EAM: Mission-Critical, Poorly Practiced

Automating enterprise asset management can boost profitability and performance, survey reveals

Automating enterprise asset management can boost profitability and performance, Aberdeen/Supply & Demand Chain Executive survey reveals

Boston, MA  September 10, 2003  More than half of enterprises believe that effective asset management is important to their success, and yet a minority track assets on an enterprise-wide basis and only a small minority regularly track all their assets, according to a new study from technology consultancy Aberdeen Group and Supply & Demand Chain Executive magazine.

Companies that have automated some or all of their asset management operations are achieving such benefits as improved asset utilization and performance, improved budgeting and planning procedures, and improved overall profitability, the study found.

But fewer than one-third of companies track assets on an enterprise-wide basis and just 4 percent track all their assets on a regular basis, Aberdeen reported in "The Enterprise Asset Management Benchmark Report: Maximizing Value in What You Own," which was based on the study conducted jointly with Supply & Demand Chain Executive (formerly iSource Business) magazine.

In the report, author Mark Vigoroso, a senior analyst for supply chain research at Aberdeen, pointed out that the total amount of assets that a company owns no longer is necessarily the determinant of that company's value. "Instead," Vigoroso wrote, "success will be measured by how well an enterprise leverages its assets (as well as those of its partners) to deliver value to customers."

Enterprises appear to be increasingly realizing this, as about 55 percent of the 252 enterprises polled for the joint study said that effective asset management is important or extremely important to their success. Moreover, the study identified "improving overall profitability" as asset management professionals' top goal for their enterprise asset management (EAM) strategies.

But while effective EAM is coming to be viewed as critical to a company's success, just 2 percent of the respondents to the Aberdeen/Supply & Demand Chain Executive survey reported that they were "completely satisfied" with their current asset management programs and processes.

That is perhaps not surprising given the barriers standing in the way of effective asset management. Vigoroso identified three key hurdles, including the isolated management of different asset types, the latency of asset status and performance data, and inadequate executive visibility and involvement in asset management.

On the first point, the analyst noted that for companies in asset-intensive industries  Vigoroso cited manufacturing, transportation and utilities  "diverse assets are often interdependent and need to be managed as a whole so that their bottom-line impact on an organization can be fully understood." Yet just 32 percent of enterprises in the study reported that they track assets on an enterprise-wide basis, while 34 percent track assets on a divisional or single-site basis, and fully 18 percent said they have no formal enterprise asset management process in place.

As for the latency of asset-related data, it is notable here that nearly half (46.8 percent) of respondents said they use paper-based systems to track their assets, and the primary automation tool used by a majority (56.3 percent) of respondents was a spreadsheet application. These types of systems leave asset managers ill-prepared to carry out one of their primary functions, which is to provide decision-makers at all levels within the enterprise with structured, actionable information derived from timely asset data.

As a result, asset management remains tactical in nature, Vigoroso asserted, and top-level executives lack the visibility into the disposition and performance of their companies' asset that they need in order to make strategic, profitable decisions.

To meet the challenge of effective enterprise asset management, Aberdeen believes that companies will increasingly look to automate their EAM processes using Web-based enterprise asset management solutions, which can allow for integration with a variety of other systems across an enterprise to provide real-time data on assets.

"Most companies need to improve the currency, flexibility and communicability of asset-related data," said Vigoroso. "To achieve these improvements, asset-heavy firms must graduate beyond paper- and spreadsheet-based asset management processes."

Currently, based on the results of the Aberdeen/Supply & Demand Chain Executive survey, just 18 percent of companies are using these types of Web-based EAM solutions. However, the present survey and other Aberdeen research into enterprise software buying intentions indicate that nearly 40 percent of enterprises will be using such solutions by 2005. In addition, nearly one-third of respondents (31.7 percent) said that their budgets for EAM solutions would be increasing over the next 12 months.

Vigoroso cited several "success factors" for effective asset management, including ensuring that an EAM process covers a sufficient proportion of an enterprise's total assets. "However," the analyst cautioned, "asset management is clearly more than a volume game. Aberdeen believes that firms in asset-intensive industries should focus first on mission-critical assets that directly affect the delivery of their product or service."

The report addresses differences between different industry segments; explores additional success factors and best practices for effective EAM; highlights the need for effective asset management to meet the governance requirements inherent in the latest financial accounting regulations, such as the Sarbanes-Oxley Act; and offers some guidance on asset management solution requirements.

In wrapping up the report, Vigoroso noted that those enterprises already employing effective asset management practices are reaping bottom-line benefits that include improved overall profitability. "Companies of all sizes with significant asset investments," the analyst concluded, "would be well served to measure their existing asset management procedures against these emerging best practices...."

"The Enterprise Asset Management Benchmark Report" is available on the Aberdeen Web site.