Why OT Organizations Experience High Operations and Maintenance Expenses & How to Reduce Them
Most OT organizations in the United States rely on aging, legacy infrastructure. For these systems to operate efficiently, and optimally navigate an increasingly remote work landscape, modernization with tools like industrial remote access has become a necessity. In this blog, we will examine how your organization can optimize efficiency by reducing hidden operations and maintenance costs, and how remote access can help to alleviate these expenses.
Why Are Operations & Maintenance Expenses High?
Most organizations in the United States spend a large portion of their operating revenue on employee labor costs, which represent part of operations and maintenance (O&M) expenses. In order to reduce overall O&M costs, let's unpack why labor costs are high in the first place.
At water utilities, for example, an operator may need to tend to a pump for 20 minutes or 2 hours—but no one knows exactly when this might happen. As a result, teams of operators are needed on-site 24/7 to resolve problems as soon as they occur.
The way to address on-site issues quickly, without carrying the costs of multiple 24/7 operators, is with industrial remote access. ICS remote access allows your operators to address problems instantly—without requiring them to be physically present. By leveraging remote employees to consolidate your workforce, organizations can reduce the number of operators needed on-site 24/7. This, of course, leads to a reduced spend on employee labor costs and lower operations and maintenance expenses.
The goal is not to eliminate 24/7 monitoring or presence entirely. Having a handful of operators on-site at all times may be a necessity for your organization. However, with industrial remote access, a group of 2-3 people can more effectively tackle the work of 7-10 people. In this case, you are simply getting more out of fewer full-time employees, and improving their quality of life.
Representative Example: Industrial remote access reduced needed full-time employee burn by 33% and allowed 50% of operating workforce to alternate shifts on-site and work from home.
How to Assess Your Operations and Maintenance Costs
An O&M efficiency ratio can help inform how much your operations and maintenance costs deduct from your operating revenue as a whole, and where your organization spends most of its operating revenue. The larger your O&M efficiency ratio, the more inefficient your organization, and the more strongly you might want to consider implementing an industrial remote access tool to help cut down on costs. Depending on how your organization measures operations and maintenance expenses, you might already calculate this ratio.
Here's how to calculate your O&M Efficiency Ratio:
Let's say your operating revenue totals $100,000, and your operations and maintenance expenses total $60,000.
The formula for calculating your O&M Efficiency Ratio is:
O&M Efficiency Ratio = Operations & Maintenance Expenses / Operating Revenue x 100
Let's plug the appropriate numbers in:
When collecting the appropriate numbers, you should determine how much employee labor costs factor into your operations and maintenance expenses. For the purposes of this example, let's say labor costs represent 67% of your O&M expenditures.
If you implement remote access and reduce your labor costs by 33%, for example, that translates to $13,333 of revenue saved, and reduces your O&M ratio by 13.3%. Your new O&M ratio would be calculated as:
Other Hidden Labor Costs to Look Out For
We already discussed how maintaining operators on-site 24/7 can raise your labor costs, but now let's look at how login time, vendor supervision, and travel time can contribute to hidden employee labor expenses as well.
If you already have a remote access system in place, then it might be worth evaluating your remote access tool's login time for both operators and 3rd party vendors. If your remote access tool takes between 10-15 minutes to log in, then you are wasting money on unnecessary labor costs due to inefficient logins. An efficient remote access tool should take less than 30 seconds to connect.
What are the potential costs of an inefficient login? If we distill the labor cost of an inefficient 12-minute login time, it comes out to $6,704* per team member per year. If there are 30 people on your team, this cost becomes $201,120 per year. By comparison, a 30-second login's yearly labor cost comes out to $279 per team member.
*Based on 4 daily logins at an hourly wage of $22.96/hr.
Vendor management can be a hassle. Not only do you have to pay a vendor to come on-site to perform their required job, but an operator is also forced to tag along and supervise during their time on-site. At the end of the day, you're paying twice what you should be paying—for the vendor's salary, and the operator's time spent supervising. Instead, the right ICS remote access tool can allow you to live stream and record user sessions, helping you to save money on labor costs while ensuring your vendor complies with your security needs.
If you don't already have a remote access tool in place, and you drive on-site to perform maintenance, your organization wastes money on travel time. Depending on how far away your employees live from the site they work at, travel time can cost you $8,380** per year per employee in just hourly wages. If you have 30 employees commuting to a site, travel time associated costs jump to $251,400.
** Based on an estimated 30 minute one-way travel time once per day at an hourly wage of $22.96/hr.
There are many reasons why OT organizations might take steps towards modernization. For most, reducing costs serves as the primary motivating factor. Take the time to assess your operations and maintenance costs, and determine how much you spend on labor. Make sure to look at how much your organization spends on hidden factors like login time, travel time, and vendor supervision. The results might surprise you, and you may find that remote access is the most cost-effective solution to lower all of these labor costs, and to protect and maximize the efficiency of your organization's legacy infrastructure. For more information on industrial remote access, please visit dispel.io/efficiency.
Dispel provides secure remote access designed for OT networks. Built on Moving Target Defense architecture, Dispel helps organizations enable OT remote access while staying aligned to regulatory frameworks and compliance standards. If you are looking to securely bring an OT network online, or harden existing Internet-accessible OT assets, schedule a demo at dispel.io/efficiency.