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British Gas to invest £500m in connected homes business

Energy provider aims to build on success of its Hive smart thermostat and roll-out of smartmeters

British Gas is to invest £500m into developing its connected homes business, after selling more than 200,000 of its Hive smart thermostats.

The energy firm is soon to release further products, including smart lights, motion sensors and smart plugs, and is trialling a connected boiler. British Gas also said it is further advanced than any of its rivals in rolling out smartmeters, with 1.5 million of the devices now installed in UK homes.

“We believe connected homes offerings will become increasingly important,” said Iain Conn, chief executive of Centrica, the owner of British Gas, in the company’s latest financial results statement.

“We already have products in the market and have built high-quality, end-to-end capability in this area, with operating platform design and operation, hardware and software development, data analytics, installation and maintenance,” he said.

“Given these capabilities, the scale of our existing customer relationships, and our ability to connect physical with digital through our 12,000 direct engineers and technicians worldwide, we will be able to compete meaningfully in this space. To drive growth, we are investing £500m in operating costs and capital expenditure in connected homes’ activity over the next five years.”

More than 600,000 British Gas customers have opted for the company’s “My energy” service which provides additional details about energy use derived from their smartmeters. The firm is also trialling a “My energy live” service which will allow customers to access functions from the in-home smartmeter display on their smartphones.

In March 2015, British Gas acquired smarthome startup AlertMe, which already provided the underlying platform software development and big data analytics to support the connected home product range.

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Migration troubles

Separately, British Gas is still recovering from a troubled implementation of a new SAP customer relationship management (CRM) and billing system that replaced a legacy Siebel application.

“British Gas Business was impacted by issues following the implementation of a new billing and CRM system in 2014, which has resulted in significant delays to issuing customer bills. As a result, we incurred an increased bad debt charge and additional costs associated with extra resource required to help resolve the issues. Customer service levels also suffered,” said Conn.

As a result of the problems, British Gas Business energy supply and services operating profit fell by 95%, but the CRM issues are not expected to be resolved until later this year. The issues arose from migrating customer accounts to the new SAP system from multiple legacy systems.

“All of our business customer accounts have now been migrated onto the new system, although we have faced issues related to producing timely customer bills. Reflecting the increased risk associated with these billing issues, the bad debt charge was higher in the first half compared to the same period last year, while we have also recruited additional resource to help resolve customer service issues,” said the Centrica results statement.

“We are currently undertaking an extensive transition recovery programme, including continued investment in additional resource. Most of our customers are now being served normally, and we currently expect to have resolved the issues by the end of 2015."

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