Alignment of the business and the information technology (IT) functions within a company is critical to the effectiveness of any strategic initiative. Three years ago, our research identified a...
CIS: The new Profit Machine
eliminating three-plus CIS applications into one application and rolling that out to their different divisions."
Goodman believes it is important for the utility company to have a plan in mind before making big changes. "ROI is highly influenced by the way that some utilities are managing their merger and acquisitions," he says. He finds utilities that are adopting the "banking model-pre-determining the specific systems and processes that will be the organization's standard, and then immediately transforming the merged organization to those standards"-are "enjoying significant economies of scale and accomplishing rapid financial benefit to the merger."
Self-help can work to a certain degree, as can sticking to an old-fashioned run-the-numbers approach. SAP's Johnston says upgrading CIS has two sides. One is the technical upgrade, which some of SAP's customers do themselves, reducing their costs. "The other side of that is the functional upgrade, so when they do the technical upgrade they want the benefit from the functionalities within certain areas of their business," he explains. But the upgrade still must be justified from a business case or an ROI approach, which is standard business protocol. And while the company uses the business case to justify the upgrade, it also uses some of the third-party service providers to help them understand and implement some of the new functionalities. "A lesson learned is that the upgrade needs to be very tight," Johnston says, and "if the scope of the upgrade is very well defined and measured, based on specific goals and requirements, then it is more successful than not."
But Excelergy's Craven believes in fixing only what needs to be fixed, and a utility often can find out what needs to be fixed by simply asking the customer. He points to a present-day emphasis on component replacement with the highest payback. He says that utility commissions are very cost-sensitive and time-sensitive. They no longer are willing to adhere to a six- or eight-year timeframe to implement new CIS, so utilities aim to replace components that have the highest return.
As an example, he looks to a utility's credit management system. Craven explains that in the past, credit management was handled in a very seamless way or in a very static way. "Today you may look at credit management and say, 'Well, I have a got a charge-off rate of X, and if I can cut that by half, then I can garner margin out of that,'" he explains. "So that is a very good place to go in and add a module that does a little bit better job at credit management."
Craven also points to complex rate scenarios. He says that five years ago complex rates really were not in vogue; a utility had three standard rates-commercial/industrial, residential and wholesale. But now a utility has time-of-use rates, and a whole series of complex commercial and industrial rates, which many of the old systems cannot support. There also are non-commodity products and services. Many utilities didn't really think of selling anything other than core commodities until just a few years ago. Now they are selling