Time to Trade in Your Customer Information System?
YOUR BELOVED CAR has taken you everywhere in style and made its way through driving rain, ice, searing heat and snow. But it's rundown now, seems ready to seize up and leave you stranded at any moment. The time has come to make a change. Many electric utilities feel the same way about their cherished customer information systems.
A Customer Information System (CIS) is the linchpin in utility operations. CIS applications started off as the means to track customer use of electric, water or gas. They featured a billing system and were largely geared to revenue recognition and collection. Over time, these systems evolved and embraced customer relationship management functions, workforce management and enterprise resource planning. With CRM, utilities tried to tighten the bond they had with their customers. With workforce management, utilities monitored the efficiency of their maintenance staff. And with enterprise resource planning, the enterprise managed its business processes.
But market and technology changes have left many CIS systems overwhelmed. In fact, only 12 percent of utilities are highly satisfied with their current CIS solutions, and many are especially frustrated by the difficulty in integrating their CIS with other utility applications, according to a survey from TMG Consulting. As a result, a growing number of energy suppliers are looking to at least upgrade and in many cases replace their systems.
While the "push and pull of new demands vs. cost and risk have resulted in a relatively flat market in recent years," global spending on utility CIS systems and analytics from 2014 to 2023 is expected to total nearly $37 billion, according to Navigant Research.
Living a Long Life
No one should be surprised that we've arrived at this point. Still, "the lifespan of a CIS is quite long," said William Devereaux, vice president of strategy and alliances at Oracle. "It is common for these systems to be in use for 20 years, and I know of three that have been operating for more than 40 years."
CIS entered the scene at a time when utilities operated in slow-moving, highly regulated markets with limited energy generation options.
As we all know, the Energy Policy Act of 2005, the Energy Independence and Security Act of 2007 and the American Recovery and Reinvestment Act of 2009 tried to push utilities away from traditional energy sources, such as coal, to renewables, with solar and wind taking on more important roles in energy generation.
The utility-customer relationship has been altered in profound ways, too. Historically, utilities viewed their customers primarily as captive ratepayers who were locked into a static meter-to-cash (M2C) scenario. The CIS tracked each customer's consumption of the delivered commodity over a given period, applied the appropriate rate to create bills, presented each customer with a bill, and enabled the utility to monitor payments and generate cash flow.
Custom Pricing Options Gain Traction
Today, smart grid technology and deregulation have rewritten that equation. Pricing is morphing from a one-size-fits-all model to rates customized for each consumer.
One of the many consequences of all that change is that utilities now need to support a wider array of payment options, including prepayment programs and those made online.
"Many of the current CIS systems were put into place in the mid-1990s," said James McClelland, senior global director of the Customer Value Office, Energy & Utilities at SAP Americas.
Many of today's concerns were simply not envisioned then. The Internet was just starting to take hold, so utilities had virtually no Web presence. Cellphones were large and bulky and were used only for voice communications. Social networking was unheard of, outside of perhaps a technology think tank or two.
Things = More Data Collection
Even more demands loom on the horizon. The volume of data utilities collect is swelling. The smart grid enables energy providers to gather usage data more often --- theoretically in real time. Next up, the Internet of Things (IoT) movement promises to expand the range of intelligent devices. Home heating systems, air conditioners and appliances are expected to feed usage information into home energy management solutions.
Customer expectations are rising. Consumers today expect every company with which they interact to provide prompt service, a great deal of flexibility and rapid problem resolution. They do not differentiate between services in regulated and unregulated markets.
The end result is that the existing systems simply cannot support these needs. "Utilities now face a perfect storm of new requirements for billing and CIS solutions," said Richelle Elberg, a principal research analyst with Navigant Research.
Digging Deep into Utility Pockets
But change is never easy, and it is extremely difficult with a CIS for many reasons, starting with the expense. "DTE Energy is spending $200 million to put in its new CIS," said Navigant Research's Elberg.
Given the huge numbers, making the business case can be difficult. First, selling has to take place inside the company, where management must be convinced that money spent on the system is a better option than expansion into renewables or creating new revenue streams, such as Home Energy Management (HEM).
In addition, most utilities have to take their case to local regulatory boards for approval.
Opposition can come from many sources, and the process is typically long and tedious rather than quick and easy. Utilities need to inform and engage customers about the need for the new system and its effect on service delivery.
Stricken by the Sword
The software is complex and expensive. The projects take a few and maybe even a handful of years to install. Power companies typically need a lot of help from third-party consultants to get the systems up and running. The software is flexible, which is a double-edged sword. A utility can set its scope too wide and not be able to deliver desired functionality on time and within budget. "Utilities can find themselves in a lot of trouble if they do not manage a CIS deployment well," said SAP's McClelland.
The new systems also change the way that employees work. Typically, the initial transition is difficult. Employees often feel lost and overwhelmed, and they may take their frustrations out on the new system. Companies need to invest a lot of money and time in training, according to McClelland. Utilities need to put effective courses in place and then create a culture in which employees are open to new ways of doing their work and are not set in their ways.
Even though the challenges are great, many utilities are taking them on. "Through the years, utilities have been adding capabilities to their CIS systems, but many now realize the time has simply come for them to put in a new system," said Oracle's Devereaux.
After all, there are only so many bolt-ons that will keep the old system running.