Warren Wilson, Lead Analyst, Energy – Oil & Gas Technology

Enterprises in asset-intensive industries such as utilities and oil and gas have many billions of dollars invested in aging assets. These assets cost billions more to keep in good working order, meet regulatory compliance, and modify as requirements change. In a recent survey, Ovum found that an emerging software category, asset lifecycle information management (ALIM), can provide significant business benefits.

To date, relatively few companies have deployed such applications, but they are growing in capability and falling in price. We believe that current business conditions make the ALIM approach a sensible, even necessary, one for asset-intensive companies. Those that adopt ALIM stand to reap gains in service levels, business continuity, cost control, and compliance. Those that do not may face consequences such as greater risk, higher costs, and loss of competitiveness.

Asset management is a longstanding and expensive problem in asset-intensive industries

Utilities worldwide spend billions of dollars on power stations and energy transmission/distribution networks. Oil and gas producers and processors spend massively on drilling platforms, fracking equipment, refining and gas processing equipment, and much more.

These industries have long relied on paper-based asset management systems that are prone to incorrect or incomplete information. Where these systems have been digitized, the data often resides in isolated silos and in multiple conflicting versions. This makes it difficult for the business to achieve accurate and comprehensive visibility and takes a toll on service quality, cost, business continuity, and overall competitiveness.

A lifecycle approach to asset data can minimize costs, maximize asset value, and improve service

Software that can accurately manage all relevant data across the asset lifecycle – from concept and design, through an asset’s operating life, to eventual decommissioning and disposal – can pay dividends by optimizing asset performance while controlling service and repair costs. Such systems have been expensive and difficult to deploy and maintain, and as a result they have achieved much less market penetration than other, narrower forms of asset information and performance management.

In Ovum’s recent survey, 11% of respondents said they have fully deployed an ALIM system, while another 7% said they are trialing one. Applications that focus on asset and project information and performance management but do not take a lifecycle approach have achieved penetration rates of around 60%.

But our survey, which covered seven software categories in all, found that ALIM can be highly effective. Measured by the number of respondents who were completely or mostly satisfied with the solution they had deployed, ALIM applications scored highest in terms of increasing overall asset value and reducing asset costs. ALIM applications outscored five of the six other categories in terms of reduced times and costs for service and repair, and they scored higher than any other category in terms of ease of deployment.

The survey data are discussed in more detail in two recent Ovum reports: Managing Assets for Maximum Performance and Value and Modern Asset Management Critical in Heavy Industries.

Companies that do not embrace a lifecycle approach to asset management risk significant consequences

Compared to narrower approaches, ALIM applications offer better visibility into asset performance and provide the strongest foundation for analytics tools. Such applications are increasing in capability, becoming easier to deploy, and declining in price. We believe that today’s business conditions – including high asset costs, market volatility, increasing business and technical complexity, and tougher competition – make this model a sensible, even necessary, one.

Companies that do not pursue a lifecycle strategy face a number of consequences, including greater regulatory risk, higher costs, project delays, and reduced process stability, all of which erode the company’s competitive position.

Companies in asset-intensive industries should carefully consider the ALIM model. Those that embrace it will reap the benefits, while those that do not risk being left behind.

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