ERP: are tier-one solutions a possibility for your utility?

Trey Swain, Delinea

The current industry climate has caused energy companies, especially mid-market utilities, to contemplate growth strategies. Increasing pressures to operate more efficiently, improve customer satisfaction, provide proper governance and prepare for the uncertainties of deregulation are motivating small and mid-market utilities to endorse progressive behavior. In order to survive and thrive, these utilities require the ability to leverage technology and resources more effectively, meaning they need an enterprise-view of business performance data. Current systems tend to be disparate and built for old models of doing business. Existing software also makes linking these business systems and processes difficult. One solution for this technology dilemma is to consider implementing a tier-one enterprise resource planning (ERP) system.

tier-one ERP defined

Essentially, ERP systems act as integrators, bringing multiple systems together under one program and database. IT systems have typically been composed of multiple software products, each operating discretely, often resulting in conflicting information for an executive to reconcile when determining profitability status and growth strategies. With Sarbanes Oxley and other regulatory requirements, it is becoming increasingly difficult for utilities to operate or be compliant without full integration across the enterprise. With the key executive’s reputation and the integrity of the business on the line, it is invaluable to have an accurate view of the business.

focus on the mid-market

Today, the most scalable, robust and reliable ERP vendors include Oracle, PeopleSoft and SAP. These traditionally complex and costly systems were originally designed for Fortune 500 companies with intricate structures, business processes and multiple users that could more easily justify the steep license fees and implementation expenditures. Due to the cost and complexity, mid-market utilities have traditionally been forced to implement homegrown or second-tier systems, which are often not sufficient to handle growth or meet regulatory requirements, leaving the utility open to substantial risk. These tier-one providers are now focusing on mid-market companies and are offering competitively priced software that tends to be a “light” version of their solutions. This change provides more feasible options for mid-market utilities.

mid-market considerations

There are many considerations for a utility to contemplate before deciding which solution is best for its business, including investment of time and money. The four main cost components of implementing an ERP system are:

“- software license.
“- solution implementation.
“- infrastructure.
“- support.

Having-for the most part-tapped out the large enterprise market, most tier-one providers have made license fees more reasonable for mid-market companies. Thus, most ERP vendors now have competitive license fee structures, including reduced requirements on minimum user accounts.

The second cost component has traditionally been the most staggering to consider-people and services. Understanding the cost structure of the integration partner before implementation begins is key. Some companies now offer fixed-fee pricing, mitigating the risk of cost overruns, which can double or even triple the cost of the system over the course of the implementation. Additionally, utilities require a moderate level of custom configuration of the base-level solution. It is important for utilities to partner with an integrator with sufficient domain expertise that will enable them to configure a solution specifically tailored for the business requirements of the energy industry. Some integrators have already invested in injecting utility-specific functionality into the software footprint, substantially lowering the cost of customization.

Technology advancement over the last few years has lowered the required infrastructure investment. As with all business-critical technology, it is wise to have a partner to help guide the business through the pros and cons of each platform, database and storage configurations. Business continuity plans must also be configured as part of the infrastructure cost considerations.

A common error is to think that the deployment process is complete on the go-live date. The last component, support costs, must include employee training and post-deployment application support. All of the business processes that will change or be added need to be factored to allow for appropriate allocation of time and effort required to bring all the constituents together.

The overall implementation plan must be created to inculcate the new software and business processes along with the employees that will facilitate the system’s success or failure. In many cases, it may be most cost-effective to engage in a managed services agreement with the integrator or a hosting provider in order to effectively manage the change and provide necessary ongoing support.

Companies must also weigh the desire to implement the system quickly against ensuring proper training and change management. The market has seen implementation timelines as short as 90 days. However, this is an aggressive schedule that requires the business stakeholders to become prepared at a similar pace. The new system will bring many new and improved business processes that require the proper time commitment by the business owners to ensure success. An integration partner with domain expertise within the utility sector can significantly reduce the time required to implement and integrate the new environment within the company.

And remember, IT is an enabler of business processes-not a replacement for them. All technology enhancements should have a direct relationship to improved revenue, customer loyalty and productivity. Leveraging the proper technology will assist executives in ensuring the right solutions and information that allow them to maintain the proper control of the business and execute their businesses strategies successfully.

Swain is CEO of Delinea Corporation, an IT services company serving the utility and energy industries. For more information call 800-752-8293.

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