July 2007

1. WSSC ITEnterprise Technology RoadmapEnterprise Application Systems Implementation July 2007

2. Agenda • What is Enterprise Asset Management? • What is Enterprise Resource Planning? • Where is WSSC Today? • What benchmarking has been performed? • Compelling Reasons for pursuing an ERP/EAM Implementation? • What is the Business Case? • What are the Requirements for Success? • Why should WSSC Implement? • Questions, Comments and Feedback

3. What is Enterprise Asset Management (EAM)? • Enterprise Asset Management is an asset intensive industry approach, (for example, Utilities) used to • Optimizing the business process for asset management to yield savings and increasing the life cycle of assets. • Improve the entire asset life cycle, taking care of all the relevant phases starting • from planning the right investments, specifications and design • to asset constructions, operations and maintenance procedures • finally moving towards the disposal and decommissioning of assets. • An Enterprise Asset Management solution • can be particularly helpful for asset intensive sectors such as Water and Waste Water Utilities Organizations where asset management is critical to business operations – Gartner Group (G00129221 - Utilities should consolidate Business Functions) • Other industries that may benefit from the EAM solution include transportation, government, and public sectors.

4. What is Enterprise Resource Planning (ERP)? • Enterprise Resource Planning is a process by which an organization manages and integrates the important parts of its business. • Term ERP • Originally implied systems designed to plan the utilization of enterprise-wide resources. • As adoption has become popular and common place, its now frequently used in the context of large software applications developed to help companies implement ERP in their organization. • An ERP management information system integrates important areas such as planning, purchasing, inventory, sales, customer services, finance, human resources and asset maintenance/management etc. • We can think of ERP as the glue that binds the different computer systems for a large organization. • Typically each department would have their own system optimized for that division's particular tasks but with ERP, each department still has their own system, but they can communicate and share information easier with the rest of the company. • ERP integrate all data and processes of an organization into a unified system with multiple components of computer software and hardware to achieve the integration. • A key ingredient of most ERP systems is the use of a unified database to store data for the various system modules.

5. Where is WSSC Today? Where we are right now: • Challenges we currently face and the reasons why: • Legacy Technologies, some are 20+ years old • Best of Breed, Stove Piped and Redundant Systems with Multiple Data Source • Lack of vendor supported or high support cost put Commission at risk • Fragmented Architecture • Complex and hard to maintain Interfaces between Systems • Not easily replaceable / Not Plug and Play • IT solutions were built in silos. • Systems do not talk to each other (No interoperability) • Systems Data Lack Cleansing and/or Archival • Systems cannot support changes and improvements to business processes

6. Where are we today (cont)? • Best of Breed Solution – Where we are right now • Pros • Rich functionality specific to water and wastewater industry needs (if COTS) • These products may have evolved and stayed one step ahead of integrated ERP/EAM vendors offerings • Cons • Lack of Integration with existing systems • Does not place the burden and responsibility on the Software Vendor to ensure that functionality and architecture required for integration with other systems is compatible and up to date • Contractual obligation for upgrades and technical architecture performance of interfaces • Complex interfaces required for functional interoperability between system must be maintained in house (we are not a software company)

7. Where is WSSC Today (cont)? Where we want to be: • Benefits: • Integrated Solution, with Single Common Data Source • Unified vendor support • Loosely coupled and interoperable Architecture • Simple and easily maintain Interfaces between Systems • Plug and Play • Easy Support and Upgrade • Modular Application Architecture • Unified System of Records and Data Model • Easy accommodation for changes and improvements to business processes

8. Where are we today (cont)? • Integrated ERP/EAM Solution – Where we want to be • Pros • ERP/EAM Modules are combined by Vendor out of the box at the function and data layers providing seamless integration • More spending with one vendor provides leverage for negotiating capability • Reduces expenditure for complex interface development • We do not have to deal with multiple software technology architecture, integration issues and multiple software upgrades • Cons • Systems functionality may be generic, supporting multiple industries and requiring customization to provide required functionality from out the box offering • All eggs are in one basket • Exit strategy is more difficult

9. What benchmarking has been performed? • Industry Research – Gartner Group • Worked with Water/Waste Water Industry Analyst • Worked with ERP/EAM Industry Analyst • CIO water / wastewater utility summit • Best of Breed vs. Integrated System • We analyzed whether WSSC IT should be in the business of integrating multiple best of breed solutions. • Our efforts should not be spent in the business of software integration. Neither should it be our niche area. • The need for the best of breed functionalities outweighs the architectural challenges of integration and upgrades. • We can live with the best practices and standards of a generic offerings of a leading integrated ERP vendor

10. What benchmarking has been performed? • Notion to evaluate Oracle • WSSC already established Oracle as its database standard. • We have been using Oracle’s E-Business Suite Financials for our accounting and payroll requirements for the past 10 years. • We standardized Oracle Spatial for GIS needs. • Oracle’s flagship E-Business suite is one of the top integrated business applications in the market today. • Oracle is a viable global software vendor that can survive tough economic pressures. • Oracle offers integrated Enterprise Asset Management module in its flagship product (E- Business Suite) • Strong product offerings in this space. Oracle just acquired SPL WorldGroup software – a leading utility application provider. (2 Time selection from past effort) • Transitioned from a best of breed component assembler to an integrated suite provider.

11. What benchmarking has been performed? • Case Studies - Water/Waste Water Utilities • East Bay Municipal Utilities District, CA • Metropolitan St. Louis Sewer District, MO • Metropolitan Water Reclamation District of Greater Chicago, IL • Dekalb County, Dept. of Wastershed Management, GA • Detroit Water and Sewer Department, MI • San Antonio Water System, TX • Metropolitan Sewer District of Greater Cincinnati, OH

12. San Antionio Water System, TX Financial Loss Estimate $5M Failed Implementation Lack of Executive Management Commitment Lack of Change Management process and lots of Customizations Effort led as an IT Project Little investment in Training Lack of Project Management Principles Dekalb County, GA Total Cost Estimate $20M Successful Implementation Strong Executive Management Commit to Implementation Robust Change Management process with little or no Customizations Effort led through the formation of Core Business Team with business analysts across business unit Huge Investment in Training (about 50% of Budget) Deployed strong project management principles / methods What Benchmarking has been performed? Case Studies - Successful vs. Unsuccessful Experience waste and Waste Water Utilities ERP/EAM Implementation

13. What benchmarking has been performed? • 5 Business Brainstorming Workshops • All critical business area participated • Approach to address aging critical business systems and applications discussed • Oracle SPL Product Workshops Conducted • Product Review by representatives for all business areas i.e. Assets, Work Order, Acquisition, Finance, HR, Logistics, SLMBE. • Day in the life workflows from evaluated • Site Visit to Dekalb County, GA by Production, Engineering & Construction, Customer Care, Logistics and IT Teams • Discussed lessons learned during and post Oracle SPL implementation. • Shared experience including things to watch out for in an ERP/EAM Implementation. • Well represented by all key WSSC teams.

14. What benchmarking has been performed? (Cont) REFINED IMPLEMENTATION PLAN • Phase 0 Tasks • HW & SW Architecture (Upgrade to 11.5.10) • PMP, PQP, Core Business Team, Technical Readiness • Phase 1 Tasks • Retire COMPASS, MMIS, MEIS*, TAMSO, • Implement Oracle Inventory, Bill of Materials, Work in Process, Fixed Assets, Ent. Asset Mgmt, HRMS Benefits and Time & Labor • Phase 2 Tasks • Retire MAPS, CSIS* • Implement Account Payable, iPurchasing, iSupplier, Order Mgmt, Account Receivable and • Service • Phase 3 Tasks • Implement Ent. Plan. & Budget, Project Accounting and Fleet Management COST • Software Cost • - By Impl. Phase • - By Year • Hardware Cost • - By Impl. Phase • - By Year • Professional Services Cost • - By Impl. Phase • - By Year • Training Cost • - By Impl. Phase • - By Year • Internal Cost BUSINESS FAMILIARITY • Cursory look • - Current AS-IS business Processes • - Review materials available from business areas • Gap Analysis • - Identify the gaps in current AS-IS business processes • - Identify opportunities for improvement in future TO-BE business processes • Oracle Product Workshop • - Understand business processes offerings in Oracle Product and Modules • - Determine aberrations and remediation plan • Oracle Proposed Path • - Review of the Oracle Phases and validation of high level sequencing of modules implementation • BENCHMARKING • List of Companies with references • Plan Site Visit • CIO Forum for Water & Wastewater Industry

15. Compelling Reasons to pursue an ERP/EAM Implementation? • High Maintenance Requirements for Heterogeneous Systems and Multiple Platforms • Integrating disparate solutions and managing all the system interfaces becoming a growing challenge • Increased risk of business disruption from legacy and stove piped application technology • Inflexible technology limiting the adoption and introduction industry best practices and standards to our business processes • Constantly rising effort associated with the operations of aging application and hosting environment.

16. What is the business case? • Assumptions • Project costs includes items such as • Software, servers, client upgrades, network upgrades, support and maintenance contracts, professional services, IT training, application customization and development, implementation labor and on-going support and administration. • NPV calculations doesn't completely reflect the operating efficiency benefits. • For example the process improvements that can improve productivity, re-deploy labor resources, avoid purchases or eliminate expenses. • Project risk costs were not factored in the NPV calculations. • This includes everything from schedule and budget overruns, functionality shortcomings, slow adoption and resources risks that may affect planned costs and benefits. • Intangible benefits are strategic and important but non-quantifiable in monetary terms such as brand advantage or business agility with ERP implementation.

17. What is the business case (cont)? • Timeline • 5 Years vs. 7 Years Implementation Effort • Net Present Value (NPV) • Out of the two scenarios, the 5 year ERP implementation is our recommended approach • Although the 5 year implementation has a negative NPV when compared with 7 year ERP implementation with a higher NPV, the 5 year ERP implementation will • Reduce risks on implementation due to extended implementation time • Improve implementation delivery by reduced user training to usage timeframe • Reduce risks of extended dependency and integration of aging systems • Return on Investment (ROI) • Notwithstanding higher NPV, we recommend 5 year plan to get it done.

18. What is the Business Case (cont)?

19. What is the business case (cont)? • Increased budget commitment • Shorter implementation duration • Negative NPV

20. What is the business case (cont)? • 5 Year Phased ERP Implementation • Phase 0 (11.5.10 Technical Upgrade, Phase Planning, Requirements Definition etc) • Phase 1 (Compass replacement, TAMS/O Replacement, WAM, OTL, INV, eAM ) • Phase 2 (MAPS & CSIS replacement, CCB & BI Extract, iSupplier, iProcurement, PUR) • Phase 3 (Projects, EBP Modules Implementation) Fiscal Year 2012 Fiscal Year 2011 Fiscal Year 2008 Fiscal Year 2010 Fiscal Year 2009 Phase 0 Implementation Phase 1 Implementation Phase 1b Phase 1a Phase 2 Implementation Phase 2c Phase 2b Phase 2a Phase 3 Implementation

21. What is the business case (cont)? • Moderate budget increase • Longer implementation duration • Positive NPV

22. What is the business case (cont)? • 7 Year Phased ERP Implementation • Phase 0 (11.5.10 Technical Upgrade, Phase Planning, Requirements Definition etc) • Phase 1 (Compass replacement, TAMS/O Replacement, WAM, OTL, INV, eAM ) • Phase 1 broken into 3 sub phases to accommodate budget cycle • Phase 2 (MAPS & CSIS replacement, CCB & BI Extract, iSupplier, iProcurement, PUR) • Phase 2 broken into 3 sub phases to accommodate budget cycle • Phase 3 (Projects, EBP Modules Implementation) Fiscal Year 2008 Fiscal Year 2009 Fiscal Year 2010 Fiscal Year 2011 Fiscal Year 2012 Fiscal Year 2013 Fiscal Year 2014 Phase 0 Implementation Phase 1 Implementation Phase 1a Phase 1b Phase 1c Phase 2 Implementation Phase 2a Phase 2b Phase 2c Phase 3 Implementation

23. What are the Requirements for Success? • Dedicated Business Analyst from Customer Care, Production, E&C, Logistic, HR, Finance teams committed to implementation • ERP/EAM is a business project, not an IT exercise • Enterprise that do not understand this are likely to experience ERP project failure • Must be Lead by Executive Steering Board (ESB) • ESB buy in and sponsorship • Proper executive involvement and governance • Avoid Modifications and Customization • Adjust business processes to standards industry best practices • Openness to vendor and industry recommendations • Strong support from all business teams to adoption new business processes • Strong Project Management and Change Management • Effective training plan and education activities • User Community preparation • Change readiness assessment • Core Business Team formation • Formal Project Management Methods

24. What are the Requirements for Success? (cont) • Budget Increase • Multi-year implementation will require a significant increase on IT Budgets over the implementation period • Strong Change Management • ERP implementations are inherently risky; however, some of these risks can be minimized by defining implementation strategies appropriate for the organization’s unique circumstances • Commission-wide involvement • Paying close attention to the people aspects of an ERP/EAM project is as important as the technical aspects to the project’ success. • Expect challenges be prepared to exercise endurance – ERP is more than a project, it’s a lifestyle

25. Why should WSSC Implement an EAM/ERP? • An EAM/ERP implementation • will significantly impact the Utility Master Plan execution by enabling planners to decide what to work on and why, and how they can best perform the work. • may be the single most important technology solution for preventing operational surprises and reduce operating cost. • helps cost-constrained operations further lower costs • meet tougher performance and production targets • comply with regulatory requirements (SSO etc) • maximize return on assets (Maximize Asset Life Cycle)

26. Questions, Comments & Feedback