Industry Short List for Enterprise Asset Management for Refining: Keeping Petroleum Flowing

Energy Downstream Strategies

www.energy-insights.com

INDUSTRY SHORT LIST J i l l F e b l o wi t z

#EI208856 Michael J. Heagney

ENERGY INSIGHTS OPINION Enterprise asset management (EAM), in the context of this report, is a set of processes and applications used by downstream oil and gas companies (i.e., petroleum refineries) to manage capital assets, work performed on those assets, and the resources required to perform the work. EAM includes software products traditionally known as computerized maintenance management systems (CMMSs). Oil refining holds many similarities to other types of manufacturing where EAM systems are strong. The assets tend to be localized rather than distributed, as they are in oil and gas pipelines. EAM also includes supply chain capabilities provided by suppliers chosen for this report but does not include separate best-of-breed supply chain management offerings such as strategic sourcing, construction management, or project scheduling and management software. Vendors evaluated in this report are IBM, Ventyx, Oracle, and SAP. Energy Insights recommends that: Downstream oil and gas businesses, specifically companies owning and operating petroleum refining, should approach the EAM vendor selection process expecting to spend significant time up front to accurately assess their business and technology needs. Refiners should use the Industry Short List to quickly identify EAM solution vendors for further evaluation. Since each refinery will have its own unique needs, it is important to take the next step and rigorously evaluate each vendor selected for the Industry Short List.

Global Headquarters: 5 Speen Street Framingham, MA 01701 USA

P.508.935.4400

F.508.988.7881

October 2007, Energy Insights #EI208856 Energy Insights: Energy Downstream Strategies: Industry Short List

TABLE OF CONTENTS
P In This Report 1

Methodology ............................................................................................................................................. 1 Market Definition....................................................................................................................................... 2 Vendors Included for Consideration.......................................................................................................... 2 S i t u a t i o n O ve r v i e w 3

Introduction............................................................................................................................................... 3 Current Industry Dynamics ....................................................................................................................... 4 Weights Applied to Criteria ....................................................................................................................... 4 E va l u a t i n g t h e V e n d o r s 14

Vendor Overview ...................................................................................................................................... 14 Partnerships and Alliances ....................................................................................................................... 16 Industry Short List Evaluations ................................................................................................................. 16 Future Outlook 19

Industry Impact ......................................................................................................................................... 19 Vendor Profiles ......................................................................................................................................... 20 Essential Guidance 22

Actions to Consider................................................................................................................................... 22 Learn More 23

Related Research ..................................................................................................................................... 23

#EI208856

2007 Energy Insights, an IDC Company

LIST OF TABLES
P 1 2 3 4 5 6 Features and Functionality for Refining........................................................................................ 6 Industry Short List for the EAM for the Refining Market: Definition of Ratings for Fit to Market Needs (X-Axis) Attributes ................................................................................................. 11 Industry Short List for the EAM for the Refining Market: Definition of Ratings for Ownership Confidence (Y-Axis) Attributes ..................................................................................................... 14 EAM for Refining: Industry Short List Vendor Overview............................................................... 15 Industry Short List for the EAM for the Refining Market: Vendor Ratings for Fit to Market Needs (X-Axis) Attributes ............................................................................................................. 17 Industry Short List for the EAM for the Refining Market: Vendor Ratings for Ownership Confidence (Y-Axis) Attributes ..................................................................................................... 18

2007 Energy Insights, an IDC Company

#EI208856

LIST OF FIGURES
P 1 Industry Short List: EAM for the Refining Market ......................................................................... 19

#EI208856

2007 Energy Insights, an IDC Company

IN THIS REPORT
Methodology

This analysis is intended to help oil and gas executives quickly arrive at a short list of EAM application suppliers for refining. It uses the Industry Short List methodology and tool to compare EAM offerings and the vendors that provide these offerings. The tool centers around three principles Energy Insights believes are critical in today's selection of an IT supplier: fact-based research, industry focus, and evaluation transparency. The Industry Short List is designed to be an easily understandable tool that facilitates a technology buying decision process. Energy Insights presents the results of each assessment in a 2 x 2 graphic in order to quickly communicate the relative position of each technology supplier. Further information about the assumptions behind each vendor's position is included in each Industry Short List evaluation. Energy Insights analysts are available to consult with technology buyers individually. Furthermore, Energy Insights analysts can customize the Industry Short List tool to address the specific needs of each organization. For each Industry Short List evaluation that is published, the analysts undertake the following steps: Define the scope of the market being evaluated and the associated IT suppliers that will be evaluated (Technology suppliers selected for evaluation are those suppliers that are leaders in the market. Leadership is determined by the analyst developing the Industry Short List evaluation and based on the supplier's number of current customers and its business model's viability.) Assign weighting to criteria that will be used in the evaluation (A management review of the weighting is undertaken to ensure appropriateness and to minimize analyst bias.) Notify all vendors that will be evaluated of the upcoming evaluation process (The analysts also collect data about the vendor's products and business model.) Interview within the past 12 months at least three customers that have the product operating in a production environment (This is done for each vendor.) Use the Industry Short List criteria and tool to evaluate each vendor and develop the Industry Short List document

2007 Energy Insights, an IDC Company

#EI208856

Page 1

Market Definition

EAM, in the context of this report, is a set of processes and applications used by oil and gas lines of business (e.g., petroleum refiners) to manage capital assets, the work performed on those assets, and the resources required to perform the work. These processes include the "build" and "maintain" portions of the asset life cycle as well as the associated asset supply chain. Oil refining holds many similarities to other types of manufacturing where EAM systems are strong. The assets tend to be localized rather than distributed, as in oil and gas pipelines. EAM also includes supply chain capabilities provided by suppliers chosen for this report but does not include separate best-of-breed supply chain management offerings such as strategic sourcing, construction management or project scheduling and management software. Vendors evaluated in this report are IBM, Ventyx, Oracle, and SAP. EAM applications for refining have historically comprised a large number of disparate software systems. This fragmented environment may include separate maintenance work management systems for different types of work, such as construction, operations, and maintenance. It is not uncommon for an oil and gas company to use different applications within its portfolio of refineries, especially if the company has recently acquired new refineries. Additionally, the degree of integration among the applications has been relatively low compared with other enterprise applications in areas such as finance and human resources.
Vendors Included for Consideration

As previously mentioned, this report includes vendors already considered as leaders in EAM for generation. As such, it does not include EAM vendors that have little or no presence in this market. Vendors included in this report are: IBM Ventyx Oracle SAP

Page 2

#EI208856

2007 Energy Insights, an IDC Company

SITUATION OVERVIEW
Introduction

As consumers continue to see rising gasoline prices, oil and gas companies are feeling the pressure to reduce costs. One area receiving attention is petroleum refining. The industry is interested in getting better at predicting which petroleum products are likely to be popular and gearing production toward those products. Capacity is constrained, but oil and gas companies are reluctant to make major capital investment in new capacity in North America. At the same time, the cost of refined petroleum has continued to rise for a number of reasons, including cost of crude oil feedstock, cost of labor, and cost of materials. Last spring and early summer of 2007 arrived with larger than usual refinery maintenance shutdowns. Chevron's shutdown at its El Segundo Refinery lasted longer than the originally planned three weeks due to delay in the receipt of materials, even though the project had been planned for two years ahead. According to Ana Campoy in an article in the "Refiners' Summer Break" (The Wall Street Journal, June 26, 2007), ExxonMobil, Valero, and others had shutdowns reducing capacity by about 17.5 million barrels and ultimately putting upward pressure on gasoline prices at the pump. With the high cost of gasoline and good margins, now is a good time to make capital investments. In fact, according to Industrial Infosource, there are 637 construction projects amounting to $71.4 billion currently at some stage of development as refiners reinvest in plants, safety, or process improvement. Still, only six new refineries are slated for construction in North America. This is partly due to the long-term outlook for refining good margins are only expected to last until 2011 and the construction of refineries in other parts of the world. Even though margins are good, refiners are still cautious based on their experience with thin margins in the 1980s and 1990s. Refineries are capital intensive when it comes to physical assets. The following are contributing factors to the high costs of operation facing the industry (see also Working with What You Have Operating Refineries in North America, Energy Insights #EI207929, August 2007): Shortage of skilled labor. This is not just a regional problem, with a shortage of craft and construction labor due to rebuilding in the Gulf of Mexico. It is well documented that the average age of the oil and gas workforce is increasing and that there will be a shortage of trained technical personnel to replace retiring workers. Petroleum refining tops all industries in having the highest percentage of employees within retiring age in the next 510 years.

2007 Energy Insights, an IDC Company

#EI208856

Page 3

 Aging refineries. No new refineries have been built in the United States since 1976. At the same time, refineries have been running close to capacity just to keep up with demand, putting more wear and tear on equipment and shortening its useful life. Environmental health and safety (EH&S). Also, in some regions referred to as health, safety, and the environment (HSE). The Texas City refinery accident during a plant turnaround in 2005 has led to increased inspections by the Department of Labor's Occupational Safety and Health Administration (OSHA). In recent years, energy companies have undertaken initiatives to consolidate EAM systems and to use these more effectively in managing turnarounds. According to one refinery company interviewed for this report, the primary objectives for implementing an integrated EAM system are: Support for a best-in-class maintenance work management business process Proper identification and control of all critical information in support of this business process Effective cost reporting and optimization of all work activities, from a reliability and asset criticality perspective
Current Industry Dynamics

According to the Worldwide Oil and Gas IT Spending Guide, 2005 2010, spending on EAM software globally amounts to $182.7 million. For North America, spending on EAM is estimated at $66.4 million.
Weights Applied to Criteria

The Industry Short List methodology is based on a set of criteria and allows for unique weighting of the criteria for each market. Each technology provider is assessed based on how well its product fits market needs and our confidence that the technology provider will provide the customer with a satisfactory ownership experience. The fit to market needs assessment is a weighted total of 12 criteria that assess the product's strength in terms of feature/functionality, interoperability, architecture, quality of service and support, and cost. The ownership confidence assessment is a weighted total of 5 criteria that assess the soundness of the supplier's strategy, financials, commitment to an industry, and customer satisfaction. Each criterion is rated 1, 2, or 3. Definitions for 1, 2, and 3 ratings vary according to the criterion. To determine a criterion's overall

Page 4

#EI208856

2007 Energy Insights, an IDC Company

importance in the composite rating, each receives a weighting of 0, 1, or 2. For example, in terms of weighting, if feature/functionality is a critical criterion for assessing a vendor's ability to fit the market's needs, the criterion will receive a 2. In terms of ratings, if the vendor has significant gaps compared with other applications in this product category, then the analyst will provide a rating of 1 for this vendor. Therefore, the equation will follow as: 2 (weight of criterion) x 1 (vendor rating for this criterion) = 2 (vendor score for this criterion) When the criteria are presented graphically, fit to market needs is plotted on the x-axis with low to high moving from left to right. Ownership confidence is plotted on the y-axis, with a low to high movement from the center outward. Those IT suppliers that are best positioned will appear in the upper-right quadrant, which represents a high fit to market needs and high likelihood of a positive ownership experience.
Fit to Market Needs

The fit to market needs (x-axis) criteria definitions and weightings are described in the following sections.
Fe at u re /Fu nct ion a lit y (2)

Energy Insights considered a range of features and functions to define this criterion. Vendors were asked to provide information on the maturity level of features and functions as described in Table 1. As refineries continue to pursue best practices in asset management, EAM application functionality will play a significant role. The most important capabilities are: Ability to facilitate operational intelligence through compilation and rationalization of various data sources (EAM, enterprise resource management, distributed control systems, programmable logic controllers, equipment sensors, meters, etc.) to support a variety of maintenance approaches (condition based, preventive, predictive, reliability centered, criticality based, etc.) Ability to maximize the value of plant turnarounds (This means minimizing the time the plant is offline and taking advantage of plant shutdown to perform maintenance tasks when timing is appropriate. This increases utilization of the maintenance workforce during otherwise idle times.) Ability to provide access to unstructured documents and job plans associated with a particular asset to mitigate the effects of a retiring workforce and aid in knowledge transfer

2007 Energy Insights, an IDC Company

#EI208856

Page 5

Energy Insights considered this criterion to be very important in this market and gave it a weighting of 2.

TABLE 1
Features and Functionality for Refining
Categories Asset management Subcategories Asset hierarchies and rollup Cost tracking Condition monitoring Automated work orders (alerts) Equipment failure analytics Asset risk analysis Reliability-centered maintenance (RCM) Work management Schedule optimization Crew assignment Work planning and coordination Turnaround planning Permitting Lockdown/tag-out Project scheduling Preventive maintenance scheduling Materials management Min./max. automated ordering Scraping/obsolesce designation Configurable parts catalog Internal sourcing Returned items Kitting Inventory management Warranty management

Page 6

#EI208856

2007 Energy Insights, an IDC Company

TABLE 1
Features and Functionality for Refining
Categories Procurement Subcategories Support for RFP, RFQ Self-service procurement Vendor-managed inventory Demand analysis Indirect spend Ability to aggregate assets by suppliers Supplier catalog interface Service management Invoice matching Automatic credit/debit Invoice generation Service-level agreement (SLA) management Term and conditions library Milestone alerting Functionality Data management Graphical capabilities Key performance indicators Integration with mobility Data warehouse Data migration tools Automated data quality checks Ability to attach unstructured documents Workflow
Source: Energy Insights, 2007

2007 Energy Insights, an IDC Company

#EI208856

Page 7

S ca la b i lit y: U se r s ( 1)

The trend toward consolidation and rationalization of EAM processes and applications implies the ability of a single system to support a large number of users. In addition, Energy Insights expects that access to electronic data will become more common on the plant floor, with craft supervisors able to access specifications and drawings electronically. Still, the workforce needed to run a refinery is relatively small compared with that in other industries. The maximum number of concurrent users was used to define this criterion. Energy Insights considered this criterion to be of average importance in this market and gave it a weighting of 1.
Sca la bi lit y: T h roug h put ( 1)

Energy Insights does not consider this criterion to be important in this market because the magnitude of work orders for maintenance of refineries is relatively small compared with the number of work orders that typically support work and asset management for utility gas distribution. The one exception is in major turnarounds, where as many as 7,000 work orders can be issued during a six-week turnaround. The maximum number of work orders processed per day was used to define this criterion.
S ca la b i lit y: C ap ac it y ( 0)

Capacity is a criterion typically used to evaluate data warehouse/business intelligence applications and is measured by terabytes of storage capacity. Energy Insights did not consider this criterion to be important for this market and gave it a weighting of 0.
Int eg rat ion C ap ab il it y ( 2)

Integration involves the movement of data and coordination of workflows between the EAM system and other systems such as enterprise resource planning (ERP), project scheduling, supply chain, maintenance analytics, data historians, process control systems, equipment diagnostics, and human resources. Since EAM systems are almost never implemented standalone, Energy Insights considered this criterion to be very important for this market and gave it a weighting of 2.
Pl at f or m Su p p o rt ( 1)

There is no wide variation in the platforms offered by vendors in this report, nor is there a wide variation in user requirements. Energy Insights considered this criterion to be somewhat important in this market and gave it a weighting of 1.

Page 8

#EI208856

2007 Energy Insights, an IDC Company

Ar c h it e ct u r e ( 2)

Architecture enables a number of capabilities, including flexibility, scalability, and integration. It partially determines the ease and cost of implementation and also relates to the ease and cost of ongoing support. A modern product architecture is an indicator of a vendor's R&D commitment toward its products. Also, a uniform architecture is desirable in offerings that have been assembled through the acquisition or consolidation of multiple, previously separate products. Energy Insights considered this criterion to be very important in this market and gave it a weighting of 2.
Br e adt h o f S e rv i ce s ( 1)

Since most EAM vendors offer implementation, training, maintenance, and support services, along with limited pre-implementation consulting services such as value engineering studies, there is no wide variation in the breadth of services offered by vendors in this report. Energy Insights considered this criterion to be somewhat important in this market and gave it a weighting of 1.
S erv ic e G u a r an t e es ( 0)

EAM vendors do not generally offer service guarantees, nor are they required by the market. Energy Insights did not consider this criterion to be important for this market and gave it a weighting of 0.
P ri ci ng Ar r an g e me n t s ( 1)

There is no wide variation in the pricing arrangements offered by vendors in this report, nor is there a wide variation in user requirements. Energy Insights considered this criterion to be somewhat important in this market and gave it a weighting of 1.
Ha rdw a r e Cos t s (0 )

Hardware costs are considered a commodity item by users in this market and are not a differentiator among solutions. Energy Insights did not consider this criterion to be important for this market and gave it a weighting of 0.
Imp le me n ta tio n Cos t (2)

Implementation costs for EAM systems tend to be determined by a number of factors, including: Software license fees Complexity of the business processes (often determining the degree of customization/configuration required) Scope of integration with other systems, especially where EAM systems are used for inventory management and receipt and
2007 Energy Insights, an IDC Company #EI208856 Page 9

enterprise resource management systems are used for purchase orders and accounts payable Data conversion/migration requirements Number, variety, location, and jurisdiction of refineries Project time frame Energy Insights considered this criterion to be very important in this market and gave it a weighting of 2.
Imp le me n ta tio n Sup p o rt (2)

The ability to implement systems on time and on budget is generally determined by the availability of resources, typically through partnerships with systems integrators (SIs). Successful integrators must possess adequate knowledge and experience related to project management, EAM business processes, and the product being implemented. Energy Insights considered this criterion to be very important in this market and gave it a weighting of 2.
Imp le me n ta tio n T ool s ( 0)

Generally, in this market the implementation tools are used by systems integrators rather than the end users. As such, this criterion is already addressed by the implementation support criterion. Energy Insights did not consider this criterion to be important for this market and gave it a weighting of 0.
An nu al M ain t en an ce Co s t s ( 2 )

A number of factors determine annual maintenance costs for EAM systems, including: Annual software maintenance fees Extraordinary upgrade or change fees Internal labor required to support the applications Energy Insights considered this criterion to be very important in this market and gave it a weighting of 2.
G eo g r ap h ic C o v e ra g e ( 2)

Given the constraints related to the development of new refineries in North America, more refineries will be built closer to the source as well as close to the demand for refined products. Energy Insights sees this as an increasingly important criterion in terms of ability to serve the refining market.

Page 10

#EI208856

2007 Energy Insights, an IDC Company

Fit t o M ar k et Ne ed s Cr it er ia R at in g s

The fit to market needs (x-axis) criteria ratings are described in Table 2.

TABLE 2
Industry Short List for the EAM for the Refining Market: Definition of Ratings for Fit to Market Needs (X-Axis) Attributes
Category Feature/functionality Rating Criteria 1 Significant gaps 2 All substantial features/functionality 3 Several significant advances (i.e., maintenance optimization, ability to add unstructured data, and service management) Scalability: users Relative ranking based on range of maximum total and concurrent users among vendors evaluated Relative ranking based on range of maximum work orders per day among vendors evaluated 1 Little/no support for standards-based integration 2 Support for enterprise application integration; some productized solutions 3 Business processlevel application integration via XML and Web services; many productized solutions Platform support 1 Few (one or two) platforms 2 Several platforms/platform versions 3 Many platforms/platform versions Architecture 1 Two tiers 2 Three tiers with limited Web services 3 Service-oriented architecture (SOA) across components supporting integration at the business process level Breadth of services 1 Limited capabilities (maintenance, support, implementation, and training) in single geography 2 Broad capabilities (those services listed in 1 above plus integration with major applications) in all major global economies 3 Full service capabilities (those services listed in 1 and 2 above plus strategic consulting and change management) with global delivery

Scalability: throughput Integration capability

2007 Energy Insights, an IDC Company

#EI208856

Page 11

TABLE 2
Industry Short List for the EAM for the Refining Market: Definition of Ratings for Fit to Market Needs (X-Axis) Attributes
Category Pricing arrangements Rating Criteria 1 Complex user purchase requirements; multiple products and licenses required for each user 2 User-based pricing; single price for all required components 3 Multiple options, including enterprise pricing Implementation cost Implementation support Relative ranking based on range of costs among vendors evaluated 1 Limited selection of SIs 2 Moderate support from SIs 3 Support from a wide range of SIs Annual maintenance costs Geographic coverage Relative ranking based on range of costs among vendors evaluated 1 Concentrated in one country or region 2 Major developed regions 3 Full global coverage
Source: Energy Insights, 2007

Ownership Confidence

The ownership confidence (y-axis) criteria definitions and weightings are described below.
Sup pl ie r' s M a rk et S h ar e ( 2)

Market share is an indicator of a vendor's commitment to a specific market and its success in that market, and, as such, is a good measure of market viability. For this report, Energy Insights based market share on the global revenue each vendor generated from EAM products and services in the utilities industry. Energy Insights considered this criterion to be very important in this market and gave it a weighting of 2.
Su p p l ie r' s P ro f it ab i li t y ( 2)

Profitability is an indicator of a vendor's overall financial viability. For this report, Energy Insights evaluated total company profitability over the past three years. However, there have been significant changes in

Page 12

#EI208856

2007 Energy Insights, an IDC Company

ownership over the past year such as acquisitions and/or private equity investment. Energy Insights took this also into account with current ratings. Energy Insights considered this criterion to be very important in this market and gave it a weighting of 2.
Sup pl ie r' s R& D In v es t men t L ev e l ( 1)

EAM is a relatively mature market, with few innovations or product changes occurring compared with other emerging markets. As such, Energy Insights considered this criterion to be somewhat important in this market and gave it a weighting of 1.
Cus t om e r Sati sf ac tio n w ith Imp l em ent atio n ( 2)

Utility companies place a high degree of importance on positive references from similar companies. The assessment of this criterion was based on multiple customer interviews for each vendor. Energy Insights considered this criterion to be very important in this market and gave it a weighting of 2.
Cus t om e r Sati sf ac tio n w ith O ngo ing Supp ort (2)

Utility companies place a high degree of importance on positive references from similar companies. The assessment of this criterion was based on multiple customer interviews for each vendor evaluated. Energy Insights considered this criterion to be very important in this market and gave it a weighting of 2.
Ow nershi p Conf id en c e Crit er i a Rat ing s

The ownership confidence (y-axis) criteria ratings are described in Table 3.

2007 Energy Insights, an IDC Company

#EI208856

Page 13

TABLE 3
Industry Short List for the EAM for the Refining Market: Definition of Ratings for Ownership Confidence (Y-Axis) Attributes
Category Supplier's market share Supplier's profitability Rating Criteria Relative ranking based on revenues of vendors evaluated 1 Not profitable for the past three years 2 Marginally profitable for the past three years 3 Profitable for the past three years Supplier's R&D investment level* 1 <10% of annual revenue 2 1015% of annual revenue 3 >15% of annual revenue Customer satisfaction with implementation 1 Customers have some problems/issues with vendor quality/cost 2 Customers have few problems/issues with vendor quality/cost 3 Most customers rate positively Customer satisfaction with ongoing support 1 Customers have some problems/issues with vendor quality/cost 2 Customers have few problems/issues with vendor quality/cost 3 Most customers rate positively *Absolute level of investment is also a consideration.
Source: Energy Insights, 2007

EVALUATING THE VENDORS

Vendor Overview

There has been considerable consolidation and financing activity in the vendor community in the past year. Oracle acquired SPL WorldGroup, which had limited capabilities in asset management, mainly for delivery, through its previous acquisition of Synergen. IBM acquired MRO Software. Ventyx, along with mobile workforce vendor MDSI, has been acquired by private equity firm Vista and will no longer be a public company. Another vendor that offers EAM applications to this market Mincom recently received private equity investment from Francesco Partners. Mincom is not included in this Industry Short List.

Page 14

#EI208856

2007 Energy Insights, an IDC Company

Table 4 lists the vendors evaluated in this Industry Short List, providing the names of key customers, geographies, products currently supported, and comments of note.

TABLE 4
EAM for Refining: Industry Short List Vendor Overview
Products Currently Supported Maximo Client Server (4.x), Maximo Enterprise (5.x), Maximo 6 (MXES)

Company IBM

Select Customers BP, China National Offshore Oil Co., Abu Dhabi National Oil Co., Kuwait National Petroleum Co., Flint Hills Resources, Occidental, Chevron, and Syncrude Petro-Canada, Frontier Refining

Geographies North America, Asia/Pacific, Europe

Of Note Advanced architecture from ground up, complete asset management features and functionality in the MRO product, especially with IBM providing data warehousing and integration; the latest version of Maximo for Oil and Gas includes the ability to track incidents, record asset defects, and measure suggested solutions and improvements in work practices

Ventyx

North America, Western Europe North America, Middle East

Indus Asset Suite 6.0.0

Long history of supporting reliabilitycentered maintenance, workflow, and supply chain An integrated suite that supports an asset-based view of the total cost of maintaining an asset; foundation for condition-based and reliabilitycentered maintenance provided by Oracle's extensive database capabilities; new features to complement its capabilities in this area Highly integrated work order management ensures right people, tools, and timing of maintenance tasks; ability to tie costs to assets; support for knowledge transfer and collaboration; automated contractor invoice processing; role-based portals

Oracle

Shell Canada, Lubref

Enterprise Asset Management (11.5.911 and 12.0)

SAP

ExxonMobil, Shell, Statoil, Petrobras, Reliance, Valero, OMV

North America; Europe, the Middle East, and Africa; Asia/Pacific; Latin America

Enterprise Asset Management, ERP with project scheduling and plant maintenance, IS-Oil

Note: Other EAM products offered by Oracle but not included in this Industry Short List include JD Edwards EnterpriseOne (XE, 8.912) and Capital Asset Management (8.1012).
Source: Energy Insights, 2007

2007 Energy Insights, an IDC Company

#EI208856

Page 15

Partnerships and Alliances

EAM systems are essentially transactional systems used to manage maintenance work. The applications use integration with enterprise financials or proprietary procurement modules to manage the supply chain for maintenance, repair, and operations materials required to complete work at the plant. Where additional functionality is needed, EAM vendors partner with niche vendors. The most popular alliance is for project scheduling, such as Primevera, as EAM systems are weak when it comes to scheduling for major overhauls. The era of condition-based and predictive maintenance has brought new alliances with vendors providing data transport and analytics. Many of the vendors have been building ecosystems of partners to extend their applications in this space. Ecosystems typically involve more than just a marketing alliance and include a deep understanding of the technical architecture of the partners and integration as well. These ecosystems include analytics, data historians, and engineering control systems such as distributed control systems (DCSs), programmable logic controls (PLCs), and electricity management systems (EMSs), as well as the more traditional systems integration firms. Data historians, in the past used to compress and transmit large quantities of time series data, are now being used to deliver this data in near real time. SAP, Ventyx, and IBM all have partnerships with OSIsoft that have enabled condition-based alerts and work orders. Asset maintenance optimization and reliability-centered maintenance (RCM) are performed using analytics applied to work history and asset data from the EAM applications, historic operation data from the data historians, and cost data from the financial system. SAP has a strong alliance with Meridium for this purpose, as does IBM. SAP and IBM are also building out their ecosystems to include vendors such as Siemens. Another important function is that of data quality. Asset data needs to be correct and updated periodically. In addition, refining oil is a complex manufacturing process and an asset needs to be viewed in the context of that process for the most effective decision support. One notable partnership in this area is SAP and NRX. NRX provides software and services to enhance the views of the asset, allowing the user to access structured and unstructured data such as photographs and drawings.
Industry Short List Evaluations

The following tables and figures provide the results of the vendor assessment. Table 5 displays the scores for the vendors for fit to market needs. Table 6 displays the scores for the vendors for

Page 16

#EI208856

2007 Energy Insights, an IDC Company

ownership confidence. Figure 1 shows the relative positioning of the vendors.

TABLE 5
Industry Short List for the EAM for the Refining Market: Vendor Ratings for Fit to Market Needs (X-Axis) Attributes
IBM Feature/function Scalability: users Scalability: throughput Integration capability Platform support Architecture Breadth of services Pricing arrangements Implementation cost Implementation support Annual maintenance costs Geographic coverage Overall score 3 3 3 3 2 3 3 2 2 3 2 3 2.68 Oracle 2 3 2 2 2 2 2 2 2 2 2 2 2.05 SAP 3 3 3 2 3 2 2 2 2 3 2 3 2.47 Ventyx 2 3 3 2 2 2 2 1 2 2 2 1 1.95

Note: See Table 2 for an explanation of the scale for each attribute.
Source: Energy Insights, 2007

2007 Energy Insights, an IDC Company

#EI208856

Page 17

TABLE 6
Industry Short List for the EAM for the Refining Market: Vendor Ratings for Ownership Confidence (Y-Axis) Attributes
IBM Supplier's market share Supplier's profitability Supplier's R&D investment level Customer satisfaction with implementation Customer satisfaction with ongoing support Overall score 3 3 2 3 Oracle 2 3 3 3 SAP 3 3 3 2 Ventyx 2 2 1 1

2.89

2.56

2.78

1.44

Note: See Table 3 for an explanation of the scale for each attribute.
Source: Energy Insights, 2007

Page 18

#EI208856

2007 Energy Insights, an IDC Company

FIGURE 1
Industry Short List: EAM for the Refining Market

IBM SAP

Oracle

Ownership confidence

Ventyx

Fit to market needs

Note: Those IT suppliers that are best positioned are in the upper-right quadrant, which represents a high fit to market needs and a high likelihood of a positive ownership experience.
Source: Energy Insights, 2007

FUTURE OUTLOOK
Industry Impact

EAM applications are relatively mature compared with other applications. However, when used in the context of asset management strategies, these applications will provide an anchor to the technology stack used to support creative maintenance and operations strategies in the refinery. In addition, these applications provide a logical and intuitive interface to the worker on the plant floor when integrated with document management. These applications can go a long way in
2007 Energy Insights, an IDC Company #EI208856 Page 19

addressing the issues of an aging workforce by supporting efficiencies (the need for fewer workers) and knowledge transfer (job plans based on experience and access through the asset). Refineries will begin to see equipment replacements come with advanced sensing technology. With new plants, or as equipment turns over, refinery operators can make use of the data supplied by these sensors to prevent unplanned outages by anticipating potential failures. Energy Insights also expects to see the installation of wireless mesh on the plant floor to facilitate collection and transport of data. Advances in technology have made it technically feasible to install wireless in the harsh and obstructed environment on the plant floor.
Vendor Profiles IBM

With its recent acquisition of MRO Software, IBM stepped clearly into asset management, but not just for IT assets. Before the acquisition, IBM Global Services had been successful as a partner implementing MRO's Maximo software and undoubtedly recognized the offering for its advanced architecture relative to other work and asset management applications. IBM hopes to offer the application and IT infrastructure to support best-in-class asset management in a vision of the intelligent refinery. The vision is one of sense and respond with sensors on equipment in the plant delivering data to be analyzed and acted upon through automation or engineering centers of excellence. The vision is still a long way off and requires organizational commitment. In the meantime, IBM has stated its commitment to accelerating new releases of Maximo to expand Maximo's capabilities. Although not nearly as large as SAP's installed base in refineries, IBM has a decent representation in the oil and gas industry when it comes to EAM. Add to that the substantial revenue that IBM has from the oil and gas industry, estimated at $2.6 billion in 2005. The latest version of Maximo for oil and gas addresses two issues that are important to the industry aging workforce and safety. New functionality includes capabilities to report incidents, defects, and investigations as well as measure the benefits of suggested improvements in work practices related to an asset.
Oracle

Historically, work and asset management has not been a core strength of Oracle, compared with the rest of the vendor's ERP applications. Oracle has a large installed base in oil and gas companies globally, with many companies in this sector using its database. Energy Insights and IDC estimate Oracle's 2005 revenue attributable to oil and gas to be about $436.6 million. Oracle offers multiple work and asset management products, including Oracle eAM and JD Edwards
Page 20 #EI208856 2007 Energy Insights, an IDC Company

EnterpriseOne. Asset-intensive industries were served well with the JD Edwards, which tends to have a larger installed base in EAM. One of the reasons is that the Oracle E-Business suite has not been offered for as many years. Oracle's mobile solution Mobile eAM, now available with Release 12 supports real-time data presentation and data entry into the EAM application. The company has tackled the challenge of different form factors, and its solution is now available on many wireless PDAs. This is particularly relevant in the oil and gas industry, where the ability to record inspections while viewing the asset condition is important. Refineries will need to make a commitment to establishing a wireless umbrella at the site in order to take advantage of this feature. Oracle has stated that it is committed to supporting and continuing to develop each of the applications that it has recently acquired. The approach has been branded as Applications Unlimited. Because Oracle feels confident that its acquisitions can stand on their own, there are no current plans to re-architect and consolidate, only to integrate through the Oracle Fusion platform currently being developed. The first step already in progress is asset definition. Energy Insights is aware of a number of software vendors that have not been able to sustain support, not to mention further development, of multiple similar applications. Even with Oracle's size and resources, utilities should approach Applications Unlimited with healthy skepticism. Given the mature nature of the work and asset management application space, it seems that consolidation would make the best use of R&D investment.
Ventyx

With a revamped product strategy for work and asset management and a new Foundation Architecture, Ventyx enables easier integration within the product suite. It also brings a relatively strong supply chain solution compared with other best-of-breed vendors. Ventyx has some presence in the industry, but it is still predominantly a North American vendor. Ventyx's financial health has been strengthened with the investment by Vista Equity Partners, and its installed base has been extended with the acquisition of mobile workforce vendor MDSI, although MDSI has less applicability in refining. The recent acquisition of Global Energy Decisions signifies a commitment to the energy industry as fuels suppliers form a significant portion of the global energy client base, adding to Ventyx's more than two-dozen clients in the oil and gas industry. The transition from a public to a private company, along with the ability to access capital, will free Ventyx to concentrate on continued advancement of the Foundation Architecture, as well as further acquisitions in its targeted assetintensive industries.

2007 Energy Insights, an IDC Company

#EI208856

Page 21

SAP

SAP has a long history of providing functionality to the oil and gas industry. It has put considerable effort into developing IS-Oil, which is in use at numerous oil and gas majors and refining companies. SAP is installed at refineries across the globe. Tight integration serves to support asset life-cycle management. For example, a plant manager can get information quickly on the total cost of maintaining each of the plant's assets. SAP is extending beyond its traditional capabilities through NetWeaver and its NetWeaver certified partners that are part of the Industry Value Network (IVN) for oil and gas. Note the extension of SAP capabilities to maintenance optimization with Meridium, and asset identification and inventory through NRX. In addition, SAP's Global Advisory Group, made up of major oil and gas companies, serves to support the IVN. Although SAP has developed business intelligence primarily in the financial area, it is building capabilities for operational intelligence from a business perspective. SAP is ahead of other vendors in developing the asset repository and the analytics necessary to understand asset maintenance in a business context. Going forward, SAP is focusing attention on portfolio planning prioritization of capital-intensive projects to build or upgrade refineries an area of particular importance in the asset-intensive refining industry. The industry has long sought the seamless transition from major construction to maintenance and operations of the assets. The concept is to be able to share design documentation structured and unstructured across all phases of development from design to construction to operations. ESSENTIAL GUIDANCE
Actions to Consider

Refiners need to pay attention to operations and maintenance of the plant, given aging workforce and aging assets. The consolidation of vendors providing EAM will pose some new challenges for companies, especially those with multiple vendors within the enterprise. Energy Insights provides the following advice: Oil and gas companies should approach the EAM vendor selection process expecting to spend significant time up front to accurately assess their business and technology needs. Refiners should use the Industry Short List to quickly identify EAM solution vendors for further evaluation. Since each refinery

Page 22

#EI208856

2007 Energy Insights, an IDC Company

will have its own unique needs, it is important to take the next step and rigorously evaluate each vendor selected for the Industry Short List.

Until now, it was not uncommon for multiple EAM applications to be in use at an oil and gas company. The ultimate goal for refiners is to create maintenance templates and efficient turnaround processes that can be applied across the enterprise. These templates include business process best practices as well as standardization on one EAM application across all refineries. Companies such as Valero and Lubref are examples of refiners seeking to standardize their applications.

When reviewing options for asset management, companies should not stop with selection of an application for EAM. The best practice in asset management includes a combination of asset management, work management, and supply chain management strategies that depend not only on EAM, but also on analytics, data historians, portals, sensors, visualization, and messaging. LEARN MORE
Related Research

Worldwide Revenue for Top 50 IT Vendors in the Oil and Gas Industry (Energy Insights #EI208510, September 2007) Working with What You Have Operating Refineries in North America (Energy Insights #EI207929, August 2007) Best Practices in Asset Management Comprehensive Strategy Wins the Race (Energy Insights #EI204552, December 2006)

Copyright Notice

Copyright 2007 Energy Insights, an IDC company. Reproduction without written permission is completely forbidden. External Publication of Energy Insights Information and Data: Any Energy Insights information that is to be used in advertising, press releases, or promotional materials requires prior written approval from the appropriate Energy Insights Vice President. A draft of the proposed document should accompany any such request. Energy Insights reserves the right to deny approval of external usage for any reason.

2007 Energy Insights, an IDC Company

#EI208856

Page 23