are boring. After all, good process should be predictably boring. We stick with the think big, but start small approach to investing in this area.”

Senatro concurs. “Unfortunately the media hype has created a frenzy among all companies to do something with the lure of great dollar savings and radically improved processing time. Money seems not an issue. But what direction to take?”

Finally, everyone wants to look into the crystal ball predicting the future. Who will be in the driver’s seat a decade or so down the road? Although no one can know, the panelists know everyone wants to know that they think.

“The winner in my opinion will be the entity which controls the window on a given customer segment,” says Makansi. “At this point, say, for power generation, that could be Microsoft as easily as it could be General Electric or IBM. No one really knows what or who will ultimately be most successful. One thing’s for sure, though. Judging successes and failures at this juncture is pointless. The battle between AOL and Microsoft for the soul of the Internet, however, will embody lessons for all of us in vertical industrial markets.”