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B2B Integration (B2Bi)

A Whitepaper exploring the needs of UK

Gas Industry

by – Vijay Mohire

IT Specialist, GMSBU practice

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Introduction The structure of the natural gas industry is undergoing a phenomenal change in the UK. The state-regulation is reducing and the introduction of competition has made the natural gas industry more responsive to customer needs, less regulated by government agencies, and more susceptible to market forces. New entities and roles are getting introduced in the market which would introduce greater complexity and challenges in terms of Business-to-Business (B2B) interactions. The objective of this paper is to explore the B2B (B2Bi) integration possibilities in the new gas industry scenario in the UK and to bring up the benefits as well as the challenges that need to be addressed for attaining a streamlined B2B integration among various entities. Section 2 describes the current state of UK gas industry and some of the key interactions among the traders. Section 3 identifies the B2Bi needs of the gas industry. Section 4 lists the benefits of implementing B2Bi solutions. Section 5 highlights the challenges of a B2Bi exercise and finally Section 6 presents Wipro's expertise in handling B2Bi cases.

1 The UK Gas Industry The UK gas sector is divided into two elements. The first is the exploration, extraction and transportation of gas to a compression system, the second element is the ownership of compression systems, transportation of gas to homes and businesses and the management of gas across this network. The first element of the industry is referred to as upstream, the second as downstream activity. Throughout the 1960s and 1970s the large state owned firm British Gas was the single purchaser of gas from producers in the North Sea, and so it could wield a tremendous degree of influence over the producer prices. With the privatisation and fragmentation of the downstream sector this is no longer the case. The policies of successive UK governments in the past 14 years has been to increase the degree of competition at the point where the energy provider meets the customer – and to increase customer choice at the same time as reducing the price of energy. Prior to privatisation British Gas was the entire British gas industry. The government decided to introduce effective competition into the downstream gas industry through two means. The first was the division of British Gas into Centrica and Transco, and the second was the establishment of a regulatory framework intended to stimulate the growth of new entrants. The subsequent two sub-sections describe the UK gas industry scenario in brief and the key interactions among the participants.

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1.1 Entities and Their Roles The various entities playing a role in the UK gas sector are depicted below in the figure.

Figure 1 - UK Gas Industry Supply Chain

The above figure shows entities and relationships as of now. Essentially the roles would remain the same in future but at the same time new roles might be introduced in the market which would have a responsibility which is currently internal to Transco. Two of the above roles, which might be seen in near future, are - Emergency Works and MRA (Meter Reading Agencies) or MWA (Meter Works Agencies). As and when new roles are introduced, newer possibilities of external interactions would arise. A brief description of the above entities is given below- Producers extract and sell it to shippers. Shippers buy the gas from the producers and transport the gas through channels owned by them to the entry points called BEACH from where gas is shipped through Transco network to the end consumers. There are around 60 to 70 such shippers in UK.

Transco’s primary responsibility is to lay and maintain the pipelines from the beach points to the end consumers supply points and ensure the quality of the gas flowing through the pipes. It is responsible for the installation, maintenance and de-installation of meters at consumer supply points. It is also responsible for collecting the meter readings and raising invoices to shippers for utilizing the pipes. Suppliers manage the customer relationship management and billing activities with the end consumers. They buy gas from the Shippers based on their own demand forecast.

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Storage Operators procure gas from the producers and store it for selling the same when there is a demand for Gas. Market Operators facilitate the buying and selling of Gas between shippers/traders through Auctions (Energy Auctions). The market operator maintains anonymity of Shippers. OFGEM is the regulatory body for all the entities in the UK GAS industry. MRA (Meter Reading Agency) - These agencies take up the responsibility of collecting the Meter Readings on behalf of Transco. Currently MRAs interact directly with Transco, but in near future another entity - Meter Company (Meter Co.) will be introduced as a result of unbundling, which in turn would be interacting with all MRAs. MW (Meter Works) - This entity is likely to come into picture shortly. Transco may offload the responsibility of meter maintenance and related work to these entities. Emergency Works - Emergency requests are currently handled by Transco which may be offloaded to independent agencies in near future. These agencies would need to take care of emergency field services. Storage Operator and Shipper - Trading of Gas could happen between the Shippers and storage operators when the demand for the gas required by the shippers is in excess of what the producers can supply. Consumers are the household and business entities who are consuming the gas. 1.2 Interactions among Entities

The interactions described below are purely with respect to Gas business and do not include any other interactions that the entities might be doing to fulfill other needs (like MRO procurement).

Figure -2 - Interactions among entities

Producer

Shipper

Market Operators

Supplier

Transco

Storage Operators

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Consumer

MRA / MRW

Emergency Works

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Shipper procures gas from Producer.

Producer fulfils the requirement and invoices the shipper.

Shipper transfers the gas from producer's end to Transco

Storage operator buys from shipper. Mostly one-off buying depending on the market conditions.

Storage operator sells to a shipper.

Gas Trading (Buying and Selling of Gas) - Between the Market Operator and Shippers Between Shippers through the Market Operator.

Trading is based on auction mechanism - RFQ/RFP Anonymous auctions where the identities of traders is not revealed.

Invoicing done through Market Operator - Market operator raises invoice to the shipper who bought the gas and shipper who sold the gas raises invoice to the Market operator.

All information exchange is file based.

Market operators have variety of systems with them, some of them web based.

Capacity Auction (Nomination) by Transco- RFQ (9 Types) Contracts (Short/Medium/Long Term)

Capacity Trading among Shippers (For trading the capacity on Transco network) - RFQ based Auctions

Meter Related requests to Transco- New pipeline request ( From Supplier to Shipper to Transco) Meter installation request ( From Supplier to Shipper to Transco) Meter Servicing ( From Supplier to Shipper to Transco) Meter Reading Meter Removal request ( From Supplier to Shipper to Transco)

Transco invoices shippers for transmission rights.

Information exchange is file based

Transco Systems - Mainframe, C/S and web Based.

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Suppliers buy gas from Shippers.

Contractual buying (Amount, Price and Time fixed through contracts)

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2

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5

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CRM

Billing

Meter Reading sent to Transco from MRA (Likely interaction in future)

Installation information sent to MRA by Transco (Likely interaction in future)

Field Service Allocation (Likely interaction in future)

File transfer of all trade information from Market Operator to Transco

Transco buys and sells through market Operator for its own storage.

2 The B2Bi Needs of Gas Industry Successfully operating in today's networked, electronic economy mandates that companies be able to share information with trading partners and customers in real-time, preferably without manual intervention, whenever possible. Such real-time, system-to-system communication is realized by enabling disparate information systems to share data in the context of specific business processes, e.g., quote-to-order. Systems integration is the process of explicitly linking systems together to communicate and share information. A B2B integration is achieved when all business partners within a trading community can easily exchange information electronically, preferably without significant modifications to existing technology or security infrastructure, and in real-time over the internet. A comprehensive B2Bi solution must provide companies with integrated direct links to their trading partners, while also facilitate participation in an e-MarketPlace or a trading exchange. Now let us consider the relevance of B2Bi to UK gas market. The gas market in the UK is fragmented. There are a large number of relationships through which the everyday business of buying and selling must pass. The increase in competition and entry of new firms has also raised the complexity with the utilities now having a large number of different trading relationships across a range of platforms. By virtue of these multiple interactions which each of the player has with external entities, the gas industry today presents a unique opportunity to reap the benefits of B2B integration (B2Bi). Traders (All the entities operating in the gas industry - Producers, Shippers, Transco, Suppliers, Market Operators etc have been collectively referred as traders in this paper for simplicity) can move to the internet rather than using phone/fax or file based interactions. Additionally the transactions / deals happening in electronic formats over VAN can be shifted over to internet which can connect traders in a cost-effective manner. It also raises the possibility of creating a trading community / network using a platform independent communication environment which would enable traders to share information with each other in a common format regardless of technological sophistication. In specific terms the following are the potential areas where there is a need which can be fulfilled by a B2Bi solution -

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Buy-Side Buy-side applications and services are those that address how companies buy products and services. A Buy-Side solution is installed within the firewall of a buying organisation and helps in carrying out procurement activities. The buy-side solution when integrated with back-end systems (ERP, CRM or Legacy Applications) of the organisation and external applications (e-MarketPlace or Sell-Side applications) can enable seamless transfer of information within and across the boundary of the organisation. Some of the key areas that could be of interest to gas industry are - MRO Procurement- Buy-side e-procurement has received a great deal of response in

the MRO (Maintenance Repair and Operating) supplies and indirect goods area. Like all other companies, those in the gas industry can also automate and e-enable their procurement activities.

RFQ/RFP - A substantial amount of trading is done by issuing RFQs/RFPs. Big organisations can possibly run their own RFQ/RFP systems instead of using the public ones.

Contracts - As the supply and demand of gas is matched through contracts, the buy-side solution can also provide an effective mechanism to enable a paperless and internet based contract management process.

Payments - Online payment solution can manage the payment processing cycle.

e-MarketPlace / Trading Exchange

An e-MarketPlace or a Trading Exchange (Referred as hub here onwards) is a central platform that combines B2B technology along with market-specific or process specific expertise to facilitate trade. The hub can be owned by a third party (Public) or jointly by a trading community (Private). A hub can quite efficiently handle multiple forms of energy trading in the gas industry - Trading of energy where buyer and seller meet to agree on prices and exchange

contracts. This can be based on RFQ/RFP mechanism. Trading of energy where excess supply can be sold in the market - Forward Auctions. Energy hedge contracts

Sell-Side

Sell -side applications and services are those which help companies to sell their products and services online. These sell-side solutions when integrated with back-end systems (ERP, CRM or Legacy Applications) of the organisation and external applications (e-MarketPlace and Buy-Side applications) can enable seamless transfer of information within and across the boundary of the organisation. Some of the key interest areas of the gas industry, which can be enabled by sell-side applications include- Capacity Auctioning - Applies to Transco specifically. Trade fulfilment activities Electronic invoice presentment Payment Processing

Information Exchange A lot of information exchange needs to happen when two entities trade with each other. With multiplicity of trading relationship, this information exchange can become complex. The traditional

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way of information exchange like paper, fax or telephone can become cumbersome. Even EDI or file-based exchange suffers with drawbacks, like its inability to enable online information exchange. Moreover in a rapidly changing business scenario the need of an extensible framework becomes very important wherein a change in business practice can be easily accommodated. XML (eXtensible Markup Language) offers a key solution here. It not only overcomes the drawbacks of traditional approaches but also offers an extensible framework, which means users can add data tags regardless of whether the receiving user is prepared to handle the additional data. Considering the existence of complex trade relationships, entry of new firms with de-regulation and the amount of information exchange taking place (Not only among buyers and sellers but even others like Market Operator sending trade information to Transco, Transco sending meter information to MRA etc) in the gas industry, the importance of XML cannot be downplayed anymore. Like in other industries, it is the key solution for all data exchange problems of the gas industry. Apart from a solution like XML, industry standards (Like RosettaNet , ebXML etc) are key in streamlining data exchange as well as business processes. These standards enable exchange of XML based messages -

Using standard message structures

According to standard business process sequences

With clear semantics

According to mutually agreed Trading Partner Agreements The major UN backed XML standard ebXML from OASIS has substantial parts devoted to hi-tech products and these may finally produce real benefits. To quote from the gas industry itself- In the US the Gas industry follows the GISB (Gas Industry Standards Board) standards. Similar such standard need to be evolved in the UK (Can be based on the existing TRANSCO standards) which can be widely deployed.

3 Benefits of implementing B2Bi Solution

According to IDC, speed and flexibility to meet customer expectation, rather than low cost, are emerging as the leading competitive differentiators. Companies that exchange timely and accurate information across their extended enterprise of customers, suppliers and partners will enhance revenue generating opportunities, increase internal efficiencies and reduce overhead costs. This capability is achieved by linking internal applications as well as linking processes from the internal applications to those of the external parties by means of integration. A study by Benchmarking Partners, Inc. found that 90% of the companies surveyed said they benefited, either quantitatively or qualitatively, from B2B integration. The key advantages of implementing a B2Bi model are -

Reduced Errors- The elimination of manual errors, reduces costs and prevents delays (Reduced Cycle Time).

Improved customer satisfaction and support- Real-time links enable companies to respond fast to customer needs.

Improved co-ordination among traders

Improved order / contracts management

Reduced Inventory - Specifically in the case of MRO items.

Tighter logistics control- Automated, real-time views into the delivery and fulfilment links in supply chain enable users to find any problems and correct them in a timely fashion.

Better delivery of information required for planning and forecasting- With B2B integration, companies could check and collate information on a real-time basis, which improves planning, and forecasting.

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4 B2Bi Challenges Though the need and benefits of B2Bi look quite obvious given the current reality but at the same time it is a challenging problem. Significant complexities result because no system was originally designed to share information with other non-homogenous systems and until the internet there has been no common network over which users can share information. The challenge further increases as companies try to automate business processes spanning across firewalls. The challenges of effective B2Bi are many and as key requirements it must:

Leverage existing enterprise and business partner infrastructures

Integrate heterogeneous systems across firewalls

Provide authorisation and security across corporate firewalls

Support online as well as batch interfaces

Establish a communication and data exchange standard (Can be Transco Standards or others - e.g. GISB in the US market)

Guarantee delivery of messages

Manage change and ongoing evolution

Support XML-based technologies

Deliver scalability and performance Once a business community is fully integrated, an organisation's enterprise applications such as ERP, CRM and Legacy applications can interact seamlessly and securely with those of external business partners without cumbersome manual processes or significant changes to organisation's IT infrastructure

5 Wipro's B2Bi Solution

Wipro Technologies is a global provider of IT solutions for the enterprise and technology markets. Our solutions for the enterprise are focussed on 'e-enabling' the corporation. These solutions are in the areas of Electronic Commerce, Business Intelligence, ERP, CRM, SCM and Infrastructure Management. They are offered to specific industries like Finance, Telecom, Retail, Utilities, and Health Care. We offer our enterprise customers a 'time to application' advantage by implementing

e-business strategies efficiently and cost effectively. With over 400 person years of E-Business related experience and alliances with the industry majors, Wipro has a unique position in the B2B Integration Space. Wipro's B2Bi practice offers the following product/component based services.

Solution Based On B2B Integration WebMethods, Biztalk, Wipro Component

Framework

Web Services Microsoft .NET, Wipro Component Framework

Web Site Aggregation WebMethods, Wipro Component Framework

ASP Service Integration WebMethods, Wipro Component Framework

ASP Service Automation WebMethods, Wipro Component Framework

Business Process Automation Service

RosettaNet

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We continually build our expertise in these as well as emerging areas/products in the B2Bi space. To help our customers to efficiently overcome the challenges of B2Bi we offer the following services -

B2B Integration Architect and design services

B2B Integration Product evaluation and recommendation services

B2B Integration initiative assessment services

B2B Business Process Integration

System Integration using third party products and tools

B2B Integration Application Development Services based on ground up architecture solutions and platform technologies

B2B Integration Application Development based on Wipro's reusable component framework We have a well-equipped team of professionals with diverse experience, which makes us uniquely positioned to address our client's integration requirements. Our past experience and a continuous investment in knowledge upgrade help us add value to our customer. As a B2Bi group we have: Good understanding of B2Bi and EAI market completing various end to end projects with

clients in this market space. Dedicated team of business analysts continually exploring the developments taking place in

B2Bi and EAI industry. Qualified project teams to work on this assignment, with an appropriate mix of business

analysts, technical leads and project management experts. Trained and webMethods certified consultant/developers on webMethods B2B tools. Proven track record of successfully executing complex projects on schedule, backed by SEI-

CMM Level 5 credentials.

Our Alliances include -

Consulting and SI (System Integrator) alliance with webMethods

SI Partnership with Microsoft (MCSP), Vitria on the B2B Integration space

SI Partnership with i2 Technologies

SI Partnership with Ariba

SI partnership with NEON, FORTE and STC in EAI (Enterprise Application Integration) space