Putting the hype in context: IT execs discuss utility trends

Pam Boschee, Managing Editor

EL&P invited four IT executives to share their opinions about IT trends at utilities. The participants included two representatives from utilities and two solution providers.

The utility perspectives were provided by Verlyn Kroon, division manager, Information Technology, at Omaha Public Power District, and Dave Coker, vice president-IR Computing and Network Services, Southern Company. ORCOM’s CTO, Steve Kim, and Conversant Inc.’s CEO, Stan Royal contributed the solution providers’ insights.

EL&P: A Gartner study recently reported that utilities are spending about 5 percent less than they did last year on IT. The Meta Group predicted that utility IT spending in North America will increase 20 to 30 percent through 2005. What do you predict will be the next wave of investment in IT at utilities?

Kroon, OPPD: Web-enabled systems that are remotely accessible. Performance management systems and more multi-media applications for business use.

Coker, Southern Co.: Emphasis on security and information management will continue to be a focus for us. We believe that technologies to support establishing both public and private trading exchanges will also continue to play a role in enabling our Supply Chain organization to strengthen and streamline relationships with partners and suppliers.

We also see the need for technologies in the enterprise application integration (EAI) space that will allow us to integrate existing legacy systems with each other and with new packaged systems. This will further our goal of improving business processes leading to greater efficiency and eliminating the need for large system implementations such as ERP (enterprise resource planning) and CRM (customer relationship management) by allowing us to leverage and improve what we already have.

Another key investment will be in wireless technologies. The convergence of the PCs and handheld devices is part of our end user vision.

Royal, Conversant: IT investment in utilities will be dependent on changing market pressures, including deregulation (open market competition), new product offerings, and new service offerings. In addition, we will see replacement of aging systems with inflexible architectures and technology which can no longer support the changing market in a cost effective manner. Replacement will also be required because of the number of retiring persons who support these old systems. Replacement will enable utilities to attract and retain bright new technical persons that are needed to continue at a fast pace into the near term future.

Kim, ORCOM: I do think you will start to see a rebound in IT spending, however, it will be a different kind of spending, more focused and results oriented. Technology spending in general over the last few years has been chaotic and driven by hype. Projects over the next few years will be smaller, more measurable and results driven as technology spending will focus on areas that will yield the largest measurable results. More than likely the focus will be on operational efficiency, cost control, and customer insight; to this end, we will likely see more outsourcing contracts as a method of reducing IT and operating costs and improving efficiencies with industry expertise. I think you will see very focused investments in integration technologies, not EAI , but more standards and component based solutions. Having the same information available to different systems, employees, and customers, is huge in terms of operational efficiency, cost control and customer insight. Customer insight itself will be driven by investments in business intelligence and analytics. There is a considerable amount of investment being made in this area by technology vendors since it’s similar to what the government needs to predict and track terrorist activity. This level of investment will yield increasingly sophisticated tools to track buying patterns, spending, preferences, and your actual costs and profit associated with the service you provide to a customer.

EL&P: What technology or system do you identify as having fallen short of its hype?

Kroon, OPPD: None. The process changes that business failed to implement have fallen short, not the technology or system.

Coker, Southern Co.: Portal technology has been challenging. We have already obtained many of the benefits through other means. For example, many people use portal technology to build employee access to HR systems, benefits, etc. We have already done that utilizing custom tools. It has been frustrating for us to make a compelling business case for the majority of information access capabilities.

Another area that has been disappointing for us is content management. The tools are not as robust as we expected. Implementing a content management system across a multi-company corporation is a lot more challenging than we expected.

(Note: Southern Company is a holding company for five electric subsidiaries including Alabama Power, Georgia Power, Gulf Power, Mississippi Power and Savannah Electric.)

Royal, Conversant: Browser-oriented technology without the re-architecture of aging software is a cover-up to prolong the life cycle of systems without incurring the cost of redevelopment.

Kim, ORCOM: I think businesses in general were disappointed with the results they achieved with technology investment. There definitely was a lot of hype surrounding certain technologies such as CRM, EAI, and probably the Internet and eBusiness to some degree. But if you look at the raw productivity numbers, the investments in technology are paying off, but not at the hype level.

I think most of the disappointment was attributable to over-selling and grandiose roll-out and deployment strategies.

EL&P: Please provide a snapshot of recent IT initiatives you’ve identified at utilities.

Kroon, OPPD: [Initiatives at OPPD include] improved network reliability, improved security, distribution automation, replacement of legacy systems with Web-enabled systems, and replacement of process control computers.

Coker, Southern Co.: Southern Company has seen tremendous growth in the use of its e-customer applications. We have implemented e-mail management systems (e-Gain), Web site tracking (Aria) and Web reporting (IWR). Our e-Bill application currently serves 80,000 customers and is adding 1,000 online payments each week. We are very proud that Southern Company’s suite of Web sites was recently selected as a finalist in the ‘Business Transformation’ category of the Massachusetts Institute of Technology Sloan eBusiness Award competition. This award category “recognizes companies that have transformed the way business, or some important element of business, is done in an industry, thereby creating new market opportunities and/or sharpening their competitive advantage.”

We have focused on several efforts to make it easier for our employees and business partners to have access to information by enabling transactions via the Internet. This includes implementing PeopleSoft 8 to provide a more cost effective self-service delivery. Leveraging EAI technology is one of our key initiatives.

We are also working on better integration between our internal materials system (AMPS) and an external exchange (Pantellos) to support process changes in the Supply Chain Business that make us more efficient. To do this we are leveraging EAI technology.

In addition we continue to put major emphasis on tools that help employees work more efficiently such as wireless messaging, and remote access tools.

Royal, Conversant: There are a few customer system initiatives, not the normal annual number of project starts. Risk management and energy trading appear to be of high importance. There are a few work management opportunities as well as geographical information systems.

Kim, ORCOM: From a utilities perspective I think you will see IT initiatives in open systems and architecture, integration focused around investments that have already been made, high availability around systems/networks, and CRM around business intelligence. The initiatives will be smaller and more results focused and as you can see more classic IT and less hype IT. Additionally, you will see more focus on outsourcing critical complex applications, which are non-core competencies of utilities such as customer care and billing.

For more information on these utilities and solution providers, please visit: www.oppd.com, www.southernco.com, www.conversantinc.com, and www.orcom.com.

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