HPC CEO Jerry Cavalieri to Join SAP Advisory Board of San Francisco State University

We are pleased to announce that Jerry Cavalieri, CEO of HPC America, has joined the SAP Advisory Board of the College of Business at San Francisco State University. The Advisory Board provides guest lecturers and collaborates with the SFSU Information Systems (IS) faculty to enhance the University's curriculum with respect to SAP and the employability of IS graduates.

SFSU Professor Sam Gill commented that, "Jerry will bring his vast experience in helping organizations implement SAP to the development and implementation of SAP-enriched curricula at SFSU. In particular, Jerry will assist with the integration of SAP into the financial curriculum, which would also also include the implementation of GAAP using SAP. Jerry will also advise on how to extend the SAP curriculum to the use of the Sybase platform (acquired by SAP) to advance mobility solutions."

Open jobs: SharePoint Developer and SAP BASIS Consultant

HPC is hiring for two contract positions: a Microsoft SharePoint Developer, and an SAP BASIS Consultant. Both roles are for work in the San Francisco Bay Area, so local candidates are a must. Make sure to include a cover letter with your resume that articulates how you'll add value to our team and help delight our customers.

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SAP Enterprise Asset Management (EAM) Benefits

The latest water cooler talk at HPC was about Enterprise Asset Management. By combining elements of Plant Maintenance, Project Systems, Materials Management, and Warehouse Management, SAP EAM enables utilities to realize much higher productivity from PM orders compared to Internal Orders. After setting up a Functional Area hierarchy and identifying the location of all assets, utilities can create orders more efficiently via notifications (what we'd call a "pre-order"). So if the inspection of a pump, for example, identifies necessary corrective maintenance work, the order for that work can be created automatically. Tight integration with the MM module, plus records of prior labor and parts history, also mean that repair kits with all relevant parts can also be identified easily.

For utilities that are considering transitioning from their legacy CMMS to SAP EAM, we would make two particular recommendations. First, ensure that your project team includes subject matter experts from Engineering, Construction, Generation, Transmission and Distribution Maintenance—that is, the people who know what it takes to fix things that break. Their knowledge and requirements will ensure the success of the initiative beyond the needs of IT and Finance. Second, conduct a thorough review of all equipment so that nothing is inadvertently left out of Plant Maintenance. For selected assets, seriously consider bringing in a year or two of work history from the external CMMS.

Document Splitting and the Balance Sheet in SAP New GL

In all of our previous posts about the SAP New General Ledger, we've only looked at P&L accounts.  But what about the balance sheet? Using the New GL will eliminate either the accounts approach or the company code approach to IFRS compliance using SAP. A somewhat complicated feature is the use of document splitting, which we'll touch on next.

Let's suppose a vendor is paid with invoice line items charged to both generation and transmission on the same invoice, but with only one offset to the vendor account on the balance sheet. Using document splitting, the offset account charged to accounts payable is allocated or "split" between the generation and transmission lines. So, if $300 is charged to generation and $500 charged to transmission on the same invoice, the offset for the total of $800 is split to "follow" the P&L accounts that were charged originally.  By doing this split, separate balance sheets can be generated for each segment (i.e., generation and transmission) below the company code level. This will save time during document entry, as the preparer doesn't have to be affected by a process change. An employee in Accounts Payable doesn't change his SAP business process. Rather, in the background, SAP will split the transactions entered to create the separation by segment.

Document splitting can be a complicated undertaking and shouldn't be conducted without ample testing. In fact, a utility's New GL conversion scenario should consider the impact of document splitting when determining a migration data and activation date. Since most large utilities can have thousands of open items during a New GL migration, it is suggested—and we highly recommend—to set an activation date as close to the migration date as possible to limit the amount of documents (and line items) that will need to be split.

New SAP for utilities email newsletter

We've just launched an email newsletter for SAP for utilities professionals to get our latest news and insights. We'll send periodic product updates, customer case studies, white papers, and other tips and tricks on regulatory reporting and enhancing SAP for utilities. We won't share your personal information with anyone outside HPC, and you can unsubscribe at any time.  Subscribe to our email newsletter online.  If you have any requests for content that we cover, please let us know.

SAP New GL and Cost Models

We've commented before about the increasing interest we're seeing from utilities in migrating to the SAP New General Ledger. In the context of SAP's recent announcement that ECC 6.0 will be supported until 2020, we expect to see even more interest—and action—since utilities are under no immediate pressure to upgrade. Instead, they can focus on a New GL migration independent of future upgrade plans.

That said, we also notice that some utilities are focusing almost exclusively on the migration itself, and not enough on their underlying cost model. Some aren't thinking about it at all, while others separate, uncoordinated initiatives in the works. This is a serious mistake. Not to discount the care with which a New GL migration must be undertaken, but it's essentially a technical procedure that can be handled smoothly with proper preparation and coordination with SAP. In contrast, there is far greater benefit potential from reassessing the cost model and transitioning from a cost center-centric to order-centric model—in other words, abandoning the approach adopted during 1990's deregulation, and going back to what most utilities did in the 70s and 80s (when they had no choice and regulation was the only business model). Here are a few quick reasons why this makes so much sense:

1. Cost-centric models are ideal for what we think of as the trifecta of utility financials: budgeting, regulatory reporting, and possibly in the near future, IFRS.


2. Using the order as the central point means evaluating activity type pricing and unbundling rates, such that the cost of labor going into each order is very close to the actual rate of pay.


3. By documenting secondary costs in each order, they'll be fully supported and enable easier cost recovery. They will, as we like to say, provide one version of the truth.

We'll revisit this topic in November to discuss some realistic approaches to a managing a cost model project in conjunction with a New GL migration.