The decision to upgrade or replace a utility’s core billing and customer care system is never one taken lightly. But after a decade of amassing multiple applications for different customer segments or geographical markets, energy retailers and network companies have found themselves constantly battling to stay responsive to changing market conditions. Customised interfaces and heavily modified code can make migration to new technology paths difficult and as a consequence, growth is impeded and levels of customer service deteriorated.

Inevitably some energy utilities have turned to ERP providers, drawn by the perceived benefits of integrating not only their billing and customer facing applications, but moving all parts of their business onto one fully integrated system.

However, not all energy or water utility companies require, or are ready to handle such large scale business transformation projects. Advances in interoperability standards have further clouded the allure of single vendor ERP systems and paved the way for the rapid introduction of more flexible, best of breed alternatives.

The global economic environment has brought matters to a head. With capital budget purse strings tightly drawn, CIOs have to fight hard for any new IT expenditure. System selection decisions need to now focus on the ROI that any such investment will yield.

There are two fundamental differences between ERP solutions and best of breed applications that need to be considered by utilities reviewing their systems. The first is the way in which each is configured and implemented, and the second is the actual service delivery and support model. Trade-offs must therefore be carefully weighed between the benefits likely to be gained from each approach, with any risk to the business and total overall cost of ownership.

MANAGING BUSINESS RISK

There is no doubt that enterprise wide application integration offers greater utility end-to-end process visibility and simplifies data flow between business functions, removing data silos and many manual procedures.

However such integration benefits can be overwhelmed by the rigid processes inherent in ERP solutions, many of which have foundations in other industries or they have been stitched together as a result of mergers and acquisitions. As a result the complexity and sheer scale of mapping every business requirement, re-engineering every process and the subsequent levels of testing needed should not be underestimated.

Best of breed solutions, by their nature, instead tend to integrate the data and streamline the processes within a business function, such as energy or water retail, and use open interfaces based on SOA to simplify data interchange with other systems within and outside of the business.  Designed specifically for a market segment, their inherent business processes are already aligned to the specific sector’s proven practice and tested for local market conditions, simplifying any gap analysis and configuration required.

“CAN I STILL MANAGE CUSTOMERS ON MY OWN TERMS?”

Despite the shift to more efficient procedures, utility companies should still be able to manage their customers on their own terms. Look at how the unique or competitive characteristics you have built up over the years will be retained, as well as how easily you can position yourself for market leadership in the future.

Indeed, new initiatives are coming at energy and water retailers and distributors so thick and fast that unless their billing system is flexible enough, they will struggle to exploit the potential of Advanced Metering (AMI) and Smart Grids.

So, when evaluating new solutions don’t just look at current requirements but consider the implications of changing market and regulatory forces at the micro level. 

• How deep does the relationship with your customer need to go?
• How agile will your new billing and CRM platform be at introducing multiple, highly granular pricing and supply programs?
• Can it be quickly configured to cope with new front end applications, evolving in-home communication standards and completely new processes, or will the budget and resources required to shift from ‘standard’ procedures thwart business growth plans?

MANAGING DELIVERY RISK – DO YOU REALLY NEED SYSTEM INTEGRATORS?

The other fundamental difference between ERP and best of breed software offerings is in the service delivery model.  Best of Breed vendors often prefer to work directly in partnership with their customers and as such, have a lot at stake in ensuring a successful project outcome.

Large ERP deployments are instead characterised by the use of third party consultants for process reengineering and system implementation. Indeed, being able to leverage consultancy experience in enterprise business transformation is no doubt a key component of any ERP offering.

Although this allows the utility to tap into a pool of consultancy resource, it does mean that often off-shore software vendors have to relinquish much of the responsibility of successful software delivery.  Contracts between an ISV and the customer thus tend to be very tightly defined with less room for movement and budgets can rapidly blow out if any changes to the initial scope are required.

Care should also be taken over the specifics of problem resolution. Projects are often delayed and costs escalate when the vendor and the Systems Integrator (SI) trade issues back and forth, unable to agree ownership.

Other key factors to consider are:

BALANCING RISK WITH REWARD – ERP IS NOT THE ONLY OPTION

The challenge of environmental protection and water conservation continues to fall on the utility market. Changing market and regulatory forces will still require energy and water utilities to tackle the issue of aging legacy systems and adopt meter data management (MDMS), billing and customer facing applications that support greater levels of integration and automation. 

Tackling redundant, inefficient processes is a fundamental part of any new system redesign. But ERP is no longer the only option available when a step change in performance is required. Companies considering such a move really need to understand if ERP is right for their business and if their staff, customers and investors have the appetite for such a high risk business transformation project.

By openly evaluating all alternatives, they might actually find that implementing a flexible best of breed solution with open interfaces and industry specific processes built on SOA, will meet both their current and future business objectives, at a fraction of the risk and less than a tenth of the cost.