priorities and challenges in customer experience: impact...

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Priorities and Challenges in Customer Experience: Impact on the Utility CIS Produced by RIM Solutions, the Research Division of TMG ConsultingCommissioned by VertexOne04.2016

Commissioned by:

Pressing Utility Challenges 3

Customer Experience Priorities 4

CIS in Use 5

CIS Management 5

CIS Total Cost of Ownership (TCO) 6

CIS Age 7

CIS Satisfaction 8

CIS Priorities 9

Cloud-Based CIS 10

Methodology/Demographics 12

ContentsWhere Business andTechnology Intersect

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Executive Summary TMG Consulting recently concluded a research study focused on customer experience priorities and challenges and how those factors will influence current and future Customer Information Systems (CIS) The research was commissioned by VertexOne™ and conducted by RIMSolutions™, the research division of TMG Consulting, a utility enterprise software consulting firm that offers Advisory Services, Client-Side Delivery Support (CSDS) Services and Research The objective of the research was to better understand how utilities are approaching the future in relation to supporting, maintaining, updating and/or replacing their existing CIS solutions, and what factors weigh in on those plans in today’s evolving, technologically advanced and customer-centric market

Some of the key findings from the study include:• On average, less than 20 percent of utilities are completely satisfied with their

current platforms in terms of maintaining the skillset to maintain the system, keeping it up to date, integrating with new and complementary technologies, and executing modifications in response to new rate structures and regulatory pressures Slightly less than half are exploring technologies to augment their current platforms, and just over one in four utilities surveyed plan to replace their CIS within the next two years

• About one-third of utilities surveyed report their organization’s total cost of ownership for CIS was more than was originally anticipated, and in some cases, significantly more so

• Nearly seven out of ten utilities surveyed rate web and mobile self-service channels as an “essential” customer experience priority

• Many industry experts believe cloud technology offers benefits of a more agile way of improving customer experience, upgrading an aging CIS, and even lowering cost, risk and resources expended, but adoption among utilities has been slow Yet, the survey findings indicate that utilities are beginning to understand the potential of cloud technology in helping them address the challenges and priorities they face today and in the future; for example, nearly half of the utilities surveyed believe the cloud will help them more efficiently innovate and scale their CIS as needed

The following synopsis includes data analysis of 50 utility surveys and in-depth interviews with industry analysts, consultants and experts from North America (see demographic details outlined at the conclusion of this report) on these topics

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Priorities and Challenges in Customer Experience: Impact on the Utility CIS






Pressing Utility ChallengesThe top three most pressing challenges utilities anticipate encountering over the next five years include physical and cyber security (71 percent), an aging workforce (64 percent) and investments in smart grid and energy efficiency (48 percent)

Thirty-eight percent of utilities surveyed said replacing an aging CIS is their most pressing challenge, the fourth-most cited selection With 37 percent of utilities surveyed running a CIS 15 years or older, it is not surprising that one in four respondents plan to replace their current CIS within the next two years

Another revealing result is that 41 percent of respondents said their organizations are currently researching technologies to augment their current CIS platforms This, along with the challenge of replacing an aging CIS, indicates utilities are under pressure to migrate toward solutions that enhance their operational capacity to support innovative programs and services, especially those that improve customer experience

This further supports the fear that often goes along with replacing a legacy CIS and that utilities would rather wait and focus instead on enhancing the system already in place

Replacing an aging CIS, however, is not the only pressing challenge utilities face today It immediately follows physical and cyber security, the very real deadline of replacing a skilled workforce, and investments in other innovative technologies, including smart grid Utilities ranked those challenges as more pressing than an aging CIS

All of these challenges compete for resources within most organizations, so it’s more essential than ever that utilities prioritize them, as well as build a vision of how they want to innovate Regulatory requirements, customer expectations, and a conscious desire for more efficient and effective operations should all be thoroughly analyzed and examined

Utilities should see this more as an opportunity to take a holistic look at the entire utility enterprise and construct that vision of a more efficient organization A new CIS could serve as a foundational tool that addresses many of those challenges Today’s CIS must do more than ever before: support new regulatory requirements; automate processes that previously required teams of workers to address; fully secure customer data; integrate with several important operational software applications; and enhance the customer experience

As utility customer service executives consider a new CIS, they must demonstrate it can satisfy the requirements of today, provide flexibility to adapt to future demands, and do so affordably

3

FACTReplacing an aging

CIS is a top challenge among utilities surveyed, and 41 percent are

researching technologies to

augment their current CIS platform







Customer Experience PrioritiesFor several years, utilities have focused on developing and enhancing their digital channels in order to improve the overall customer experience The hope is that these self-service touch points will increase customer satisfaction while optimizing call centers, as there is a cost associated with call volume and duration

“Given the unprecedented rate of change associated with customer experience expectations, there is much more focus on incorporating design functions and ease of use for users,” said Robert Eastman, research manager for IDC Energy Insights “Utilities today have to make sure ease of use becomes a determining factor when selecting a new CIS platform ”

According to J D Power, between 2011 and 2015, the percentage of utility customers using mobile devices (smart phones and tablets) increased from about six percent to 19 percent Along those same lines, customer chat has emerged as one of the most satisfying channels for customers of utilities that offer it—J D Power estimates that fewer than 10 utilities currently have live chat

While still considered a fringe customer service channel by some, social media is slowly – if not steadily – becoming more prevalent in its use Tom Raftery, principal at Raftery Consulting, believes utilities are still lagging in their adoption of social media channels but are starting to see its importance

“It’s overlooked typically but it’s starting to be addressed now It’s how people communicate SMS text is going out the window Now it’s all Facebook and Twitter, WhatsApp and WeChat That’s how people are communicating,” Raftery said

4

FACTOf the utilities

surveyed, 69 percent stated that web and mobile self-service

were “essential” to their customer service strategies



Web and mobile self-service

Credit and collections

Paperless billing

Energy e�ciency/conservation programs

Proactive outbound communication

Social media

Speech analytics

0% 20% 30%10% 40% 50% 60% 70% 80%

69%

52%

26%

38%

25%

7%

40%

Figure 1: Rate your organization's customer experience priorities -Essential Only





J D Power reports that in 2015 four percent of utility customers identified social media as their preferred method of contact Recent history has shown a much larger increase during large outages And in some cases, some utilities, such as Duke Energy, Dominion Power and National Grid take a proactive approach to using social media to inform customers as well as respond to specific service requests from customers

CIS in UseConsistent with findings from research TMG conducted in August 2015, Utility CIS Replacement: A Comprehensive Look at the New Age of Risk Mitigation, the dominant systems in place at utilities that participated in this survey were Legacy/Custom Developed, SAP IS-U, Oracle Utilities Customer Care & Billing (CC&B) and Cayenta

CIS ManagementMore than half of utilities rely on a third-party vendor to help them manage their CIS, according to the survey’s results (See Figure 3) These findings indicate that utilities find it challenging to manage their CIS’ entirely in-house Using a third-party vendor can be a costly endeavor, so what makes more than half of all utilities turn to outside resources for CIS management?

5



Legacy/Custom Developed

SAP IS-U

Oracle Utilities Customer Care and Billing

Cayenta

eCIS

NISC Customer Care and Billing

Customer/1

Ventyx

Banner

SPL CIS Plus

SEDC utilityPOWERnet

CIS Infinity

Tyler Technologies Incode

Alliance

0% 5% 10% 15% 20%

19%15%15%

8%

6%4%4%4%

2%2%2%2%

6%

13%

Figure 2: Please choose the CIS your organization currently uses

https://www.tmgconsulting.com/wp-content/uploads/2015/09/NewAgeOfRiskMitigation-1.pdf

https://www.tmgconsulting.com/wp-content/uploads/2015/09/NewAgeOfRiskMitigation-1.pdf





TMG Senior Consultant Jim Hendershot explained it this way: “When a customer puts in a new system, especially a CIS, as much as 10 to 20 years or more may have gone by since the last time their legacy system was replaced Their application management skills have atrophied or are dated; they do not understand the new application technology, architecture, or operation, and they are woefully understaffed to maintain a new configuration-based application as well as everything else they have to do ”

Attracting and retaining the right in-house skills can be difficult for many utilities Accessing the skills needed to maintain the systems and keep the technology current can be more economical through a third party A third party technology partner also offers reliability and accountability, which frees up the utility staff to focus on addressing their customers’ needs and the larger organizational goals and strategies

Tim Almond, executive vice president at TMG, said, “Bear in mind that a utility employee is unlikely to be as efficient or effective as a technical consultant hired from a third party; nor is their organization flexible enough to deal with the peaks and troughs they may experience managing a live application or unanticipated resignations and retirements ”

CIS TCOWhen asked to describe their organization’s experience with the total cost of ownership (TCO) of the CIS project, only seven percent of utilities saw a TCO that was lower than what was expected More than 30 percent—nearly a third of the respondents—indicated that they experienced TCOs that were more than expected (See Figure 4 )

6

FACTThe majority of

utilities surveyed find it challenging to keep

their systems up to date and sufficiently

access the skills needed to maintain

their systems



Figure 3:Please select the option that best describes how

your CIS is deployed and managed

On-premise, managedby internal IT personneland third party

52%

On-premise, managedby internal IT personnelexclusively

39%Other2%

5%On-premise, managed bythird partyexclusively

Hosted andmanaged bythird party on acloud platform

2%





In terms of looking ahead to the TCO, Hendershot suggests there are four main areas that utilities miss in predicting total cost of ownership, including:

• The total downstream cost of modifying the packaged software With a large number of modifications, each migration to a new version is either put off—which delays additional benefit realization—or each migration becomes a multi-million dollar major project

• The staffing impact throughout the utility The utility underestimates the impacts of the system which hampers benefits and causes significant staff disruption in both operations and IT This often takes unanticipated funding for training, recruitment, redeployment, early retirements, etc

• Vendor contracting for changes and support The utility underestimates its dependence on the vendor staff and finds itself having to bring in high-cost resources for long durations

• Financial The utility books out project assets for incorrect periods This can be related to hardware, software or services If booked out too short, the depreciation schedule drives more O&M cost sooner than expected If booked out too long, the remaining depreciation can cause problems for any future replacement or retirement activity which can cause realized loss issues or inability to get at new opportunities or regulations

CIS AgeWhen asked about the age of the surveyed utilities’ CIS:

• 29 percent indicated that their CIS were less than five years old• 18 percent indicated the CIS they are using is five to 10 years old• 37 percent have CIS’ that are 10-20 years old• 16 percent of those interviewed have CIS’ in place that total 20 years or older

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CIS TCO is as expected

CIS TCO is more than expected

CIS TCO is significantly more than expected

CIS TCO is is less than expected

0% 10% 30%20% 40% 50% 70%60%

61%

25%

7%

7%

Figure 4: Please select the statement that is most accurateconcerning your organization's Total Cost of Ownership (TCO)





“We’re a big industry on assets, but we’re a rather small industry in terms of scale, and number of customers,” said Todd Arnold, managing principal of Smart Customer Insights “And so over the years, historically we’ve got ourselves to where we have this one big structure (CIS)—it’s kind of all or nothing—and as long as we’re in that set, we’re probably on a 30-year change out It’s too bad that the world of CIS hasn’t been more modularized; maybe going forward what it ought to be is we change components every five to 10 years ”

CIS SatisfactionNearly half of the utilities surveyed find it challenging to keep their CIS up to date and sufficiently access the skills needed to maintain their current systems Utilities were evenly split when asked about ease of integration and ease of modification of their existing systems

Respondents were asked to rank their satisfaction level with their current CIS, in terms of:

• Sufficient access to skills needed to maintain and evolve the platform— Only 20 percent were completely satisfied; 80 percent were less than completely satisfied

• Ease of keeping the platform up to date— 21 percent were completely satisfied; 79 percent were less than completely satisfied

• Ease of integration to new and complementary technologies and software (AMI, meter data management, outage management, workforce management, etc )— 12 percent were completely satisfied; 88 percent were less than completely satisfied

• Ease of modification due to new rate structures, complex rate structures, new business rules, new regulatory guidelines, etc — 14 percent were completely satisfied; 86 percent were less than completely satisfied

Because implementing a CIS or even upgrading it has such daunting implications—even with a high level of dissatisfaction of one or more of its key components, such as a poor ability to receive modifications or integrate with edge products—a general consensus seems to be: if it ain’t broke, don’t fix it

“There has to be some type of encouragement to upgrade Software support Hardware support Internal resources There are always regulatory pressures These are the accelerators,” Kevin Prouty, vice president of research at IDC Energy Insights, said

“Most utilities have not gone on an enterprise rollout in at least a decade—it’s incredibly painful There’s a lot of push back and change management is a tricky topic,” said Raftery

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“It’s too bad that the world of CIS

hasn’t been more modularized; maybe going forward what it ought to be is we

change components every five to 10 years

- Todd Arnold, Managing Principal,

Smart Customer Insights







Mike Smith, principal industry consultant at SAS, concurs “It has always surprised, stunned and scared me how many 25-year-old systems are out there,” he said Yet, utilities are reluctant to make improvements to their CIS,” he added “When asking utilities when they plan to upgrade or change their CIS, a lot of them say simply, ‘Not on my watch ’”

Yet, with the pressing challenges and priorities utilities face today—including the aging workforce that maintains their systems and the customer expectations that can impact their customer satisfaction ratings—not keeping systems up to date harbors an ever-growing risk

CIS PrioritiesOne in four utilities (26 percent) surveyed plan to replace their CIS within the next two years, which is in-line with results pertaining to age; 37 percent of the utilities surveyed are running platforms older than 15 years Given that the average lifespan of the industry CIS is approximately 20 years, it makes sense that many utilities are looking to transition to newer systems with more functionality to match modern customer experience requirements

This is further supported by the fact that slightly less than half (41 percent) of the utilities surveyed are exploring technologies to augment their current platforms Yet, 64 percent are not satisfied with their current CIS’s ability to integrate with new and complementary solutions – the difference is likely explained by utilities who are planning to implement within 24 months

9



Ease of Modification

Ease of Integration

Ease of Keeping Current

Ease of Acces to Skills

0% 10%

No Yes

30%20% 40% 50% 70% 80% 90% 100%60%

Figure 5: Completely Satisfied with Currrent CIS?





When assessing priorities, flexibility and adaptability to meet customer needs seem to be key, sought-after features and functions of the CIS by utilities today How well the CIS platform can integrate with edge systems and address the ever-growing demands for self-service is also a frontrunner

While utilities typically have several business drivers for replacing their CIS, being able to seamlessly integrate and optimize with other enterprise utility software systems, such as meter data management (MDM) and mobile workforce management (MWM), can be significant motivation as well, as it maximizes the value proposition of all systems That extends to customer self-service applications, which can completely automate a customer’s interaction with a utility Therefore, putting into place a product with longevity and durability is of utmost importance

“For those contemplating the future of their CIS, it is critical to align with the right product organization that will continue to invest in its own products—and grow,” said TMG CEO Mario Bauer “It’s like buying a car almost—if that company goes out of business where are you going to get parts for that car? The same is true of a CIS ”

Cloud-Based CISAbout one-third of the utilities surveyed agree cloud-based solutions will help their organizations focus their time and staff on the core business of serving their customers, while nearly half believe cloud-enabled solutions will help their organizations quickly and efficiently add new features and scale as needed

As for overall cloud acceptance, Raftery said utilities will have to see proof-of-concept first before making a cloud-based solution a viable option

Bauer agrees that it would probably take several early adopters before significant traction is seen “Our industry has a ‘show me’ approach—not going to do anything that’s not proven and proven again,” he said

Smith, however, believes there is also an element of utilities not wanting to surrender data ownership to an outside entity He said there seems to be a “fear and a legacy of: ‘it’s my data don’t touch it ’”

Smith touches on something that may go beyond simple anxieties about data security or just simply a desire to retain ownership to maintain capital expenditures in order to show positive growth At least for larger IOUs, regulatory pressures—or the fear thereof—could also have a significant impact on adoption as well This alone could prevent cloud migration unless there is a significant shift in regulatory or revenue models in the near future

Yet, cloud participation among utilities will likely increase in coming years as more utilities take the plunge into using cloud solutions to host multiple enterprise and edge software platforms, including CIS This will be driven by several factors,

10

“In terms of the advantage, a cloud-

based offering is going to be up-to-date In general, the security

will be top of line I just think it will take time for attitudes to shift

- Richelle Elberg, Principal Research Analyst, Navigant







including but not limited to the previously mentioned issue of fewer utility resources to manage disparate systems, data storage costs, the potential upgradability of cloud-based systems, and the flexibility and scalability to add additional modules, especially with regard to customer self-service

But the growth may not be as significant as with other industries, or necessarily led by larger investor-owned utilities, who are tied to owning their own data infrastructure due to capital expenditure requirements Nearly one-third of the utilities surveyed agree that cloud is unsuitable for their organization because it cannot be capitalized

Cloud computing promises to ultimately replace capital expenditures with operating expenditures, which is likely why there has not been rapid adoption thus far among large IOUs Still, as Andrew Jornod, chief executive officer for Vertex, points out, with recent changes in generally accepted accounting principles (GAAP), there are significant portions of a hosted deployment that can now be capitalized, giving the utility ownership over more than just its data Those capital expenses can be built into rate cases, similar to an on-premise CIS

Indeed, other industry experts agree the cloud in its various forms—software-as-a-service (SaaS), infrastructure-as-a-service (IaaS), and platform-as-a-service (PaaS)—could have a marked impact on improving customer experience, upgrading an aging CIS, and even lowering cost, risk and resources expended

“The grid is a two-way network and can penetrate prosumers who want to be involved All of it requires IT and communications All of it require a CIS that is flexible and almost modular such that the utility can experiment with different

11



Focus time and resources on serving customers

Help quickly and eciently scale and add new features

Reduce TCO for CIS

Cannot be capitalized

Risky because of data security

0%

Agree Neutral or Disagree

20% 40% 80% 100%60%

Figure 6: Rate the following statements pertaining to cloud CIS





programs and services and not break the bank,” said Richelle Elberg, principal research analyst with Navigant

Raftery also believes the current concept of a software lifecycle is going to be a thing of the past, replaced by constant development – something that cloud solutions will be able to make seamless but on premise haven’t been able to support

More than half of the respondents (58%) believe cloud solutions are risky because of data security IDC’s Prouty said utility fears on the cloud are misdirected and that data is probably more secure in a large, hosted data center by a company that is actively engaged on potential threats and remediating factors

“In terms of the advantage, a cloud-based offering is going to be up-to-date In general, the security will be top of line,” said Navigant’s Elberg “I just think it will take time for attitudes to shift ”

“I fundamentally believe that 99% of utilities will be in the cloud within 10 years,” Raftery said “The IT staffing is reduced drastically Integrating is far easier It’s a no brainer ”

Methodology/DemographicsOf the 50 surveys completed between December 2015 and January 2016, 92 percent of respondents offer electric service, 31 percent gas, 22 percent water, and 14 percent wastewater, and six percent other Those percentages are not based on a cumulative total; several utilities offer a combination of commodities

The majority of respondents were from Investor-owned utilities (IOUs), followed by electric membership cooperatives and municipals in North America

12

“For those contemplating the future of their CIS’, it is critical to align

with the right product organization that will

continue to invest in its own products—

and grow

- Mario Bauer, CEO, TMG Consulting



Figure 7:

Investor-owened(IOU)

47%

Deregulated entity2%

Provincial2%

State2%

Publicpowerdistrict

6%

20%Electricmembershipcooperative

Municipal20%





SourcesJ D Power The Power of Understanding Customer Trends, SAP for Utilities Conference 2015

AuthorsLaurie Anderson, Senior Consultant, TMG ConsultingMark Hall, Director, Research and Strategy, TMG Consulting

Expert ContributorsTim Almond, Executive Vice President, TMG ConsultingTodd Arnold, Managing Principal, Smart Customer InsightsMario Bauer, CEO, TMG ConsultingRobert Eastman, Manager of Research, IDCRichelle Elberg, Principal Research Analyst, Navigant ResearchJim Hendershot, Senior Consultant, TMG ConsultingKevin Prouty, Vice President of Research, IDCTom Raftery, Principal, Raftery ConsultingMike Smith, Principal Industry Consultant, SAS







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