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CIS: The new Profit Machine
How IT can allow utilities to invest in customers-and even improve returns-without breaking the bank.
A high quality customer information system (CIS) at a utility company can build revenue streams and promote customer loyalty. But while those are admirable goals, it is not that simple to wade through all the various CIS systems and figure out what a company needs in order to achieve those benefits.
Of course, the state of the economy plays a large part in the decision of whether or not to invest in CIS. But since CIS is vital to the survival of the utility, it cannot be ignored. Over the last few years, when the economy was dragging, many utility companies adopted a wait-and-see attitude toward new investment in CIS. But that could be changing.
Before spending lots of cash on CIS, it is important to know what factors to examine in deciding what systems need to be implemented. spoke to the experts to help decipher key challenges confronting companies as they make CIS selections.
Jay Jerrier, vice president of client services for Alliance Data System's Utility Services Group, says investment in CIS is beginning to open up as utilities start to look at where they can maximize their investment dollars. Jerrier sees utilities starting to examine whether they want to continue to invest in legacy systems or upgrade. "I think most utilities are getting to a back-to-basics philosophy, where they are looking to drive efficiencies and help show the commissions that they are doing their part to help support rate case decisions, or to just drive the overall improvement in their business," Jerrier says. He attributes that philosophy to lower credit ratings for utilities and poor financial performance. The result is that they have to get creative and look for new alternatives.
As one analyst reports, utilities have repaired their balance sheets in the last few years and are looking for ways to address the long-term growth outlook. "I think things are starting to really heat up," Jerrier says.
Furthermore, while deregulation was the driver for such technology in years past, some say utilities now want CIS to improve return on investment (ROI) and help address specific problems.
The IT Conundrum: Why Buy?
Jerrier says his company's deregulated customers are expressing greater interest in value-added services. They already have a sizeable customer base, and now they want to dissect that customer base to distinguish between the high-value customers and low-value customers. The reason: Utilities may want to treat the high-value customers a little differently, or incent the low-value customers to behave like high-value customers. "We have a lot of our deregulation clients coming to us and asking, 'Help us look at the data and customers we have and figure out how we can treat people differently,'" he says.
But Charles Craven, director of strategic consulting for Excelergy's new EPIC consulting practice, views the scenario differently. He agrees it is important to look back at the big thrust in deregulation in 1998 and 1999, which caused a series of CIS changeouts because there was a technology shift.