Key Trends in

Information Technology
in the Engineering &
Construction Industry

A Knowledge-Driven Consulting
White Paper
2005 Hitachi Consulting Corporation

Contents
Introduction.................................................................................3
Understanding the Customer to Improve Service .......................4
Centralization of Key Business Processes .................................5
Globalization: Managing Multiple Markets ..................................5
Regulatory Compliance ..............................................................6
Conclusion..................................................................................7
About Hitachi Consulting ............................................................8
About Hitachi ..............................................................................8

Introduction
Progressive Engineering and Construction (E&C) companies are growing
rapidly - organically and through acquisition - domestically and in global markets
as well. Services offered by the industry are expanding, requiring E&C providers
to assume broader and often permanent forms of risk for project success &
performance. But amidst this evolution, one thing remains unchanged regardless of the lines of service offered, and the quality of the end product,
bottom line performance on a project-by-project basis is the single most
significant measure. As a result, effectively managing an E&C company today
requires standardized business processes and technology systems which are
integrated and support all core business processes. These solutions will allow
E&C firms to better manage projects and forecast profitability, better serve their
clients and enable strategies to differentiate themselves from their many
competitors.
Today, E&C firms must manage and understand the entire project lifecycle. To
be competitive, they need to know which clients and projects are most
worthwhile and their real cost basis. They must control project performance and
scope, provide accurate and consistent forecasts, hold suppliers and
subcontractors accountable, select the best people, maintain the best equipment
band identify and mitigate risk. All this must be done in compliance with
requirements from the sureties, insurance carriers, banks and in accordance with
the more stringent legislative requirements recently passed into law.
At Hitachi Consulting we have worked together with many E&C clients, helping
companies respond to their challenges and move ahead of their competition
through a combination of process and technology improvements. This review of
Key Trends in Information Technology in the Engineering & Construction
Industry reflects the results of our services to companies like yours. A team of
our most experienced practitioners debated these issues and organized this
discussion to provide you with a blueprint of the major issues impacting your
organization. In many cases, the core of the technology solution has been
Oracle Applications, a comprehensive, integrated software package and we
reference those functional solutions in the discussion below.

Key Trends in the E&C industry

Facility owners are in the drivers seat. Todays owners are increasingly
interested in a single point of responsibility for their projects. From concept to
completion, owners need a higher degree of certainty, in not only project cost
and schedule, but also financial and operational performance of the asset
through the entire lifecycle. This shift is driving attention to the following:
Higher degree of service to the customer As competition intensifies, E&C
firms will need to provide better all-around service to their clients. They need a
central store of client information that allows them to track project pipeline,
project history, project financial performance, customer service information,
backlog and sales forecasts.
Expanding lines of service Site selection, assistance with financing, lifecycle
costing, market studies, asset performance and guarantees among others
provide customer value and increased competitiveness.
Convergence of the market Larger engineering firms are taking on at-risk
construction contracts. Contractors are buying Engineering firms to gain more
control of the projects and differentiate themselves in the marketplace.
Collaboration and shared service centers Firms are looking to collaborate
with all project parties for central accountability. Many would like to leverage the
mass of the entire company with shared service centers (HR/Payroll and
Procurement for example). There is also a trend to roll out company standards
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while maintaining a certain degree of flexibility between divisions and locations.

Centralized control of processes deployed to decentralized operations enables
project success.
Based on our recent work with 20 E&C companies we have combined our
industry experience and knowledge to create best practices targeted to these
four key areas of your business. In numerous cases Oracle Applications
provided technology solutions to solve many of the problems facing your
company today.

Understanding the Customer to Improve Service

Access to Information to Support a 360 View
Customer expectations continue to rise as the level of service in all industries
continues to improve. As technology provides the capability to immediately
provide information on bank accounts and package shipments, for instance,
expectations for similar levels of service in the E&C industry are set. Accurate
information on project history, status, and financial performance, as well as
customer history and projected business must be readily available and
accessible to support these expectations and provide a competitive edge.
This level of service requires real-time access to reliable (one source of truth)
and complete (360 degree view) customer data. Today, most large and global
E&C firms rely on compiling, cleansing and consolidating customer data from
disparate point solutions, most having different customer data structures. This is
typically addressed through one of these conventional solutions:
1)
2)

Synchronize all source systems with one another leveraging Enterprise

Application Implementation (EAI) tools and methodologies, or,
Implement and leverage data warehouse solutions by extracting,
transforming and loading data (ETL) from different source systems into a
new repository system

These methods can deliver effective solutions, but implementation of this

approach is typically time-consuming and expensive and information produced in
not generally real-time information. Additionally, enhancements to any of the
supporting systems may require extensive modifications to the ETL process,
creating ongoing maintenance issues.
Evolving integrated enterprise solutions are providing capabilities to improve the
real-time access to this information. Oracles Customer Data Hub provides a
unique and powerful alternative a comprehensive and flexible data architecture
and tool set to successfully leverage and maintain the customer data. This
solution provides:
1)

2)
3)
4)

Flexible customer data model Trading Community Architecture (TCA):

TCA is the blueprint or logical heart of the Oracle Customer Data Hub
where trading relationships are designed and defined for a companys
business partners. The TCA design has departed from the traditional
notion of independent customer and supplier models because they do not
reflect the complexities of todays trading communities. For example, if a
company is both your customer and your supplier, most ERP and CRM
applications would store two separate representations of that company
with no link between them.
360 view of customer data Oracle Customers Online (OCO):
Customers Online provides a set of predefined and comprehensive views
of the TCA data.
Maintain customer data quality and integrity: Customers Online also
provides set of comprehensive search and merge routines designed to
enable companies to cleanse their potential duplicate data.
Integration with external applications OCO provides an infrastructure for
loading data from external sources. In particular Dunn & Bradstreet data is
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directly loadable into TCA. Moreover, Oracle 10g Application Server

provides the architecture and infrastructure to share a common view of
the TCA data to other applications in the enterprise if needed.
The availability of all information associated with customers, from organization
structures and contact details to project and financial information, provides E&C
companies the ability to provide a level of service to their customers not
previously available and the information to more effectively sell and deliver
projects to those customers.

Centralization of Key Business Processes

The Importance of Streamlined Shared Services
Over the past few years, companies have been implementing integrated webbased systems and process solutions to seamlessly connect and consolidate
their global internal operations. The biggest driver for this change is an
increasingly competitive environment and shrinking profit margins. This effort to
focus business units on core competencies and away from non-revenue
generating units has led major companies to look more closely at the shared
services business model.
This new, emerging shared services model is different from its predecessor in
one very important area - it is an autonomous operation and thus accountable to
the rest of the organization. This imposed accountability has improved the
performance and reliability of such operations.
Oracles march into a more streamlined shared services environment is well
under way. By using its existing multiple organization (multi-org) architecture,
Oracle allows users to process and report on data that resides in an unlimited
number of operating/business units from a single user sign-on. These new and
more flexible controls will provide shared services users more flexibility and
efficiency and thus the ability to better support a global organization.
In the absence of a shared services center environment, and as companies
develop more complex structures, security becomes more important. Some
business units will require complete control and security over their data while
others might not. Oracles multi-org architecture is flexible enough to handle
both types of requirements. It secures data based on the operating/business unit
associated with a responsibility (a set of transaction menus) all on a single,
company-wide database. This allows business units to operate autonomously
while continuing to share common unsecured data.

Globalization: Managing Multiple Markets

Standardize Your Infrastructure Base Design
Some firms have expanded internationally to support the needs of their global
clients. As large companies continue to acquire complementary service
offerings, the ability to work through geographic borders, time differences and
local/statutory regulations is becoming a competitive advantage.
Consequently, the ability of an organizations infrastructure to support growth
through acquisition is receiving much more attention than it has previously.
Recent results demonstrate that Oracles multi-org architecture, coupled with
robust multi-currency functionality, is a proven solution for organizations
supporting growth through M&A, as well as internal expansion. Oracles
architecture also facilitates consolidation of project and financial data without the
need for a third party product.
If your organization is attempting to increase its global reach, our best practices
have shown that you should standardize your infrastructures base design as
much as possible. By developing a Global Design that meets most (but not
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necessarily all) of a global organizations business requirements, companies are

able to stay away from costly customizations. The multi-org architecture then
allows minor deviation in design to support very specific local/statutory
requirements - essential in broadening a companys global footprint.
As an organization expands its global reach, Oracle provides robust functionality
for the leverage of resources around the globe. The inherent functionality and
integration between core modules (i.e. projects, procurement, payables,
equipment, etc.) is extended with self-service portal applications, (e.g.,
iProcurement and iExpense). This combination allows an organizations
enterprise application greater flexibility in delivering key business processes.
For instance, resources from all over the globe can charge time and generate
requisitions and expense reports for a single project. Oracles native reporting
capability allows for operational reporting from the module sub ledger and
financial reporting from the general ledger.
With proper planning and design, Oracles architecture (multi-org) allows
organizations to tailor their application to meet global reporting requirements.
Through the use of organizations and associated hierarchies, Oracles base
functionality will meet even the most complicated organizational hierarchy
requirements. The correct definition of What is an organization? and How will
these organizations impact our financial transactions? are crucial questions
global organizations must assess and design to address.
Another challenge in the ever-changing landscape of global operations is the
process of organization change or restructuring. Oracles functionality provides
for changes in a companys organizational structure, although it is important to
note that organizational changes can have far reaching effects in operational and
financial reporting and must be managed accordingly.
Best practices dictate that global organizations should call for an organizational
freeze during the original design effort. This allows for the initial design to be
adequately tested before deployment. Any subsequent reorganization needs to
be coordinated and requires careful planning and testing prior to implementation
in a production system.

Regulatory Compliance
Ensure Accuracy - Consolidate Disparate Systems
Companies across industries today are striving to align critical business
objectives with evolving governmental regulations. From an operations
perspective, E&C companies face increasing pressure in ensuring regulatory
compliance with multiple sources. Under particular scrutiny is the proper
management and reporting of revenue recognition.
Those organizations that contract with U.S. governmental agencies are subject
to strict regulatory requirements (e.g., DCAA overhead allocation) and must
ensure that their enterprise application solution has been designed appropriately.
With adequate up front analysis and design, Oracles out of the box Project
Accounting module provides E&C organizations with robust functionality to
enable regulatory compliance. Oracle also provides extensions in an effort to
help organizations meet more complex business requirements. Extensions are
add-ons to the standard product and are supported during future Oracle
upgrades. Extensions can be a much more palatable alternative to costly and
risky customizations to the software.
Revenue Recognition is typically difficult to account for correctly and generally
differs based on the project/contract type e.g. time and materials vs. fixed fee.
Also, E&C firms are often required to report project financial information based
on accurate revenue recognition methods to interested third parties e.g. banks
and surety organizations. The Oracle software is flexible such that it can support
multiple revenue recognition rules based on different contract types.
6

Organizations which engage in construction-type projects typically have complex

requirements pertaining to time, entry and payroll. These requirements are
typically mandated by labor union regulations. Oracles native integration
between the Project Accounting module, Oracle Payroll and the Oracle Time and
Labor system provides a comprehensive solution capable of meeting these
requirements.
US-based global companies are under increased scrutiny in the preparation of
accurate financial reporting and full disclosure of internal controls and business
processes. The Sarbanes-Oxley act, which was signed into law in July 2002, is
the driving force behind this change in the business environment and
dramatically impacts company governance and reporting obligations.
Most notably, Section 404 of the act titled: Management Assessment of Internal
Controls, requires that a complete assessment of the effectiveness of an
organizations internal control process be documented and signed by executive
level management.
Large companies are more and more inclined to shed the patchwork of
applications that collectively make up their legacy system and move towards a
more integrated solution. An ancillary benefit to the consolidation of disparate
systems is to develop business processes that are in compliance with the
Sarbanes-Oxley act. Oracles Internal Controls Manager module provides the
functionality necessary for organizations to become compliant and maintain
compliance into the future. This new addition to the Oracle eBusiness suite of
modules rounds out the offering to provide enhanced visibility, control, and
efficiencies through a configurable, centralized enterprise system that delivers:

Reduced time to close your books

Detailed visibility into operational and financial data
Compliance with international and domestic accounting standards
Support for multiple currencies and languages
Faster access to vital information that could alert you to errors
Consistent enforcement of policies and business practices. (2)

If the General Ledger module is the heart of the Oracle eBusiness suite, the
Enterprise Project Management (EPM) system is the brain for the E&C
industry. It is in the EPM system that the key project management requirements
come to life. Thorough foresight and analysis during the design phase of
implementation must be reinforced with rigorous configuration and testing
methodologies. It is critically important that all components of an implementation
team (e.g., the Finance team and Projects team) work together to develop an
integrated and stable solution. After Go-Live, ongoing maintenance, tempered
by adequate IT governance, is crucial to ensure the stability of the application.

Conclusion
As Engineering and Construction companies broaden their services with
expanded capabilities, extend their reach into new markets, or merely compete
in their existing environment, market forces are demanding improved
performance. Increasing customer expectations, growing competition, and more
rigid regulatory requirements are driving the need for better business processes
and technology solutions to improve project performance, both financially and
operationally. These forces, and how companies and their management
respond to them, represent critical areas of success or potential failure for many
E&C companies today. Getting it right in these important areas requires skills in
emerging technologies, experience in industry processes, and a management
team dedicated to achieving a competitive edge.

About Hitachi Consulting

Hitachi Consulting is Hitachi, Ltd.s (NYSE: HIT) global business and IT
consulting company. We serve Fortune 2000 companies across many industries
across the United States. We work with you to understand your needs and to
enable and implement key business strategies. We deliver practical solutions to
generate demand, ensure supply and help you manage your enterprise
effectively. Our commitment to delivering measurable results is unparalleled, as
is our dedication to transferring knowledge.
To find out more about how Hitachi Consulting can inspire your next success,
please call 1.877.664.0010 or visit us at www.hitachiconsulting.com
About Hitachi
Hitachi, Ltd. (NYSE: HIT), headquartered in Tokyo, Japan, is a leading global
electronics company, with approximately 326,000 employees worldwide. Fiscal
2003 (ended March 31, 2004) consolidated sales totaled 8,632.4 billion yen
($81.4 billion). The company offers a wide range of systems, products and
services in market sectors including information systems, electronic devices,
power and industrial systems, consumer products, materials and financial
services. For more information on Hitachi, please visit the company's Web site at
http://www.hitachi.com.
###
2005 Hitachi Consulting Corporation. All rights reserved. "Inspiring your next success",
"Knowledge-Driven Consulting" and "Information Velocity" are registered service marks of
Hitachi Consulting Corporation. Printed in USA.