Developing customer-centric IT departments requires strategic planning

Tami Cissna

Associate Editor

By now, even the stodgiest of electric power companies are well aware that they must be customer-service driven. Energy service providers (ESPs) and utilities distribution companies (UDCs) are scrambling for ways to differentiate themselves from the competition. The key means to do so, by and large, is to build relationships and loyalty by pro- viding value-added services and offer- ing outstanding customer care.

Customer interface systems represent a vehicle by which companies can accomplish that. This area is hot. According to Frost & Sullivan research, the total market for interface systems was $4 million in 1997. The firm projects by 2004, market revenues will reach $161.1 million, with a compound annual growth rate of 69.7 percent from 1997 through 2004.

Never before in businesses has IT been seen as crucial to mission-critical business strategy as today. “It is clear one of the differentiating core competencies of the future industry leaders will be effectiveness in using technology to reshape the energy business,” said C.D. Hobbs, vice president and director of META Group`s Energy Information Strategies (EIS) practice. “We believe this partnership is making a difference among the industry leaders, and we observe other utilities struggling with how to make technology a core competence.

“It is more difficult to learn to be customer-centric, than it is to learn to market energy.”

Because the market for customer interface systems in the utility industry is relatively new, it has so far remained segmented with sporadic growth rates.

Utilities and their unregulated affiliates are increasingly offering value-added services to their customers. Value-added services include such customer interface system applications as automatic meter reading (AMR), real-time pricing, home automation, telephony services, outage detection, remote connect/disconnect and load control. Other IT-facilitated customer touch points include interactive Web sites, electronic billing, and energy-usage monitoring and interactive access to account information or outage management.

It is widely believed electronic commerce will redefine energy business processes. Most utilities have a ways to go yet. In a global review of utility Web sites in late 1998, META Group found only six utility Web sites with truly interactive Web sites.

Priority shift

IT professionals sense the urgency to shift their focus from product orientation to customer orientation. In an online poll conducted by Dell Computer Corp., more than 1,000 indicated their foremost concern is the increasing complexity and loss of accountability in service and support (see table).

“Many in our industry continue to promote the latest software and hardware inventions, often with little connection to customer concerns,” said Michael Dell, chairman and CEO of Dell Computer. “We believe customers needs are too distinct and complex for a one-size-fits-all solution. Our industry must deliver greater choice, flexibility and accountability in service and support.”

AMR is currently the most common form of customer interfacing, according to Frost & Sullivan`s study, “North American Electronic Utility Customer Interface Systems.” Increasingly, many system vendors include AMR as a standard system application. Prepayment meters, real-time pricing, and messaging are also expected to grow substantially.

Another technological trend is the ability to deliver systems that support broadband solutions. This is important to UDCs` and ESPs` if their customers, the utilities, want to resell value-added services to their own customers.

The growth of broadband communications, along with the infrastructure investments made by data networking leaders to increase the speed and capacity of networks worldwide, will enable more businesses and homes to take full advantage of the Internet.

As this occurs, the Internet will become an even more critical link between companies and their customers, and broadband communications will allow richer, more complex data to travel between customer and supplier.

Dell plans to soon begin shipping the industry`s first built-to-order PCs with factory-installed ADSL modems designed to provide faster Internet access allowing customers to use the same phone line to surf the Internet and talk on the phone.

AMR Research Inc. predicts in its “Customer Relationship Management Software Report” that total aggregate revenue of the customer relationship management (CRM) market will grow from $1.2 billion in 1997 to $11.5 billion in 2002.

“CRM is quickly becoming one of the hottest areas in enterprise applications, and will continue to spur significant mergers and acquisitions,” said Peggy Menconi, AMR Research`s CRM research director. “This business activity will result in the formation of dominant players being identified over time in this emerging open market.”

ERP software

AMR Research forecasts the leading ERP vendors will offer complete CRM suites by 2000. ERP applications make up the largest portion of IT budgets; 39 percent of large companies and 60 percent of smaller companies are deploying ERP systems, according to the enterprise applications analysis firm.

ERP vendors will work to extend CRM`s reach into manufacturing verticals that have been relatively untapped by most CRM best-of-breed vendors, it said.

At last November`s AGA/EEI Information Technology conference, C.D. Hobbs, vice president and director of META Group`s Energy Information Strategies (EIS) practice, offered another perspective.

In the context of escalating competition, utilities must carefully determine if implementing an ERP package fits the business strategy. “There are many reasons ERP packages are instituted that are not the right reasons,” Hobbs said. “Sometimes they are looked upon as a safe solution. But can it become an anchor in a rapidly changing industry?”

There is no doubt there is value in back office integration, especially the administrative space and the supply chain, he said. Packages are developing to include the front office, particularly customer care. “Sales functions in fully integrated suits are not complete,” Hobbs said. “Do you still prefer the fully integrated suite?

“There is not complete customer relationship management in any of the vendors. Some new ones will be emerging that are extraordinary. If you buy now, you may have regrets two years down the road when you see what`s out there later.”

Utilities must choose-they can go with a single vendor for greater integration; or they can partner in software packages in order to get better functionality, and retain better flexibility to quickly respond to change.

Change should be evaluated in light of the impact on all other processes, and especially the business strategy-obtaining competitive advantage and market leadership, Hobbs said. “How do you choose to differentiate yourself? How effective is the fully integrated suite in reaching your goal? Federal Express says it can change its business processes in nine months.”

The key in business strategy is the customer relationship, he said. “Don`t bog down your time and money elsewhere. Protect your capability to differentiate and brand. This is an area where you can`t afford to be slow.”

Hobbs said in today`s business environment the successful IT organization will:

– create a technical infrastructure with adaptability to business processes (which are changing faster than ever before);

– provide the applications and architecture for quality CRM; and

– minimize IT costs per unit of product service across all regulated and competitive lines of business.

Most utilities acknowledge CRM is crucial to their business strategies. Judging by other deregulated industries, those who master this function quickly will likely be most successful in this market.

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