Online customer service enables utilities to improve billing systems and cut costs

IT spending by utility companies in the UK is expected to drop slightly in 2004 to £2.3bn from last year's £2.4bn, according to...

IT spending by utility companies in the UK is expected to drop slightly in 2004 to £2.3bn from last year's £2.4bn, according to the latest Computer Weekly IT Expenditure Report, produced by Kew Associates.

Much of the spending within the sector, which covers electricity, oil, water, gas and nuclear fuels companies, is expected to focus on IT services, which is expected to rise by 6% to £1.01bn, from 2003's £956m.

This increase would follow the trend of recent years, which has seen large numbers of utility companies using consultants and systems integrators to manage parts of their IT infrastructure.

A study by AMR Research, conducted last year, revealed that 70% of global energy companies outsourced IT services in 2003 in areas such as application development and management and back-office operations such as payment processing.

Some utility companies have also considered outsourcing their customer service functions, but most will decide that it is too important to leave to a third party, said AMR analyst Jill Feblowitz.

"Most customer enquiries are too complex to be effectively outsourced," she said. "Although there may be a few energy companies that will take the bait and sign on for business process outsourcing for customer care, we expect these companies to return in-house in a couple of years."

In a climate where regulatory pressure and increased competition require utility IT directors to improve customer services while keeping costs low, many companies are putting customer-related processes, such as billing, online.

Last November, British Gas began e-mailing bills to customers in the first stage of the company's ambitious plan to bill one million customers online by 2005.

Companies such as British Gas, which sends out more than 70 million paper bills every year, will be able to boost customer service as well as cut costs and increase internal efficiency by using e-billing, said Avivah Litam, an analyst at Gartner.

"Internet billing and payment reduces costs and drives economies and savings to the bottom line," she said. "However, by looking at only cost savings, a biller can forget that e-billing generates business value by enabling a company to deliver superior and efficient customer service."

Other utility companies are using online systems internally to improve customer service and efficiency, with some achieving impressive returns on investment.

Last month, Computer Weekly reported that Scottish Water had saved £18m in 12 months after rolling out a £7m online customer service system from Oracle in conjunction with 200 Panasonic laptops for field staff.

As well as improving the ratio of customer calls resolved first time, the Oracle's E-Business Suite system improved productivity with field staff carrying out 11 jobs a day rather than five.

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