Utility Business Models

Selling to the 3 major types of Utilities.

Say you are a software person, and you want to sell you software to Munis, Coops and IOUs. What do you need to do to get a reasonable reception.

Let’s start with Cooperatives, highly focused on cost. First you want to Check the catalog of National Information Solutions Cooperative (NISC). If your solution is not in the catalog and no competitor is in the catalog, then you may have an opportunity, but it takes a two-pronged sales approach, several cooperatives need to want you solution and NISC needs to be approached about providing the service to member cooperatives. This can be a complex dance, surveys of members, and potential RFPs can happen at any stage as members get involved. The more support you have up front the better your chances are. Not all cooperatives use NISC, and some buy their own in-house solutions. Remember, cooperatives want to lowest long-term price. Figure out how to price it so that it works to that principle.

Now Municipals, Muni’s may outsource a big part of IT to a cloud service provider, or to another part of the municipality, or other parts of the local government may outsource to the Muni. Figuring out who is the buyer can be an interesting dance, as can figuring out what applications they have. Here is where the dance gets complex. Do they want to own or rent the applications, buy by the transaction or inhouse, or out of house or as a pure SaaS model? What they are not interested in is a capitalization model. What they will want is the lowest cost per transaction they can get (and the lowest overall annual cost, that is easy to build a budget around). Many Munis are small, and so the upside revenue is limited in these small organizations, which may only have a single user. The good news is staff tends to be career employees, the bad news is when they leave, all that knowledge walks out the door, as does any loyalty to you.

IOUs, mostly larger utilities, that have hundreds of thousands to millions of customers, purchasing cycles are 12-48 months of back and forth. Everyone will have some unique requirements, and eventually there will be an RFP that will require at least 3 valid bids to enable procurement. Because of the way regulatory accounting works, the IOU will want to buy the software, and hopefully bundle customization, installation, data migration, and annual maintenance into one capital project. O&M for a SaaS model or a cloud model is right off the table. The IOU will want to reach initial operating capability within 6 to 9 months after the contract is signed, so the software is used and useful.

If you try to find a sale model that will work for all three, you will likely fail at all three. Many medium and larger software companies have 3 different marketing teams to handle the 3 different types of utilities.

Hardware (transformers, etc. ) is different. Since reads have dropped over the series, I will stop here. 😊

Utility Business Models - Part #12