by Richard Charles
Utility needs and supporting technologies are finally converging.
That was the common theme of our customer care trends panel, and it comes as no surprise. For 2007 and beyond, the accelerating pace of technological development will impact virtually every operational area of the utility. From web-based customer care to automated metering infrastructure (AMI), technology is a key to a utility”s ability to thrive, not just survive.
In recent years, utilities have avoided much of the intense drive to adopt the technological innovation experienced in the telecom industry. Timing and product maturity were not yet aligned with the industry”s needs. Now it appears that the situation is rapidly changing.
Alliance Data tapped leading analysts to collect their thoughts on the latest trends in customer care and what we can expect to see in 2007. Participating were Karen Blackmore, program director, Energy-Insights, an IDC Company; Zarko Sumic, vice president energy and utilities at Gartner Industry Advisory Services; Dennis Smith, vice president research and information delivery, Chartwell; and Jon Brock, chief operating officer, UtiliPoint International.
Q. What is the most pressing customer care issue for utilities in 2007?
Blackmore: Value for price of service (electric or gas). Utilities must grapple with cost-to-serve issues to improve value for price. Utilities should consider using a new CIS and/or smart metering transformation with rigorous attention to the best way to improve, such as outsourcing some functions or raising the bar on operational metrics.
Sumic: North American utilities will need to continue meeting regulatory imposed service indices while reducing cost of customer service provisioning. The means to achieve these objectives is different in 2007; for example, using service-oriented architecture and business process management technologies.
Smith: The common denominator we have heard for several years is the dichotomy between improved customer satisfaction/service and reduced operating costs. Rate increases are public relations challenges. This has driven efforts to do more with less in the call center, outsource certain areas of customer contact, improve collections, promote web and IVR self-service, and push “new” energy efficiency and demand-side load control programs.
Brock: The ability to interact with new applications and/or services as a result of increased AMI or demand response programs. 2006 UtiliPoint research indicates that 53 percent of 308 utilities in the U.S. and Canada state the ability to integrate is very important in their customer service departments. New programs such as DR are coming at them so fast that they need a flexible, robust structure that allows quick and effective integration with AMI, Meter Data Management, outage, new Internet apps, smart thermostats, etc.
Q. How will the consolidation of CIS platforms affect the customer care market for utilities?
Blackmore: The consolidation should be good for utilities. The major vendors will now be competing squarely against each other to provide service-oriented architecture platforms. Midtier vendors are also now offering more enterprise solutions. Vendors serving the C&I market are still plentiful. Essentially, there are a variety of best of breed and enterprise software solutions and the enterprise now may be the best of breed!
Sumic: The gap between leading CIS vendors in the tier-one utility market and niche vendors is widening, which will put more pressure on challengers and niche vendors. Acquisitions haven’t been made by the CIS vendors but rather by the enterprise application vendors and services providers outside of the utility market looking to “verticalize” and extend their product portfolio by adding customer care and billing functionality to their offering. We see creation of the ERP-like vertical product suites. Consequently, CIS will be subsumed into vertical enterprise application suites. Options for end users will be an integrated solution provided by a single vendor or much less viable best of breed small CIS vendors.
Smith: A lot was spent by investor-owned utilities in the previous decade on customized systems that most utilities aren’t eager to part with yet. The advent of meter data management systems (MDMS) is replacing the way many view CIS. The new thinking is that MDMS will be the hub for all interval usage data, while the CIS will be an external yet integral part of the billing and payment process. Industry consolidation will allow CIS and customer care systems vendors to better meet the demands of the utility market as it evolves to a more integrated environment where MDMS feeds CIS and billing, among other business needs.
Brock: There have been quite a few acquisitions recently but one must be careful in classifying them as consolidations. They are existing software companies acquiring or merging with CIS companies in an attempt to fill a gap in their service and/or product offering. The only Tier-1 CIS vendor to not have a change of ownership in the last year is SAP. Harris has been performing a true consolidation play for years. This true consolidation signals a reduction in company offerings to the municipal utility market but may not necessarily signal a reduction in product offerings.
Q: In which customer service related technologies do you see utilities investing? (AMI/AMR, CIS, IVR, EBPP, Business Intelligence/Predictive Modeling, etc.)
Blackmore: The two biggest investment areas will be CIS improvements and AMI-related technologies. Many utilities are finding a need for MDM systems to fully take advantage of smart metering benefits, such as outage management that can tie to the CIS and enable outbound customer notification. A secondary benefit is reduced call overflow volumes. Another example where customer satisfaction can be improved with an MDM and CIS working together is in disconnects and reconnects.
Sumic: We see two different kinds of investment in the CIS market, driven by two different sets of business requirements and regulatory directives. AMI/AMR and MDM (as part of AMI) are being investigated by many utilities. The driver is the EPAct 2005 recommendations, as well as the intention to implement demand response programs to address existing infrastructure constraints and peak demand growth. Additionally, the drive for increased efficiency forces utilities to invest in technologies such as IVR and EBPP, which help in automating some business processes and correspondingly reduce the cost.
Smith: AMI/AMR continues to make great inroads. The MDMS will be an integral part of this infrastructure. Tools that can proactively reach out to customers–outbound notification automation, virtual queuing, etc.–are being implemented by more utilities. Utilities are going beyond the basic web-based services to implement more portals that can drill down to the needs of specific customer segments. Technologies that can help utilities quickly identify and respond to outages more efficiently will get more consideration.
Brock: Many utilities are struggling with priorities on investments. The obvious push from EPAct 2005 and some state commissions is demand response (DR). In order to build successful DR programs, the customer service department must first have an infrastructure in place to enable DR programs. Logically, MDM or something similar to handle a large volume of data must be in place before AMI is rolled out. CIS, or the ability to bill unique time-of-use rates, naturally follows.
Q. What are the key customer service metrics that utilities should be measuring, and how have these changed over the past few years?
Blackmore: Key metrics include customer satisfaction measures such as first call resolution and correct first billing. These metrics should significantly improve as more utilities take on smart metering. Another important measure that customers request is a more accurate and smaller service window. Measures such as call handle time have fallen out of favor with many utilities who want to get it right the first time instead of hurrying through the call.
Sumic: The CIS covers two major business cycles in utilities: customer service and billing. There are a number of universally accepted service quality indices, some related to call center operation (such as average call duration), financial indices (average cost per call or per bill) and customer service reliability indices such as CAIDI [Customer Average Interruption Duration Index].
Smith: Based on Chartwell’ s analysis, I believe utilities will measure customer satisfaction and the drivers behind it-first call resolution and its evolution to first contact resolution, usage of web and IVR applications, calls answered, and outage response and reliability, and the costs associated with these metrics. First contact resolution–calls, web and IVR contacts, field contacts and service calls, and all other touches–will be more difficult to grasp. The interactive web and IVR measures will show how customer-friendly a utility’s self-service applications are. Outage response and reliability is top of mind right now. Customers are not satisfied if they don’t think their utility is responsive.
Brock: One key area of interest in the European utility market that seems to be gaining priority in North America is the cost-toserve metric. Those who have outsourced meter-to-cash have a better handle on the cost-to-serve because it is captured in bill detail from a service provider. Outsourced operations also have contracted service level agreements to measure specific metrics monthly or more often. Commissions are starting to perform benchmarks of the cost-to-serve or what is sometimes referred to as the Fair Market Value of the service being provided. Bottom line: as it gets measured, cost-to-serve comes down.
Q. Has the market changed significantly in the past year?
Blackmore: With rate freezes ending, utilities are focusing more on how customer satisfaction can impact rate case decisions. As utilities begin to understand more about what smart metering can do for customer service, they are building the business case for smart metering and CIS improvements, coupled with business transformational efforts.
Sumic: As mentioned earlier, the gap between leading CIS vendors and niche vendors is widening. And acquisitions by enterprise application vendors and non-utility service providers are driving “verticalization” of product portfolios.
Smith: It continues to evolve. Energy efficiency and other conservation efforts have really gotten the wind behind their sails in the past year or so, and the Energy Policy Act brought demand side conservation and smart metering onto the radar screen. These are more dramatic shifts. In addition, more utilities are outsourcing non-core business functions than ever before, and utilities have begun to work toward communicating better with customers and understanding what makes customers use the various web-based and interactive customer service tools that utilities have invested their time and resources to make available.
Brock: According to our research, 2006 was the first year in North America in which legacy applications for customer service did not hold the top spot in market share. This means that the customer service market is moving from a “new license” market to a license renewal and outsourced opportunity market. This will naturally bring more acquisitions as utility suppliers look to expand their current offerings outside of customer service. The existing vendors and service providers are also beginning to bring their service-oriented architectures to market. Therein may lie the flexibility and integration requirement that the utilities are asking for.
Richard (Rich) Charles is senior vice president of business development at Alliance Data and has worked in the energy industry for nearly 20 years. At Alliance Data, he is responsible for sales, marketing and product management for the utility services division.