By Bob Vallee & Frank Leone, PwC Consulting
Adaptability is a survival characteristic-both in the natural world and the world of technology. Plug and play is the order of the day, and modularity has become a standard design feature of practically everything from PCs to semiconductor factories.
It should come as no surprise then that utilities are looking for new alternatives to the old, monolithic approach to improving customer information systems (CIS). Vendors are beginning to respond, by developing solutions that are increasingly modular in architecture and can be implemented on a component basis.
This is great news for utility companies. A truly modular CIS platform can allow companies to take advantage of new technologies more quickly than they could have before. This can translate into productivity gains and other competitive advantages delivered earlier than possible with a complete system replacement.
Accomplishing this will be difficult, however, and it can exact a premium in overall delivery cost, time and complexity. Utilities and their vendors face a significant challenge in implementing the appropriate middleware solution and determining how to access the necessary data without disrupting the rest of the CIS.
Even so, for many companies, this alternative route may be worth exploring.
How we got here
As the industry evolves, companies are finding that their legacy customer systems are becoming increasingly outdated. What it takes for utilities to service customers today is quite different from what it took even a few years ago. The market has changed. Regulatory frameworks are different. Business models and organizational structures are being rebuilt, and legacy systems need changing as well.
Unfortunately, capital constraints and market transformations have created great uncertainty for utilities around the value of customer-related investments. Utilities are much slower to undertake major CIS upgrade or replacement projects because of their historically long delivery lead times and cost overruns.
An incremental approach to system replacement, however, is beginning to provide utility companies with an alternative path. It would allow them to invest only in new components to address specific, demonstrable business needs, while leaving the rest of the system intact.
For example, a utility that has chronic problems resolving delinquent accounts might benefit from a new collections system. A component upgrade would replace these specific functions with new technology, using enterprise application integration (EAI), extract, translate and load (ETL) and other middleware solutions to integrate the new module with the legacy architecture.
Such incremental upgrades could allow companies to capture benefits sooner than they could by replacing an entire system. Also, this phased approach allows for a flexible time horizon. In other words, a company can proceed at its own pace, slowing down or accelerating further upgrades as it sees fit.
An incremental approach can be attractive, but before embarking on this route utilities should carefully evaluate the business drivers, practical limitations, and architectural implications of their decisions.
Establishing the business case for component upgrades begins with identifying the most pressing opportunities for improvement. Generally this means targeting a company’s pain points-where existing systems have proved inadequate-because this is where new functionality will most likely yield immediate and substantial returns.
Once a company identifies and prioritizes its most pressing upgrade needs, it must evaluate the practical limitations of its legacy architecture to determine if a component upgrade is even feasible. Middleware solutions can enable companies to phase out functions within systems that were not designed to be modular-but at a price. The overall business-case calculus must include the costs and technical issues arising from this solution.
Utilities should also consider the design of the replacement system, to determine whether the chosen vendor is advancing a truly modular architecture. Most vendors seem to recognize the need for componentization, but a word of caution-some platforms will prove to be more component-friendly than others.
A vendor might offer a product with a modular design, but a monolithic architecture may stand behind its functional front-end. Features may be too tightly integrated in some vendors’ designs to be truly modular. The customer-contact module, for example, might appear as a separate feature within the structure of the CIS, but removing and replacing it with a different module might be impossible.
This would negate the point of a modular design, leaving the utility stuck with an inflexible platform that will not accommodate selective upgrades in the future.
Are we there yet?
All types of IT upgrades should be undertaken with a clear understanding of how they serve the company’s progress toward its long-term goals. CIS replacement is no different, and utilities should be careful to avoid a path that could lead them in the wrong direction.
The next generation of CIS platforms will allow customers to pick and choose functions on an a la carte basis, and increasingly to upgrade individual components as new technologies are developed. Some companies may be able to selectively incorporate new features into their legacy systems-but at a cost that must be weighed carefully.
The possibilities of operational cost savings, increased efficiencies and improved functionality offer sufficient incentives for companies to at least explore this alternative upgrade path.
Whether this path will bring them to their desired destination remains uncertain, but it should make for an interesting ride.
Vallee is a partner with PwC Consulting and may be reached at e-mail firstname.lastname@example.org or by telephone at 216-875-3179. Leone is a principal consultant with PwC Consulting and may be reached at e-mail email@example.com or by telephone at 412-780-2679.reached at e-mail firstname.lastname@example.org or by telephone at 216-875-3179. Leone is a principal consultant with PwC Consulting and may be reached at e-mail email@example.com or by telephone at 412-780-2679.