Woodside post implementation review
1. Executive summary 2. Background 2.1 The Woodside implementation 3. Methodology 3.1 Method 3.2 Assumptions 4. Cost benefit analysis 4.1 Introduction 4.2 Benefits 4.3 Costs 5. Return on investment 5.1 Key findings 5.2 Internal rate of return 5.3 Payback period 5.4 Costs versus benefits 5.5 ROI sensitivity 5.6 Qualitative and intangible benefits 5.7 Future opportunities 6. Conclusion 7. Appendix 7.1 AVEVA background 7.2 Woodside background 7.3 Cost and benefit breakdown
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Deloitte was commissioned to conduct a post implementation review of AVEVA NET at Woodside Energy Limited (WEL); to identify the return on investment (ROI) achieved to date and forecasted through to 2014. In 2004 Woodside commenced the implementation of the AVEVA NET application as a solution to better manage new and legacy engineering data. AVEVA NET was chosen as Woodside believed that it integrates with industry standard business and engineering applications providing a single access point for 98% of Woodside’s engineering data. As part of the AVEVA NET implementation, significant data validation and integration of legacy data from existing facilities was conducted, which significantly contributed to the benefits realised. Four benefits were evaluated for the purpose of the ROI analysis: •
streamlined data handover •
more efficient information searching •
reduction in training costs •
reduction in the number of supported applications. The former two (efficient data searching and data handover) were found to be the most significant by Woodside.
The majority of the benefits included in the 10 year IRR (internal rate of return) have not yet been realised and are based on assumptions provided by Woodside. The realisation of those benefits will be dependent on many factors including the robustness of the assumptions provided by Woodside. In analysing the potential IRR for similar projects, organisations need to assess their own ability to realise these savings and not rely in any way on the assumptions provided in this analysis. The overall cost of the implementation was categorised into three areas: •
implementation and improvement costs •
total cost of ownership (TCO) •
training. The most significant costs were incurred during the initial implementation and ongoing business improvement projects (BIP). These BIPs only relate in part to the AVEVA NET implementation but do contribute to the benefits considered in this document; as such their costs have been included in the analysis.
The ROI was determined using the IRR and payback period analysis. A 10% discount rate was used to account for the time value of money when determining the investment’s payback period. Based on the assumption provided by Woodside that a 10% productivity gain can be achieved by all the users through more efficient information searching, the AVEVA NET implementation would achieve an IRR of 27% over a five year period from 2004 to 2009. With the benefits anticipated from 2009 to 2014, Woodside could expect to achieve an 84% return between 2004 and 2014 if those assumptions were ultimately correct. Under these assumptions, Woodside would achieve the breakeven point of the AVEVA NET implementation in mid 2007, 3.4 years after commencement. It is crucial to note that the ROI analysis is very sensitive to the level of productivity realised by all AVEVA NET users and actual savings have not been verified independently by Deloitte. As such three scenarios have been considered in section 5.5 ROI sensitivity.
Based on the assumptions used in this review and the additional intangible benefits not accounted for in the IRR and payback analysis, the AVEVA NET implementation appears to have been a successful and beneficial investment for Woodside. Woodside further suggests, in hindsight, that an earlier...
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