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Utility- New Frontiers and IT Challenges

            The utility entities have been long considered as perennially content. Coming out of the clutches of municipalities / government & getting owned by shareholders has completely changed the game plan. Maintaining revenue with regulated tariff is no more sufficient. The deregulation & consequent emergence of small price players have compounded already precarious condition of old energy retailers.

            Herd of the big retailer are now moving towards alternate pastures. We are witnessing newer business models getting introduced to earn revenue on top of their usual commodity business. Some of you might have seen electric car charging stations in the important city centers. Customers pay subscription fee to avail services of the station & also pays for the electricity consumed. Entities have also started selling small devices viz. Thermostats, equipments to measure individual devise consumption (for washing machine, geysers) etc. They get one time device charges and also regular subscription revenue. The switch towards greener energy is also throwing newer opportunities. They are present in the complete value chain starting from selling the solar panels, to installing, maintenance & even providing insurance. Revenue from services is the current buzzword in the utility business. For instance customers are suggested monthly average utility amount (Budget bills) based on their meter readings from smart meters. Small communities in villages/local neighborhoods are provided the IT infrastructure to manage their bulk energy buying, electricity generated from alternate sources etc.

              These business models are also throwing up new challenges for IT. In fact rollout of these initiatives is often hindered by the current IT capabilities. These new business models require separate billing & other functionalities which cannot be fulfilled by standard utility software packages. Also for these disparate businesses we need to maintain flexible tariffs. Then converging the invoices from all these platforms into Electricity & gas invoice needs perfect synchronizing with the organizational utility heartbeat. The future IT landscape might look more distributed. The billing & tariffs might be processed outside the core utility package & these documents will be imported in the standard ERP system. A step further, utility companies might partner with external organizations to sell products & services and thus need integration platforms. Again full potential of smart grid & meters still needs to be tapped due to enormous requirement of data computing capability. Building solutions for these requirements might require custom software involving higher costs of development & continuous maintenance.

             The large ERP players are slowly responding to the demands of the business. Current utility software packages are usually tightly coupled. In the future versions of the packaged solutions, we are seeing more loosely coupled solutions for

                              a. Flexible pricing & billing for incorporating disparate business models
                              b.Convergent Invoicing with normal utility bills
                              c.Payment handling & Collections
Even if pricing/billing is done outside ERP systems or by external organizations, seamless interfaces are provided to integrate with organizational commodity billing & invoicing system. Recent innovations in in-memory computing capability should be able to able to solve some of the Business Intelligence jigsaw.

Still the perennial gap between demands of the business & current IT capability is here to stay. Do share your thoughts on the newer revenue models introduced by business across the globe & how IT suppliers & SI's are responding to those challenges.


Indranil I partly agree with your post but in mine opinion to grow in revenue the first what has to be done is to have an organization that exceeds in operational Excellence.
When you don’t have a mean and lean organization that really have the drive for serving the customer than you can start with alternative business models when you don’t have this in place you will add complexity to the organization (including extra IT systems) that needs more specialists to solve the integrations issue’s which will drive down your revenue instead of increasing it. Only when the additional service has a high success rate you can pass probably the complexity and still earn extra revenue but these are often trial marketing campaigns with limited success rates.
So my keys word are cost to serve and cost to gain.

Hi Marc,
I would completely agree with your comments. We are seeing corporations are striving to get about 20-30% of their revenue from these alternate sources in the next decade. But in my opinion these endeavours are still in nascent stage. As the competition increases I feel retailers will give more focus & attention to these non-commodity business

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