A decade or so ago, utility companies ran many different
software products to support business functions such as finance,
billing, human resources and maintenance. Driven by deregulation,
companies started replacing these products with
SAP, a product that promised to improve the efficiency of the
business, and support the greater levels of accountability and
auditing requirements, which arose from deregulation.
SAP
in utilities is by no means a new trend. Michael Lewis,
utilities industry principal, at SAP, says that utilities have been
running SAP for almost 10 years. Some businesses began running SAP
in the early-to-mid-1990s when the utilities were being
deregulated. "There has been a steady take-up, particularly in the
water and energy sectors." SAP also saw more demand for its
software from utilities as the companies raced to make their old IT
systems Y2K-compliant.
This involved every business checking all the software they ran
to ensure they would be able to cope with the
Millennium date change. Most business software ran on
mainframes and was programmed with only two-digit dates, like "99"
instead of the full four digit "1999" date. At the time IT experts
predicted that the software would fail at the turn of the
millennium because computers would read 2000 as year 00.
Many businesses took the opportunity to replace the old software
with Y2K-compliant software. So SAP was able to provide
Y2K-complaint software at this time for utilities that wanted to
replace their old non Y2K-compliant software.
It has mainly been used within finance. However Lewis says that
utilities are now using SAP to support other business operations.
"Field engineers can use work management and scheduling modules in
SAP. This is a natural extension of the back office, finance
software."
Globalisation is the other major driver for the adoption of SAP
in the utilities sector. "There is definitely a trend towards
utilities using SAP," says Ray Wang, principal analyst at
Forrester
Research. "As the utilities industry has consolidated,
companies have become national and multi-national, which increases
the need for accurate financial reporting" Wang has also noticed
that utilities are increasingly updating their old mainframe
customer billing systems with modern, SAP software.
So deregulation in the utilities sector, globalisation and
Y2K-compliance have driven utilities to use SAP. But why choose SAP
over other products? Oracle is the main alternative, but while many
utilities buy its data and business intelligence products (in fact
SAP is often used in conjunction with an Oracle database), few
utility companies in the UK have chosen to run
Oracle
eBusiness Suite, the company's enterprise software alternative
to SAP. That said, Oracle says that 44 utilities around the world
implemented its Oracle Utilities application in 2007.
Scottish Water, for instance, is using Oracle's Customer
Relationship Management and Oracle's
PeopleSoft
Enterprise Finance Management applications.
On the other hand, Thames Water has chosen to replace its Oracle
PeopleSoft Financials, Oracle HR, and the in-house Capital
Management System and Customer billing system with SAP.
Thames Water has also implemented SAP Portal technology in
early 2007, replacing the previous company intranet. Following this
in the summer of 2007 a suite of financial reports from SAP
Business Warehouse were implemented. This allows managers to view
financial information currently held on financial ledgers in
PeopleSoft through the portal. The long-term aim is to replace all
back office, work and asset management as well as customer billing
and customer relationship management systems with an integrated SAP
system.
Capgemini is one
of the IT services companies which have a practice for implementing
SAP in utilities. "SAP is a major software company which has made a
commitment to the utilities sector and stayed with it," says John
Waymire, vice-president at Capgemini. He says SAP Industry Solution
of Utilities, has been specifically tailored to meet the needs of
the utilities sector. "SAP has a strong [product] for managing
metering in the utilities sector."
Why is it so strong? Waymire says the software is able to
integrate various business tasks in a way that improves efficiency.
For instance customer relationship management at a utility concerns
dealing with customer queries on their bill or calling out
engineers if there is a power cut or the water mains has burst. The
seemingly trivial task of taking a call from a customer and
responding to the request requires the call centre operator to use
several pieces of software. By integrating these, the SAP software
is able to automate workflow and so allow a request taken from the
call centre's CRM application to initiate a series of tasks
culminating in an engineer being sent out.
The so-called end-to-end business process integration from the
call centre operator to the engineer available with SAP means that
utilities do not need to buy extra, third-party software, according
to Jon Brooke, head of utilities at Capgemini.
What about the drawbacks? Until last year SAP did not provide
web portal software so utilities had to buy non-SAP web software in
order to create web portals for employees and websites that enabled
customers to access their bills, update meter readings or report a
problem.
SAP cannot do everything for a utilities business. "There will
always be areas of the business SAP will choose not to support,"
says Dudley Feather, SAP business development manager at
CSC. For instance, SAP does not
provide software for telemetry. Nor does it offer a geographical
information system, which is available from a specialist software
company like Intergraph.
SAP really should be run without any need to tailor it to the
specific business. Feather said companies used to ask for their SAP
systems to be customised. Now they no longer ask for modifications.
"You have to map the business onto what the software can do." CSC
tries to change business processes to work the way SAP works.
Senior executives may balk at the idea of changing how the
business runs to make the company work better with SAP. Yet SAP has
become the preferred choice for utility companies because all the
individual software products in an SAP IT system are already
integrated to work together. Even so, there's a lot of work
required to get it going, says Chris Boucher, director of
information services at Anglian Water. "We are the first water
company to put SAP across the whole business from asset management
to customer billing. The software from SAP is still relatively new.
You have to make a lot of modifications to the SAP system to make
it work in the water industry. We implemented it to work for us,
specific to the industry processes of our company."
Boucher believes that the techniques used to implement SAP at
Anglian Water could be
used in other water companies struggling to get SAP working. "We
have created a template which IT services company Capgemini is
selling to other water companies." Capgemini pays Anglian Water a
commission for each implementation of SAP that uses this template.
"SAP is bloody difficult to implement, so why do it yourself," he
says.
Mike Russell, a senior executive in the utilities practice at IT
services company
Accenture has worked in the utilities sector for more than 15
years. He says, "When I began working in the utilities sector in
1993, we used best of breed software (individual software products
to support a specific business function). These would have required
a lot of effort and heavy customisation of the software to make the
various products work in an integrated way."
SAP sells various products tailored to the utilities sector. Its
software portfolio includes SAP PM, for plant maintenance, PS for
project management and MM for materials management. With SAP, these
individual software products are pre-integrated, which means
Russell spends less time creating software that links the software
together and more time now focusing on how his clients can improve
efficiency by helping them implement more optimal business
processes powered by the SAP system.
In his experience, "Utilities need work and asset management
software and SAP is one of the best products available to support
this requirement." One of the energy companies Russell is currently
working for is looking to build a single database of hundreds of
millions of assets such as substations and pylons, some of which
have been in operation for 70 years or more. "This power company
needed to be able to track the maintenance and replacement
[schedule]. It also needs the latest software to help it sweat
assets.
By way of an example Russell says with SAP, a field engineer
called out to replace a meter is able to use a ruggedised laptop to
order and update information about the meter, which feeds directly
into the materials and finance systems of the utility company.
Last year SAP introduced the
Industry
Value Network (IVN), which includes specialist software
companies in advanced metering infrastructure such as Itron and
Landis+Gyr, plus asset management companies like LeT Systems, along
with IT services companies including Accenture, Atos Origin, Logica
and IBM.
It is probably too early to see the long-term business benefit
for SAP users in the utilities sector of this partner network. But
going forward, it is clear that more and more companies will be
looking for tighter links between the various pieces of software
that support business processes. In time, SAP and its IVN may well
be the standard software purchase for the utilities sector.
Alternatively Oracle could strengthen its utilities software and
become the preferred choice.
This article first appeared in Utility Week magazine