There’s an ebb and flow to the business and technology initiatives led by Whitney Kellett—and not just because she’s charged with IT and business transformation at one of the largest publicly traded water, wastewater, and natural gas providers in the country. The ebb-and-flow is simply an everyday reality for leaders in modern utilities that grow by mergers and acquisitions, have substantial resources committed to business transformation, and must continuously improve care for customers, natural resources, and the environment.
Kellett is the Senior Vice President of Business Transformation at Essential Utilities Inc., the Bryn Mawr, PA-based company with 3,200 employees serving 5.5 million customers in 10 states. She joined the company in 2016, four years before it became Essential in 2020, through acquiring Peoples Natural Gas by Aqua.
Earlier this year, Essential announced Kellett would lead a $143 million service improvement project across administration and operations. In 2023, she will add chief administrative officer duties to her plate. And she won 2022 Philadelphia CIO of the Year honors in the Enterprise category just last month.
In an ASUG interview following her participation at the 2022 ASUG Best Practices: SAP for Utilities conference, Kellett talked of progress, challenges, “heroics,” and lessons learned in Essential’s following SAP S/4HANA projects. She emphasized how Essential leverages peer conversations and that she will increasingly tap ASUG resources to help her keep connected to the utilities’ community and technology and innovation options.
This is an edited version of the entire conversation.
Question: What has been your organization's background and use of SAP technology to date?
Answer: The parent company is called Essential Utilities. And we have two primary subsidiaries. The water-wastewater business is under the brand Aqua, and our natural gas business is under the brand Peoples Natural Gas. In 2010, a private equity firm called SteelRiver purchased Peoples Natural Gas and assets from Dominion Gas, and, at that point, Peoples Natural Gas started an SAP journey. From 2010 to 2011, Peoples Natural Gas implemented SAP ECC across the gas business, which included financials, general ledger (GL), accounts receivable (AR), and accounts payable (AP). It included HR, integrations to link project construction costs, and project management, as well as integrations to a non-SAP work management system and GIS.
The gas business started on the journey and went live in 2011 and then made several acquisitions over the next couple of years to bring more customers onto the platform. In 2019, Peoples Gas upgraded to SAP S/4HANA. Peoples was the first North American utility to upgrade to S/4HANA, which was a big success. It was a year-long project and mostly a technical upgrade. We did not implement many functional changes; we focused on the technological architecture change with the upgrade.
In 2020, Essential was founded and the water and the gas businesses came together. In January 2022, we converted the water and wastewater businesses to the SAP S/4HANA platform for financials, plant maintenance, supply chain, HR, and BW. Now our whole company is running on SAP for financials. The next major project is to complete the SAP CR&B implementation for the water-wastewater side, and we will do that at a later date.
Q: What lessons learned from the first transition were applied with the upgrade and the adoption of the water business?
A: Peoples Gas implemented SAP in increments, meaning when they did the first implementation, there were 300,000 customers. With the next acquisition, that added another 150,000 customers, and then the next acquisition, another 250,000 customers. It's been an incremental journey.
We didn't have that luxury on the water-wastewater side. We had to go ‘big bang’ and bring our entire water-wastewater business onto SAP. We debated whether we could go state-by-state and take a phased-in approach. That introduced a lot of complexity in our financial reporting and some of our business processes to simultaneously have two different financial systems in place.
I think what we learned from the gas implementations is we spent a lot of time cleaning data before we cut over to SAP. We didn't want to put in bad data—bad data in, bad data out. We wanted to avoid that. That's something that Peoples Gas did.
We also spent a lot of time communicating and talking to our users about the change coming--preparing them. I don't think you can ever do enough on the change management side to get people ready for a big platform change.
Q: You're not the first person who's said that.
A: Sometimes, I wish we'd done more because change management and the human element are vital to the project’s success. If you don’t get it right, it doesn’t matter what the system can do, how automated it is, and how spectacular the analytics are. If the human component using the tools to run the business isn’t ready and comfortable, it just won’t work.
We also learned from our gas implementation the importance of having strong technical partners on the team. We had a competitive RFP process and looked at outside technical integrators who had experience putting large utilities on SAP, especially multi-utilities, gas and water, gas and electric, electric and water, and so on.
We did a lot of reference checks. We talked to many different customers of these technical integrators to understand which projects had gone well, what they'd done well, what they hadn't done well, and what we could learn. Peoples Gas used the same approach of doing a competitive RFP and scoring and doing reference checks to find the right project partner. Some of the people who worked on the original Peoples Gas project, some of the technical resources that worked on that project back in 2010 and 2011, were subject matter experts for us in 2021 when we did our implementation.
Q: Who ended up being the technical partner integrator?
A: We partnered with Infosys and SAP to do the technical work and with Grant Thornton to do the organizational change management work.
Q: As you look back, can you articulate the key business drivers for change specific to the most recent S/4HANA implementation for the water and wastewater and the technology drivers?
A: Before SAP, our business users were using multiple, best-of-breed technology platforms and had business processes that were very dependent on the systems talking to each other. They were required to work with a couple of different applications and then have reporting tools to bring data together across those applications. It was a little bit of a spider web. We had a financial system, a separate customer system, a separate plant maintenance system, and a separate asset accounting system. They all had integrations. But if the business wanted to look at a holistic view, they had to find the data in different places from the customer's vantage point or the asset's vantage point.
From a business standpoint, our data is naturally integrated by centralizing on SAP. It's much easier to get at that cross-functional data to do the analytics we were looking to do.
Another example is Fiori's capabilities and ability to develop Fiori screens that sit on top of SAP to deliver the user experience we want. With our older applications, we had limited ability working with the front end. So, as we bring new hires into the organization, they look at some of our older applications and say, "Oh, this is cumbersome to use. It's a lot of clicks. The user interface is old. It's not intuitive."
We've done some development in Fiori now that we're on SAP. Instead of using multiple native SAP screens, we’ve built one to two core screens with all the data our users need to do their jobs. It’s visually appealing and easy to get. It helps reduce those clicks. It helps reduce the new hire training process and onboarding process.
From a technology perspective, we did have some older applications that, while still supported, were not going to have product investment from the manufacturer. Those apps were going to be sunset at some point, and certainly, SAP has a long, healthy, active product roadmap.
That technical debt was a concern for us. We wanted to get out of that situation where we had some applications requiring a unique skill set. It took a lot of work to find technologists who knew the application, the code, the middleware, the database structures, and how that application worked. SAP skills are a premium, but many professionals know SAP and plenty work in our industry. Having a much more extensive inventory of professionals that we could tap into, to join our team or consult with us, to share best practices, to help us continuously improve was certainly another driver to go to SAP.
Q: Did you lead an effort to write a business case for the extension of S/4HANA?
A: We did. We wrote the business case from the context of bringing together our two companies. We had two of everything when we closed on the acquisition in 2020. We had two financial systems, two HR systems, two customer systems, and so on. To build the business case, IT and business leaders embarked on a nine-month effort to review and rationalize every enterprise system, service, and capability. We picked the best of the best across our footprint and wrote a business case to embark on a four-year technology roadmap.
SAP was undoubtedly a major part of that. But we had to decide what to do with email, phone systems, remote desktop, HR, and so on. The business case was not singularly focused on SAP and whether to go to SAP or not. It was more about: we have all these systems; which ones do we want to use going forward? We then put together the reasoning and the rationale for making those choices and all the value it would drive from a business and technology standpoint and presented it to our board.
Q: What types of value drivers or value outcomes were envisioned in that business case?
A: There were quantitative and qualitative drivers. For some of the quantitative drivers, we looked very hard at our capital plans and investments in technology. As a utility, both companies had five-year capital plans for how they would invest in new platforms. We looked at those plans and we were able to cut out a slew of projects that initiatives in our new roadmap would replace.
Also, quantitatively, we looked at our operating costs, especially our enterprise contracts for technology services. We could say, "If we consolidate on this platform, we're going to be able to cut our overall operating expense in this area by X percent," or hard dollar savings. Those metrics were in our business case.
From a qualitative standpoint, we talked about how it's a better experience for our employees if there's one help desk to call instead of two, and it's more efficient to have one backup system than having two. So, the speed of response from IT in answering questions from our employees would be better. With common platforms, our field services employees and call center representatives can share best practices across water and gas. Our strategic platforms also allowed us to create standard reporting for the whole company instead of water-specific or gas-specific reporting.
We talked about the efficiencies you gain from having only one set of tools and how you can cross-train. Somebody on the gas side could do the job on the water side because they're using the same tools and processes, or you could merge departments, which is what we did for a lot of functional areas. We brought them together and said, "Now it's one team, and here are the common tools we're using." So cross-training is much easier to do because everybody's using the same platforms. Those are some of the things that we identified in our business case.
Q: In the second transition or tracking back to the first, were there particular challenges—technical challenges, integration challenges, change management challenges? And how were they overcome?
A: I'll speak to our most recent project because it's the freshest and certainly the largest in magnitude. We got the approval for our business case to begin our journey in December 2019. We commenced the journey in January 2020, and COVID hit two months later. We had to decide on whether we would continue with our project and our roadmap as aggressively as we had planned or whether we would slow things down or even pause. We made the strategic decision that we could do it virtually. We did not slow down. We did not stop. We pressed on during COVID and did every workshop, design discussion, and sign-off remotely. I would say everybody involved performed heroics to do their job. But I would be lying if I said that it was easy to run the project online.
There were a lot of discussions we wish we could have had in-person, where we could put intelligent people in a room and talk something through instead of navigating the mute button and the disconnections and constant Zoom calls when you're not getting the best of everybody. There was an overhang on the project; we all worked remotely.
We could come back in person as we got into testing and then into training and deployment, which was great. But it took a while to make decisions, finalize designs, work through issues, and work through unexpected challenges. That was harder to do remotely.
When you have a project of this size, the resourcing of the project is paramount. And we are firm believers now that when you need business expertise, you go and find the people in your business that you want to work on the project, and you pull them out of the business and put them on the project. People can only successfully do one job.
Q: People who are 100% on the project?
A: That is our preferred approach. Time and again, I come back in my career when we can pull the people we need and put them in a room and say, "You're the project team. Go figure it out.” You backfill and allow the business to continue running day-to-day operations, and there's communication between the two. It is hard to share resources between project work and production support in any discipline. It takes a lot of work to ask the human mind to move between those two roles quickly and effectively.
Q: Anything else in terms of particular challenges?
A: As I shared earlier, change management is hugely important. When people have been working with tools, processes, and policies for 15 to 20 years, it's just habit for them. Breaking that and asking them to do it a different way is entirely feasible, but you must understand the psychology of each person and figure out how best to get them through that transition. One size doesn't fit all. As much as we'd like to think it can, it doesn't.
This is not necessarily a generational thing. We've had expert power users who are in the later stages of their careers, and we've had power users who are in the entry stage of their careers. We've had skittish users in their careers' early and late stages. I wouldn't draw a generational divide or stereotype there. Each user has a threshold for how they manage change. It’s paramount to focus on that, understand it, and plan the training and communication, and readiness around those groups of people.
Q: Looking at the hallmark results or outcomes, so far, what is top of mind?
A: We're not even a year into our journey with SAP as our system of record, and we are looking forward to taking advantage of a lot of automation and additional workflow. I would say we've built the foundation of the house, which is very solid. Now we are inside the house, using the kitchen and living spaces, and learning and improving daily. We must keep our expectations in check and keep our perspective that the way we’re using SAP right now is a big step forward, and we'll continue to build on that.
We haven’t captured all the benefits that will come with it. We're on an industry-leading ERP platform that hundreds of other utilities use and have a long runway of capabilities to use. I love that there are providers out there, premium platinum providers, that integrate well, so there's a lot of extended functionality that we can leverage. I love that there are providers out there, premium platinum providers, that integrate well, so there's a lot of extended functionality that we can leverage. We're on our journey, and I think a lot of value is coming. We're taking the foundational steps, and there's much more to come.
Q: What's at the top of the list for 2023 in terms of improvements and automation?
A: One area of focus will be on accounts payable and vendor management, and we'd like to get our vendors much more automated. We want them to use a portal and submit invoices to us through that, allowing for some automation and workflow so that our accounts payable group is working more than the average transactional volume.
We'll continue to integrate other applications. We're on version 1809 of HANA and need to upgrade to version 21 or 22. I think 22 just came out, so we’ve got to look at that, but we will need to do an in-place HANA upgrade over the next year.
Q: What resources have you used across the industry in addition to your partners? Have you contacted peers? Do you have a kitchen cabinet of advisors?
A: I frequently network with other companies, whether water and wastewater companies or broader utility companies that use SAP. I have called many global CIOs and spoken with them about their SAP journey and how far along they are. I've called on some and said, "I know you use SAP and system X. We have questions about that integration. Can we talk?" We've got the technical teams on the phone to talk through it. I think we've got a healthy dialogue going. Our finance, CFO, chief accounting officer, and controllers are in touch with peers at other utilities who use SAP to talk about reporting, consolidations, month-end close, or accounts payable to share and gain insights. Certainly, at the SAP for Utilities [conference], we spent a lot of time getting contacts and talking with other companies about their usage. I think we can learn from them, and they can learn from us.
Q: There were comments at the conference that the utilities' industry culture is one of community and not necessarily one of competition. Has that been your experience?
A: I would say yes. Utilities, by their nature, are a monopoly. Our customers only have a choice, unless they're really unhappy and want to sell their home and move or switch apartments. We have a different relationship with our customers. Therefore, the concept of competition, the way you might see it in retail, manufacturing, or consumer goods, is entirely different. I know I can pick up the phone and call any CIO at any utility and have a conversation or at least start the dialogue and have a conversation. I've been on the receiving end of many calls and am happy to share information. We are a community geared towards helping each other. Every conversation leads to at least one, if not multiple, learning points, which then lead to additional discussion and more learning. I want us all to be successful. We've invested a lot in these platforms, and our businesses can't run without them. Cooperation, partnership, and willingness to share are differentiators to making working in the utility space attractive.
Q: The ASUG mission is to help our members and customers get the best value from their investments in SAP technology. How are we doing that for you?
A: We're at the beginning of our journey with ASUG. At least, I am, having come into SAP only in the last two years. I don't have a lot of exposure and experience with ASUG yet. I'm looking forward to building that, at least for me personally.
I had a chance to talk with a number of members and a number of folks from SAP in San Diego. One of the things we were kicking around was a new feature in the innovation hall. At the conference in the innovation hall, many SAP partner vendors were there. I offered that it would be extremely valuable for part of the innovation hall to be dedicated to utility representatives and have utilities set up with tables with experts from the company. You could even have displays that say, "Hey, we just completed our HANA journey. Come talk to us," or "Hey, we just implemented BPC, come talk to us if you're doing that." There's so much power in the membership, talking to each other and exchanging ideas, but finding those people with the current layout is challenging. We were kicking that around, and I'd like that idea to get some legs and potentially be incorporated at SAP for Utilities next year.