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©2004 InfoNetrix LLC All Rights Reserved Worldwide 3-1 PART THREE Market Drivers, Issues & Trends Market Horizons™ Report Geospatial & Field Automation.

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Presentation on theme: "©2004 InfoNetrix LLC All Rights Reserved Worldwide 3-1 PART THREE Market Drivers, Issues & Trends Market Horizons™ Report Geospatial & Field Automation."— Presentation transcript:

1 ©2004 InfoNetrix LLC All Rights Reserved Worldwide 3-1 PART THREE Market Drivers, Issues & Trends Market Horizons™ Report Geospatial & Field Automation Solutions (GFAS) in the North American Utilities Marketplace ( )

2 ©2004 InfoNetrix LLC All Rights Reserved Worldwide PART 3: Market Drivers, Issues & Trends 3-2 About This Report InfoNetrix LLC, an independent technical research and consulting firm specialized in utility automation and information technology (Utility Automation/IT) markets conducted the research for this report. InfoNetrix reports are available for subscription by any and all interested parties, foreign and domestic (except as prohibited by law), in accordance with the pricing and terms set forth in the prospectus, provided separately. This report addresses Geospatial & Field Automation Solutions (GFAS) in the North American Utilities Marketplace. Other reports in the Market Horizons™ Series provide similar analyses of Real-time Automation & Controls (RTAC) in the North American Electric Utilities Marketplace and Real-time Automation & Controls (RTAC) in the North American Water/Wastewater Utilities Marketplace. Please visit for more information about these and other InfoNetrix Advisory Services.www.InfoNetrix.com InfoNetrix LLC, an independent technical research and consulting firm specialized in utility automation and information technology (Utility Automation/IT) markets conducted the research for this report. InfoNetrix reports are available for subscription by any and all interested parties, foreign and domestic (except as prohibited by law), in accordance with the pricing and terms set forth in the prospectus, provided separately. This report addresses Geospatial & Field Automation Solutions (GFAS) in the North American Utilities Marketplace. Other reports in the Market Horizons™ Series provide similar analyses of Real-time Automation & Controls (RTAC) in the North American Electric Utilities Marketplace and Real-time Automation & Controls (RTAC) in the North American Water/Wastewater Utilities Marketplace. Please visit for more information about these and other InfoNetrix Advisory Services.www.InfoNetrix.com

3 ©2004 InfoNetrix LLC All Rights Reserved Worldwide PART 3: Market Drivers, Issues & Trends 3-3 General Information & Notifications PURPOSE The information contained in this document is for the sole use of InfoNetrix clients and is not to be distributed outside client organizations. No part of this publication may be reproduced, transcribed, or transmitted in any form or by any means, electronic or mechanical, including photocopying, recording, or by any electronic storage and retrieval system, without permission in writing from the copyright owner. DISCLAIMER This publication has been prepared with care, however, no guarantee of accuracy, completeness, or warranty of any kind is expressed or implied, nor shall InfoNetrix be liable to any user of the publication or any portion(s) hereof for any direct or indirect damages, expenses, costs or losses of any kind resulting from its use. COUNTRY OF ORIGIN United States of America PURPOSE The information contained in this document is for the sole use of InfoNetrix clients and is not to be distributed outside client organizations. No part of this publication may be reproduced, transcribed, or transmitted in any form or by any means, electronic or mechanical, including photocopying, recording, or by any electronic storage and retrieval system, without permission in writing from the copyright owner. DISCLAIMER This publication has been prepared with care, however, no guarantee of accuracy, completeness, or warranty of any kind is expressed or implied, nor shall InfoNetrix be liable to any user of the publication or any portion(s) hereof for any direct or indirect damages, expenses, costs or losses of any kind resulting from its use. COUNTRY OF ORIGIN United States of America

4 ©2004 InfoNetrix LLC All Rights Reserved Worldwide PART 3: Market Drivers, Issues & Trends 3-4 Research Standards & Methodology The preparation of this report follows generally accepted standards of market research practice and is based on principles of truthfulness and professionalism. A reasonable and prudent effort has been made to ensure that factors and circumstances having a material impact on any decision-making process derived from, or impacted by, this report are included in the analyses and recommendations. The representations of industry and market data and portrayals of the business environment are based on market research conducted by experienced professionals with broad knowledge and experience in the markets addressed. The information upon which the findings and analyses contained in this report are based was obtained through a combination of telephone interviews with key suppliers and consultants and other individuals with extensive market knowledge and experience, augmented by survey with a cross section of utility managers and ongoing interactive research with over 1,000 utilities annually. Each telephone interview/survey was guided by a specially designed questionnaire to obtain pertinent data, insights and market perspectives. These interviews were augmented by secondary research across a wide range of reliable public and proprietary information sources pertinent to the study. The preparation of this report follows generally accepted standards of market research practice and is based on principles of truthfulness and professionalism. A reasonable and prudent effort has been made to ensure that factors and circumstances having a material impact on any decision-making process derived from, or impacted by, this report are included in the analyses and recommendations. The representations of industry and market data and portrayals of the business environment are based on market research conducted by experienced professionals with broad knowledge and experience in the markets addressed. The information upon which the findings and analyses contained in this report are based was obtained through a combination of telephone interviews with key suppliers and consultants and other individuals with extensive market knowledge and experience, augmented by survey with a cross section of utility managers and ongoing interactive research with over 1,000 utilities annually. Each telephone interview/survey was guided by a specially designed questionnaire to obtain pertinent data, insights and market perspectives. These interviews were augmented by secondary research across a wide range of reliable public and proprietary information sources pertinent to the study.

5 ©2004 InfoNetrix LLC All Rights Reserved Worldwide PART 3: Market Drivers, Issues & Trends 3-5 Research Reliability & Acceptance The information presented in this report was gathered, recorded and analyzed with care and precision. However, there will undoubtedly be differences between the findings presented and actual results for various reasons and, because future events and circumstances frequently do not occur as expected, those differences may be material. For these and other reasons (including, but not necessarily limited to human error, misinterpretations, misunderstandings and information sensitivities among respondents), the resulting data will most likely not be completely accurate in all respects. Moreover, the forecasts presented herein reflect judgments made as of the period during which this report was prepared. As such, some aspects can be expected to change as a result of numerous direct and indirect factors, which are beyond the scope of this report to accurately predict. For example, it assumes that current events will continue to have the same effect on the marketplace in the future and that the conventional wisdom of today will continue to be completely applicable to future market conditions, which is at best, unlikely. By accepting and using the information contained in this report, the user assumes all responsibility for its use for any and all purposes as user may deem appropriate and agrees to hold InfoNetrix, its principals and its staff harmless from any direct, indirect or consequential damages resulting from, or in any way related to, such use(s). However, InfoNetrix actively solicits and welcomes inquiries or other input regarding any errors, omissions or inconsistencies discovered during the course of using this report. Please direct any such correspondence to InfoNetrix Client Services. (Detailed company contact information is provided on the web at: The information presented in this report was gathered, recorded and analyzed with care and precision. However, there will undoubtedly be differences between the findings presented and actual results for various reasons and, because future events and circumstances frequently do not occur as expected, those differences may be material. For these and other reasons (including, but not necessarily limited to human error, misinterpretations, misunderstandings and information sensitivities among respondents), the resulting data will most likely not be completely accurate in all respects. Moreover, the forecasts presented herein reflect judgments made as of the period during which this report was prepared. As such, some aspects can be expected to change as a result of numerous direct and indirect factors, which are beyond the scope of this report to accurately predict. For example, it assumes that current events will continue to have the same effect on the marketplace in the future and that the conventional wisdom of today will continue to be completely applicable to future market conditions, which is at best, unlikely. By accepting and using the information contained in this report, the user assumes all responsibility for its use for any and all purposes as user may deem appropriate and agrees to hold InfoNetrix, its principals and its staff harmless from any direct, indirect or consequential damages resulting from, or in any way related to, such use(s). However, InfoNetrix actively solicits and welcomes inquiries or other input regarding any errors, omissions or inconsistencies discovered during the course of using this report. Please direct any such correspondence to InfoNetrix Client Services. (Detailed company contact information is provided on the web at:

6 ©2004 InfoNetrix LLC All Rights Reserved Worldwide PART 3: Market Drivers, Issues & Trends 3-6 Market Horizons™ Report Contents 1.Executive Market Summary 2.Marketplace Characteristics 3.Market Drivers, Issues & Trends 4.Market Analysis & Future Outlook 5.Supplier Environment

7 ©2004 InfoNetrix LLC All Rights Reserved Worldwide PART 3: Market Drivers, Issues & Trends 3-7 Market Drivers, Issues & Trends Market Snapshots ( ) Principal Market Drivers Key Issues & Trends (The Seven Signs) Challenges & Opportunities

8 ©2004 InfoNetrix LLC All Rights Reserved Worldwide PART 3: Market Drivers, Issues & Trends 3-8 Market Snapshots Near-term Impact of BUSINESS Factors Q: How important has each factor been to RTAC justification and procurement in 2002 & 2003?

9 ©2004 InfoNetrix LLC All Rights Reserved Worldwide PART 3: Market Drivers, Issues & Trends 3-9 Q: How important will each factor be to RTAC justification and procurement in the next 3-5 years ( )? Market Snapshots Long-term Impact of BUSINESS Factors

10 ©2004 InfoNetrix LLC All Rights Reserved Worldwide PART 3: Market Drivers, Issues & Trends 3-10 Market Snapshots Near-term Impact of TECHNOLOGY Factors Q: How important has each factor been to RTAC justification and procurement in 2002 & 2003?

11 ©2004 InfoNetrix LLC All Rights Reserved Worldwide PART 3: Market Drivers, Issues & Trends 3-11 Q: How important will each factor be to RTAC justification and procurement in the next 3-5 years ( )? Market Snapshots Long-term Impact of TECHNOLOGY Factors

12 ©2004 InfoNetrix LLC All Rights Reserved Worldwide PART 3: Market Drivers, Issues & Trends 3-12 Principal Market Drivers 1.Operational Efficiency: 1.Operational Efficiency: Do more with less! 2.Policy Issues: 2.Policy Issues: Regulatory, legislative & spending mandates 3.Security: 3.Security: Physical & cyber-security protection & compliance 4.Standards/Standardization: 4.Standards/Standardization: Interoperability & Cost Reduction 5.Financial & Market Uncertainties: 5.Financial & Market Uncertainties: Business Focus ($$$ & ROI) 6.Aging Infrastructure: 6.Aging Infrastructure: Reliability, O&M (& Replacement) Costs 7.EAM(Enterprise Asset Management): 7.EAM (Enterprise Asset Management): Sweat the Assets! Notably, these are substantially ALL Business issues. By contrast, the role of Technology continues to diminish as a procurement driver - except as directly related to efficiency and capital cost reduction - and plays mainly a supporting role to the principal business factors driving the market.

13 ©2004 InfoNetrix LLC All Rights Reserved Worldwide PART 3: Market Drivers, Issues & Trends 3-13 Distribution & Transmission (D&T), Treatment & StorageBiggest annual budgets for public and private water systems are for Distribution & Transmission (D&T), Treatment & Storage 48-54%  D&T: 48-54% 16-23%  Treatment: 16-23% 8-12%  Storage: 8-12%  All Other Expenses: 17-22% Doing more with less…  Downsizing has cut staff and other resources below practical levels  More outsourcing, even for previously routine internal activities  Rising demand for skilled, experienced system integration sources  Ongoing utility mergers & acquisitions will continue to exacerbate resource deficiencies and drive more outsourcing  More engineering firms now offering installation & system integration Principal Market Drivers Operational Efficiency

14 ©2004 InfoNetrix LLC All Rights Reserved Worldwide PART 3: Market Drivers, Issues & Trends 3-14 Principal Market Drivers Policy Issues Public Health Security & Bioterrorism Preparedness and Response Act of 2002  EPA funding for Vulnerability Assessment (V/A) and Emergency Response Plan (ERP) by large utilities serving 100,000+ populations has been substantially depleted  Schedule of completion for smaller utilities (by population): Population 50K to 99,999: V/A by ; ERP by Population <50K: V/A by ; ERP by  Smaller utilities are being encouraged to conduct security assessments with or without EPA funding, but lower risk profiles among small utilities suggest that many will not The Clean Watersheds Needs Survey (CWNS) and the Safe Drinking Water Act (SDWA) are frameworks upon which EPA bases regulatory and fiscal policy; also drive more accurate, more timely reporting requirements

15 ©2004 InfoNetrix LLC All Rights Reserved Worldwide PART 3: Market Drivers, Issues & Trends 3-15 Standards proliferation and implementation are steadily (and measurably) driving capital equipment and O&M cost reductions by facilitating:  Incremental upgrades & expansion of legacy systems  Interoperability among previously incompatible systems  Lowered project initiation costs due to… Accelerated planning, specification and procurement cycles Shorter learning curve for new or expanded implementations Faster, easier, more effective training and support Equipment (hardware and software) standardization has virtually eliminated the need for so-called “forklift replacements” of major system platforms due to compatibility and/or extensibility limitations HoweverHowever, broad deployments of standardized platforms (e.g., MS-Windows) adapted for custom applications are creating a new - and potentially onerous - support issues that must be resolved by suppliers  Platform provider may not support older hardware/software in new releases  Field documentation often inadequate to determine deviations from standard (or not known at all until upgrade deployment causes operational problems!)  Mounting configuration control challenges will strain internal resources Principal Market Drivers Standards/Standardization

16 ©2004 InfoNetrix LLC All Rights Reserved Worldwide PART 3: Market Drivers, Issues & Trends 3-16 Water/Wastewater utilities are considered to be among those facilities at greatest risk from terrorist attacks and other threats to critical infrastructure:  The Public Health Security & Bioterrorism Preparedness and Response Act of 2002 was designed to mitigate threat exposure through vulnerability awareness and education  Funding for vulnerability assessments has been substantially depleted on the largest utilities (i.e., those serving populations of 3,300+) and no specific funding has been provided for mitigation measures even for the largest utilities, nor is any likely  RTAC and I/T budgets are already being impacted by the need for utilities to take proactive steps to mitigate risk from both physical threats and cyber-terrorism  RTAC suppliers will be challenged to find ways to respond to the needs of their customers - both large and small - in meeting these new and emerging technological and financial challenges Principal Market Drivers Security

17 ©2004 InfoNetrix LLC All Rights Reserved Worldwide PART 3: Market Drivers, Issues & Trends 3-17 Economic impacts on WWMS-RTAC expenditures ( )   : Recession drastically slowed WWMS spending (2002) Modest rebound; then growing momentum ( ) Strong economic recovery gathering momentum (2004)   : Increasing WWMS spending tied to sustainability of economic recovery Previous levels of large WWMS projects will be substantially diminished More modest projects with tangible benefits & quick returns Any signs of instability in the economy could halt spending plans Outlook for WWMS-RTAC expenditures ( )  Improved economy suggests WWMS spending will increase  Increasing emphasis on repair & replacement of deteriorating assets  Rising attention to customer service demands  Economic stability will diminish downward pressure on selling prices  Aging infrastructure and security will become primary factors  Increasing emphasis on O&M cost reductions Principal Market Drivers Financial & Market Uncertainties

18 ©2004 InfoNetrix LLC All Rights Reserved Worldwide PART 3: Market Drivers, Issues & Trends 3-18 Like other critical infrastructure (e.g., railroads, electric power lines, telecommunications networks, pipelines, etc.), investments in water mains, drainage facilities and purification/treatment plants are lagging far behind the levels needed to accommodate the mounting “end-of-useful-life” replacements that are now imminent.  New investments in physical plant and associated facilities are desperately needed  Older assets will require closer, more precise real-time monitoring & control to extend useful life and prevent catastrophic failures  Existing equipment and facilities will need to be upgraded to accommodate tighter EPA rules and security enhancements  Retiring assets will become an increasingly common and necessary activity for utilities of all types, sizes and locations as end-of-useful- life issues continue to mount in the years ahead  Utility M&A activity and privatization tend to accelerate the need for such upgrades, mainly on standardization/compatibility and ease of maintenance grounds Principal Market Drivers Aging Infrastructure

19 ©2004 InfoNetrix LLC All Rights Reserved Worldwide PART 3: Market Drivers, Issues & Trends 3-19 Sweat the Assets! Is a corollary to the Do more with less! mantra. Utilities are being challenged to:  Extend the useful life of assets  Optimize reliability, availability & maintenance costs  Avoid and/or defer capital expenditures thru RCM/CBM EAM objectives are financially - not technically - grounded. (ROI and ROA are the key parameters.) EAM will most likely focus initially on high-cost/high- risk assets such as pumps, filters, etc. EAM will also help drive operational efficiency applications (e.g.,work management, workforce management & mobile computing) Principal Market Drivers Enterprise Asset Management

20 ©2004 InfoNetrix LLC All Rights Reserved Worldwide PART 3: Market Drivers, Issues & Trends Regulatory Policy & Governance 2.Economics & Investment 3.Technology/Integration/Standardization 4.Data Integrity & System Security 5.Web & Wireless Solutions 6.Enterprise Asset Management (EAM) 7.Customer Care & Satisfaction 1.Regulatory Policy & Governance 2.Economics & Investment 3.Technology/Integration/Standardization 4.Data Integrity & System Security 5.Web & Wireless Solutions 6.Enterprise Asset Management (EAM) 7.Customer Care & Satisfaction The 7 Signs of Market Evolution

21 ©2004 InfoNetrix LLC All Rights Reserved Worldwide PART 3: Market Drivers, Issues & Trends 3-21 The 7 Signs 1. Regulatory Policy & Governance Initiatives, guidelines, orders, regulations and legislation by governmental and non-governmental regulatory and legislative bodies including, but not necessarily limited to:  United States US Environmental Protection Agency (EPA) US Department of Homeland Security (DHS) State, Municipal & Local Regulators  Canada: Environment Canada Natural Resources Canada Provincial, Municipal & Local Regulators

22 ©2004 InfoNetrix LLC All Rights Reserved Worldwide PART 3: Market Drivers, Issues & Trends 3-22 The 7 Signs (Cont’d) 2. Economics & Investment Factors having a direct and/or indirect impact on utility financing and/or investments in some or all of the following categories…  Capital Expenditures for goods and services (CapEx)  Utility Business/Market strategy, growth and development  Divestitures, Mergers & Acquisitions (D/M&A)  Operations, Infrastructure & Apparatus  Utility Automation & IT (A/IT) products, systems & services  Facility (physical) and/or data (Cyber) security/integrity  Utility Operations & Maintenance (O&M)  Outsourcing of equipment and/or services

23 ©2004 InfoNetrix LLC All Rights Reserved Worldwide PART 3: Market Drivers, Issues & Trends 3-23 The 7 Signs (Cont’d) 3. Technology/Integration/Standardization Technology  Technological Advancements  New Products/Services/Applications Integration  Enterprise  System  Product/Application Standardization  Enterprise  System  Product/Application

24 ©2004 InfoNetrix LLC All Rights Reserved Worldwide PART 3: Market Drivers, Issues & Trends 3-24 Potential business benefits achievable Proximity to core business PC Maintenance Remote Metering Internet Systems Integration SCADA External Application Development Call Center Operation Asset Management SOURCE: DATAMONITOR Impact & Importance of Automation & IT Initiatives Among Utilities Mission-critical 3. Technology/Integration/Standardization Automation & IT Enterprise Position

25 ©2004 InfoNetrix LLC All Rights Reserved Worldwide PART 3: Market Drivers, Issues & Trends 3-25 Proliferation/implementation of standards on all levels  Microsoft Windows Operating System with Intel Hardware Platform  Linux making inroads at server O/S & embedded O/S levels  Gradually increasing use of PLCs in FDD applications will continue Security is the next major technological development area  Security mandates will start moving across the enterprise in 2004; causing new RTAC compliance/design challenges in  Potential new requirements for standard (and secure) protocols at host & field levels (e.g., AGA-12) New financial asset management and reporting mandates  GASB-34 and Sarbanes-Oxley will gradually change WWMS financial accounting design, management, operation & documentation to satisfy GASB Method 2 (Modified Approach) reporting requirements  Increasing impact on technology, integration and costs Technology/Integration/Standardization RTAC Products, Systems & Services

26 ©2004 InfoNetrix LLC All Rights Reserved Worldwide PART 3: Market Drivers, Issues & Trends 3-26 Downsized utilities struggling with…  Reduced staff  Limited time  Constrained resources Solutions must… 1.Be simple & intuitive 2.Employ open standards 3.Have a measurable ROI & solid cost-benefits ratio 4.Require low/no maintenance 5.Be easy to operate and support over full life cycle New Invensys HMI bundles WonderWare’s InTouch® SCADA software with tablet PCs 3. Technology/Integration/Standardization Utility Wants, Needs & Expectations

27 ©2004 InfoNetrix LLC All Rights Reserved Worldwide PART 3: Market Drivers, Issues & Trends 3-27 Microsoft Windows remains the platform of choice for most desktop applications BUTLinux emerging as potential rival to Windows, mainly in server applications, BUT… Recent Linux initiatives (notably by IBM) may trigger a rising tide of Linux in desktop applications Other standards & trends to watch:  OpenGIS  OpenSource* (*See notes below) 3. Technology/Integration/Standardization Standards & Standardization Trends

28 ©2004 InfoNetrix LLC All Rights Reserved Worldwide PART 3: Market Drivers, Issues & Trends 3-28 Direct and indirect impact and effects of increasing awareness and responses to physical (facility) and data (cyber) security threats and data integrity including:  Vulnerability issues and assessments (EPA funded initiatives must be completed by mid-2004 but funding is substantially depleted)  Threat mitigation methods and measures require new cost appropriation, justification and budgeting methodologies  Organizational guidance and oversight US Department of Homeland Security US EPA State/Provincial & Local Regulators  Data integrity and information reporting/compliance issues GASB-34 Sarbanes-Oxley The 7 Signs (Cont’d) 4. Security & Data Integrity

29 ©2004 InfoNetrix LLC All Rights Reserved Worldwide PART 3: Market Drivers, Issues & Trends 3-29 Global awareness of the need for enhanced or upgraded security software will force utilities to find funds to meet the challenge. 4. Security & Data Integrity Security Expenditures

30 ©2004 InfoNetrix LLC All Rights Reserved Worldwide PART 3: Market Drivers, Issues & Trends Security & Data Integrity Security Procedures Overview of Utility Threat Response Protocol

31 ©2004 InfoNetrix LLC All Rights Reserved Worldwide PART 3: Market Drivers, Issues & Trends 3-31 The 7 Signs (Cont’d) 5. Web & Wireless Solutions Direct and indirect effects and impact of Web and wireless solutions on the RTAC marketplace include:  Browser-based HMIs (Human-Machine Interfaces)  Rising wireless technologies & standards x (i.e., b, g, etc.) Wireless Ethernet Cellular conversion to digital (by 2005) Satellite (VSAT, etc.) Advancing communications deployments  Broadening cellular coverage to include rural areas  Increased bandwidth to support new functionality  Ongoing pervasive expansion of wireless  New PLC (Power Line Communications) technology under way; RF interference issues will delay progress

32 ©2004 InfoNetrix LLC All Rights Reserved Worldwide PART 3: Market Drivers, Issues & Trends 3-32 The 7 Signs (Cont’d) 6. Enterprise Asset Management (EAM) Increasing utility focus and emphasis on improved management of assets at all levels of the enterprise to enable/be enabled by:  Remote Asset Monitoring  Field Crew (“Workforce”) management  Integrated Work Management Systems (WMS)  Integrated Outage Management Systems (OMS) EAM requires access to information from various levels  Host  Field Data Devices (FDDs)  Other Intelligent Electronic Devices (IEDs) Field Data Devices (FDDs) have especially large amounts of information that is…  Acquired and “invisibly” stored  Acquired and logged but not easily accessible  Accessible but not accessed by anyone  Accessible to the “wrong” people

33 ©2004 InfoNetrix LLC All Rights Reserved Worldwide PART 3: Market Drivers, Issues & Trends 3-33 Emphasis on Remote Asset Monitoring  Infrastructure, Apparatus & Equipment  GASB 34 Compliance* primarily affects public (i.e., municipal) utilities  Sarbanes-Oxley Compliance applies mainly to IOUs  Present data acquisition methods are inadequate to acquire non- operational data* Communications networks do not adequately accommodate dramatically escalating volumes of asset data Utilities lack suitable Information Flows & Functions* model to accommodate data acquisition and communications bandwidth access issues (*See slides with details following) The 7 Signs (Cont’d) 6. Enterprise Asset Management (EAM)

34 ©2004 InfoNetrix LLC All Rights Reserved Worldwide PART 3: Market Drivers, Issues & Trends 3-34 *Adapted from original diagram by Kreiss Johnson Technologies; San Diego, CA (www.KJT.com) 6. Enterprise Asset Management Non-operational Data Management Smart Object Library Smart Object Library Notification Non-operational Data : Information Flows & Functions Model* PUMP/LIFT STATION Non-Operational Data Sources Measurement & Control Devices Equipment Condition Monitors Data Recording Devices Smart Apparatus Filters, etc.

35 ©2004 InfoNetrix LLC All Rights Reserved Worldwide PART 3: Market Drivers, Issues & Trends 3-35 *Consolidated Annual Financial Report Modified Approach (Preserving) Assemble CAFR Team Develop/ Update Inventory Determine Approach Ascertain Historical Cost Calculate Upkeep Required Assess Condition Determine Useful Life Depreciate Calculate Maintenance Expenses Publish CAFR Plan Annual CAFR* Work Depreciation Approach Compare GASB-34 COMPLIANCE SCHEDULE TOTAL ANNUAL REVENUESFINANCIAL REPORTING MODELINFRASTRUCTURE REPORTING Greater than $100 millionJune 30, 2002June 30, 2006, retroactive 25 years Between $10 and $99 millionJune 30, 2003June 30, 2007, retroactive 25 years Less than $10 millionJune 20, 2004Prospectively from July 1, 1999 SOURCE: EMA Inc. (www.EMA-Inc.com) Infrastructure Identification and Valuation Cycle (GASB-34) The 7 Signs (Cont’d) 6. Enterprise Asset Management (Cont’d)

36 ©2004 InfoNetrix LLC All Rights Reserved Worldwide PART 3: Market Drivers, Issues & Trends 3-36 The 7 Signs (Cont’d) 7. Customer Care & Satisfaction Increasing emphasis customers brought about by:  Industry privatization and M&A activity  Rising customer demands for improved service as gas and electric restructuring has empowered consumers Privatization has failed (in many cases) to deliver promised customer benefits  Privatization movement has slowed due to backlash and slowed economic conditions Outsourcing continues to expand steadily with substantial success among a growing set of qualified vendors and delivering service improvements  Outsource companies more likely to see benefits of automation applied uniformly across a large set of outsource clients  Typically demands a standardized RTAC approach, which once established, is unlikely to changes in supplier(s) or architecture

37 ©2004 InfoNetrix LLC All Rights Reserved Worldwide PART 3: Market Drivers, Issues & Trends 3-37 Security compliance cost appropriation/allocation  Funding sources  Budgeting issues Declines in average selling prices  Material cost reduction vs. labor cost increases  Low- (No-) maintenance preference  Macroeconomic and competitive pressures Simple, intuitive solutions  Little or no training required  Works out-of-the-box  Easy to integrate (employs open standards) Challenges & Opportunities Price-Performance Issues

38 ©2004 InfoNetrix LLC All Rights Reserved Worldwide PART 3: Market Drivers, Issues & Trends 3-38 Funding/Budgeting/Justification Outlook  So far, no apparent blanket legislation planned or in place for funding security mandates by other than rate-based initiatives  Some utilities have been successful in getting PUCs to approve selective spending using critical infrastructure rules, national security considerations (e.g., government & military installations) or similar justification as the basis for funding at the state, regional or local level.  Many speculate that automation/IT budgets will bear the near-term brunt of cyber-security spending, but no tangible evidence yet that any such budget shifting is widespread  Utilities will ultimately have to build security into operating costs and be amortized across the enterprise in all departments at all levels Challenges & Opportunities Security Funding/Budgeting/Justification

39 ©2004 InfoNetrix LLC All Rights Reserved Worldwide PART 3: Market Drivers, Issues & Trends 3-39 Need products with:  Minimum time/labor to install/repair/replace  Little or no ongoing local (jobsite) maintenance requirements  Little or no training requirements  Works out-of-the-box promise (guarantee?) and support Low- (No-) maintenance preference  Utility maintenance staffing is minimal and shrinking  Routine field work now being outsourced  Little or no training required  Works out-of-the-box  Easy to integrate (employs open standards) WinTel (Windows® + Intel®) platform now Linux gaining popularity for servers; embedded FDD applications; less for desktops but some emerging Challenges & Opportunities Holistic, Intuitive Solutions

40 ©2004 InfoNetrix LLC All Rights Reserved Worldwide PART 3: Market Drivers, Issues & Trends 3-40 Security & Financial/Operations Reporting  Major impact on systems integration & implementation costs for utility compliance with: GASB-34 (New reporting standard for public/municipal entities) Sarbanes-Oxley (New reporting standard for SEC entities)  “Un-funded Mandates” Utilities face unprecedented operational cost & implementation burdens required by new security and EPA reporting mandates Suppliers will be challenged with finding ways to incorporate compliance functions into RTAC, quickly… & economically! Challenges & Opportunities Security & Data Integrity


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