Strategic Perspectives on Utility Enterprise Solutions
Bt Warren B. Causey. President & CEO, Warren B. Causey, Ltd., reposted from Energy Central Posted on December 14, 2005.
As deregulation and competition loomed on the horizon in the late 1990s, utilities realized that they did not have many of the major software systems they would need to face a more competitive, more business-oriented (rather than government-structured) future. They began installing those systems at a fairly rapid pace in the late 1990s, a pace accelerated by the Y2K scare.
However, as a result of terrorism, the collapse of deregulation in California and the Enron-inspired corporate scandals, that pace of system upgrades and installation slowed sharply. As a result, faced with skyrocketing fuel costs and pressures in many different directions, utilities today still are faced with an eclectic collection of enterprise software systems, many of which communicate poorly with other systems, if at all. They also are just beginning to install business intelligence systems that would enable them to operate as true enterprises, as do companies in many other industries.
From the results of a recent survey conducted by Energy Central, it is apparent that many utilities still have a long way to go to have their systems operate on an enterprise basis. We asked our survey respondents if their systems gave them an enterprise view of company operations. Only slightly more than 50% of investor-owned utility respondents answered yes. Municipal and Co-op utilities did a bit better at about 60% and 68%, respectively. Federal/state/district respondents were much less sanguine, with only about 25% responding yes.
One of the reasons many utilities do not have an enterprise view is that they have not settled on an integration method for their systems. Integration ranges from little integration, still mostly manual interfacing which ranges from 18% to 50% at different utility types to EAI (15% to 47%) to SOA (12-13% to about 32%).
When asked about the major technological issues facing their utilities, nearly 30% of all respondents named integration as the No. 1 problem. Other issues included timeliness of data (13.5%), cyber security (9.6%), data reliability (7.7%), lack of implementation (3.8%) and others.
Political pressure and uncertainty about regulation and legislation was named as the No. 1 problem utilities face in that area. When it comes to economic and business issues, the cost of fuel was the No. 1 problem by a wide margin in the survey.
Estimating market spending for any industry over time is difficult and probably more so in the utility industry because of its diverse nature. Nonetheless, we did ask respondents in our survey to estimate their spending on the six major enterprise technologies covered in this report. According to their responses, adjusted for utility size and distribution, these executives are projecting they will spend a total of about $3 billion on ERP, EAM, GIS, WMS, OMS and BI over the next three years. IOUs managers say they will spend the most, at about $1.7 billion of the total. Municipals project say they will spend about $320 million, co-ops about $200 million and federal/state/district utilities about $693 million over the period.
Two important points should be borne in mind with regard to spending estimates:
Estimates by different organizations based on different criteria and methodologies, including different software sets, will vary widely.
While utility personnel attempt to be as accurate as possible with regard to spending estimates, they are only estimates, and experience indicates that they tend to be overly optimistic in making these estimates. Normal bureaucratic delays, delays in implementation and other factors tend to reduce actual spending from projected amounts, usually between 40% and 50%.
There has been tremendous upheaval in the vendor community providing enterprise software over the last three years. Consolidation has taken a toll and, in several cases, produced stronger, if fewer, competitors. Major changes over the period include:
J.D. Edwards and PeopleSoft are both now a part of Oracle, which made Oracle a much more significant player in the utility enterprise software field.
Indus acquired CIS vendor SCT Utilities and several smaller companies rounding out that companys enterprise offerings as a major EAM vendor.
SAP acquired several smaller companies and introduced its Netweaver SOA architecture enabling the German giant to offer its software to smaller companies and offer individual modules to companies who didnt want the whole ERP package, but did want certain functionality.
LogicaCMG also acquired some other companies expanding its suite so it too can claim to be a full-service enterprise vendor.
SPL Worldgroup, previously a CIS vendor, bought CES International and was sold to GFI ventures and married with the former Synergen, so that SPL now is a major enterprise vendor.
Severn-Trent split off its Worksuite products, making them a free-standing company (the future of which is now in question) and the European parent seemingly turned most of its attention elsewhere.
Lawson, which previously was known for its financial suite, at least in this industry, made smaller acquisitions and expanded its enterprise offerings.
Synergen, as mentioned above, was merged into SPL and disappeared as a separate company, although SPL now is operating it as a SPL Enterprise Asset and Work Management (SPL EAM) subsidiary, with its own president.
Clearly, the market for, and implementation of, utility enterprise solutions is a dynamic and evolving market. As these various solutions and applications continue to be implemented at more sites and importantly integrated with other applications on a more frequent basis, utilities will begin to realize a more significant and consistent payback for these technology investments.
Editors Note: This article is based on the findings and analysis reported in the Enterprise Solutions Report, published in November 2005. The Report can be ordered by going to www.energycentral.com and clicking on the Knowledge tab.