Moderated by the Principals of Five Point's Advisory Services Division
Commentary and opinion on the issues affecting technology & business
As we have written before, the North American CIS market is in the midst of robust activity. As business and regulatory changes continue to shape the utility to consumer relationship, utilities are finding that legacy CIS is often poorly suited to meet ongoing business needs. In our recently released CIS report, we note that 47 percent of utilities that responded to our comprehensive survey indicated that their legacy CIS will either need to be replaced (19%) to support the ongoing business requirements or will need major modification (28%). For those readers who may be interested in our full report, please find additional information in the article below. For those North American utilities looking to purchase a new CIS, another market participant has emerged that is worthy of consideration. MECOMS™ is a comprehensive CIS and MDM solution currently utilized by more than ninety utilities across the globe. With a strong foothold in the European market and recent success in India and the Asia Pacific market, MECOMS is in the process of expanding to serve the North American market. It is developed and supported by Ferranti Computer Systems, which has been serving the global utility industry for many decades. As Ferranti demonstrated during the recent CS Week conference, MECOMS is flexible, robust and certified for the Microsoft Dynamics AX platform. From a design and engineering perspective, it is built to help utilities lower their overall cost of service, while also providing comprehensive meter-to-cash functionality, as well as asset management and performance management capabilities. They have 13 certified partners across the globe to aid their customers with implementation and service. Avanade, which is a partnership between Accenture and Microsoft, is their certified partner in North America. With backing from Accenture and Microsoft, utilities that are considering MECOMS can feel comfortable that service before and after the sale will be of high quality and local to North America. Additionally, with a strong customer base, Ferranti continues to invest in the MECOMS product to provide new functionality through regular releases and upgrades. More information about MECOMS can be found here: www.mecoms.com
Drivers for utility CIS replacement have always been difficult to understand due to a confluence of complicated business issues. Determining the right time to upgrade or replace a CIS is one of the more challenging decisions utilities executives make. They take great care to make the best decision possible and, at times, that decision making process may take several years. Nonetheless, they are decisions that must be made. For some utilities those decisions occur early and easily and for others they occur later and after much consternation. But, if recent research is any indication, they are occurring in sizeable numbers. We recently completed a comprehensive industry survey for our upcoming annual CIS report. There are several important data points that help shed light on the CIS market and what is likely to occur over the next few years. First, we need to understand that 12 percent of respondents indicate that their CIS was installed more than 20 years ago and another 28 percent indicate that their CIS was installed more than 10 years ago. This leaves us with 40 percent of responding utilities using CIS systems that predate the Energy Policy Act of 2005, the Energy Independence and Security Act of 2007 and the American Recovery and Reinvestment Act of 2009. The impact of these laws, and others like them, continue to influence and shape the utility to consumer relationship in profound ways. For example, we see continued exploration of dynamic rate structures, distributed generation and energy efficiency programs, to name but a few influential drivers. On top of that, utilities are also recognizing the pressures associated with a societal movement towards near real-time engagement with customers through multiple channels and devices. Customers expect utilities to offer smart phone applications, provide proactive communication about outages, accept payment from multiple sources and programs and, generally speaking, to treat them like customers, not meters or "rate payers." In such a dynamic and changing environment, it is little wonder that legacy CIS is strained. Accordingly, 47 percent of responding utilities indicate that their CIS cannot be made to support future business needs without major modification (28 percent) or outright replacement (19 percent). Additionally, when shopping for a new CIS, utilities rank core functionality as the single most important factor, followed by price, technology platform and reputation of the vendor. Influence of executives at their utility ranks a distant fifth. When it comes to specific functionality, utilities are most interested in ease of integration with other applications (81 percent), the ability to support variable rate structures (81 percent) and ease of support for multi-channel, multi-device customer communications (74 percent). These are important consideration for CIS vendors who are looking to gain market share. Clearly, CIS decisions will be made based on the functionality offered by the system. Vendors who most clearly demonstrate capabilities around these points of functionality are likely to find favor. These data points, as well as others, have led many to believe that the robust CIS market activity is likely to continue for quite some time. Utilities who are unable to interact with customers in a manner consistent with regulatory and customer expectations will struggle and need to invest in more robust CIS capabilities. We see evidence of this today following major outage events, as well as lag time in supporting new regulatory mandates. Legacy systems simply are not up to the task. For those utilities that have not yet moved to more modern technology, the question is really "when" the 40 percent of utilities with an aged CIS will join the 60 percent of responding utilities that have already made that transition. In that same survey, 29 percent of responding utilities indicate that replacement will occur within the next three years, with the remainder indicating that it will occur in the next five years. If utilities follow replacement in a manner consistent with their survey responses, our industry will have largely completed a migration to modern CIS before the end of this decade. While that pales in comparison to the rapid movement in some industries, we need to recognize that the transition will have occurred within 13 years of the Energy Information and Security Act of 2007 and within 11 years of the ARRA ("smart grid") grants. Coincidentally, it will also be 11 years after Facebook reached 200 million users, which many regarded as an important tipping point in the development of social media as a driver of changing business to consumer relationships. Of course, that will not be the end. Time will march on and those with 10-year-old systems today will have 20-year-old systems a decade from now. Thankfully, prominent vendors are already working to address that issue through development of new deployment models, such as cloud-based solutions, as well as ever improving functionality and more efficient upgrade paths. Such future protections are some of the many benefits of pursing packaged software solutions from proactive and stable CIS vendors. Future CIS projects will be more about upgrades and less about major modifications or replacements.
Those who attended our summit last fall may recall the story I shared about a friend's son who encouraged him to use Facebook because "it's just like email, only people actually read it." Recently, I had a similar conversation with one of my daughters. I was attempting to help her navigate a newly (and poorly) designed website from a popular retail provider. She was not amused by the website's poor design and when I offered some suggestion on how she might be able to navigate, she teased in a good-natured way, "what do you know, you still use email." Her comment came from the frequent conversations we have about how her generation is using text messaging and social media to communicate. In one sentence, my daughter summed up the changing nature of customer communication that surrounds each generation. I remember being dismayed that my parents insisted on writing letters to friends and family with actual pen and paper long after email became available. Similarly, my daughters are confused by my continued use of email. Why write a longer note, when a text, a tweet or a wall posting will suffice? They simply do not check their email on a regular basis because it is of no use to them. And, just as I was frustrated many years ago by the businesses that did not accept email after it was mainstream, my daughters are frustrated that they can't have instant communication with their service providers, or if their websites and smart phone applications are poorly designed. There is no doubt that customer communication is changing in dramatic ways. In a recent survey, we asked utilities how they think their customers' communication preferences will change over the next three years. The results are telling. We found that utilities are expecting communication to migrate toward more instant forms of communication over the next three years, including gaming consoles. The volume of communication supported through the traditional phone is expected to decrease while the other channels increase. Utilities are predicting that smart phone applications will see the largest increase. It is important for our industry to invest in these new channels of communication. In addition to meeting customers' needs, they provide many opportunities for operational efficiencies related to call avoidance and call containment. The major vendors in the industry have been investing in these technologies and have some very impressive solutions. They have been dismayed at our industry's slow adoption rates (when compared to other service related industries), leading one to ask me recently, "Do utilities even care about customer service?" Utilities that have not yet begun this transition will be facing increasing time and service pressures. The millions of other people from my daughters' generation are in the process of becoming your utility customers. If you are expecting them to be satisfied with your call center, static website, inability to communicate in real time about outages, etc., you may want to reconsider your position. They will be expecting so much more from you. Here's hoping our industry will expect as much from ourselves.
Page 1 of 7
Five Point 200 Galleria Parkway Suite 1475 Atlanta, Georgia 30339(888) 830-4959 Toll Free
Five PointLevel 18Riverside Centre123 Eagle StreetBrisbaneQueensland 4000Australia+61 7 3103 3005
Five PointUnit 2309 Jollibee Plaza CondominiumF. Ortigas Road, Ortigas CenterPasig City 1605Philippines+632 656 2118 / +632 1254
© Copyright 2013Five Point Partners, LLCAll rights reserved.