Technology Corridor

For most energy firms, the returns on investments in customer relationship management have been profoundly disappointing.

Back in the 1950s and 1960s, when big cars were all the rage, energy companies were developing the first systems designed to store and print customer billing data. These early version of the customer information system (CIS), written in FORTRAN and COBOL, ran on massive mainframes. The architectural model was simple. CIS systems connected thousands of functional points in lockstep sequences. Metering data went in at one end and bills came out the other. System access points were few and tightly restricted.

CIS grew out of the need to bill a stable customer base for a measured amount of commodity at uniform rates. Data models for these systems were built around metering and meter locations. Rigid file structures were very expensive to change. Even minor modifications required reprogramming, potentially jeopardizing the stability of the whole system. Adding a new product could take a year or more.

These constraints were acceptable because energy companies needed to know only a few basic things about their customers, and what they did need to know changed very slowly, if at all. For roughly 30 years, from the end of World War II to the oil crisis of 1973, energy supplies and prices were remarkably stable. For most of this period costs actually fell as energy companies introduced improved generation and transmission technologies and created new economies of scale. Regulation was minimal and aimed primarily at protecting the financial integrity of the "public utility" from the holding company abuses rampant in the 1920s. Investor returns were modest but guaranteed and-in the case of many municipals-tax free.

Like the massive sedans of Detroit's heyday, these CIS systems seem archaic today. But they served their users well in the stable, regulated environments of their time. Some of these legacy systems, though cranky and expensive to maintain, are still spitting out the bills at the end of every month.

The problem with the CIS model is the same as with '50s automobiles: namely, that the market conditions they were developed to satisfy simply no longer exist. Today energy supplies and prices approach the chaotic. As old forms of regulation are dismantled, others-such as environmental safeguards, employee safety rules, and consumer protection standards-proliferate. Regional franchises are no longer inviolable. Even in traditionally regulated markets, rate increases are neither automatic nor commensurate with costs. Consumers are no longer content to be treated as meters, and politicians have been quick to capitalize on voter discontent by mandating products as diverse as green power switches and senior discounts.

As energy companies scramble to accommodate accelerating rates of market change, they have discovered just how rigid and inadaptable their old CIS installations are. Systems with only a few highly constrained access points, moreover, do not readily mesh with Web-based applications for customer self-service or contact center support.

The Rise of CRM

By the mid-1990s, deregulation had emerged as the most significant of the market trends perceived to be reshaping the energy industry. In the brave new world