The Cloud - A Game Changer For Utilities

Nathaniel J Sheik, President & CEO, SoftSmiths

A friend recently contacted a local utility district to get water connected to his new house. This friend, a true 21st century citizen with a Smartphone and a tablet who shops and banks online, inquired as to how he could electronically make his request. He could not. The utility district offered its services to the public as if it were 1985 instead of 2013. Herein lies a huge disconnect and a clear challenge for utilities to become more sophisticated in order to match up with customer expectations.

The experience above is just one example of the challenges the utility industry is facing due to significant changes across their operations - from Water, to Power Generation to Transmission to Distribution and from Trading and Risk Management to Retail access - bringing unprecedented challenges and opportunities along with value chain.

How can utilities act today to establish the basis for future growth, performance and customer satisfaction? The answer is already here, and is becoming clear not only for utilities, but also in many other industries—the power of Software-as-a-Service (SaaS) cloud-based solutions. While managers at utilities have heard and understand the basics of cloud-based solutions, few fully appreciate the potential for their business, and even fewer have implemented such solutions. However, Cloud adoption is taking hold, the rate of adoption will grow over the coming years, and this approach presents utilities with benefits they cannot reliably, comparatively, profitably resist or ignore. The early adopters also known as the first movers will be able to satisfy customers better than the competition.

A number of utility-specific SaaS offerings are available – ranging in scope from basic services to very comprehensive and sophisticated functionality. Accessible via web browsers and protected by financial-industry grade security, these industry-tailored services are helping to pioneer the migration by utilities to the Cloud. The inherent characteristics of cloud-based solutions directly address the main driving forces for the utility industry change, thereby providing them an opportunity to support future performance and growth. These forces are why cloud services will fundamentally change the game for utilities in the next few years.

Utilities are facing the need for a heavy investment in priorities, such as replacing aging assets, expanding their network capacities and implementing mandated changes initiated by the government regulations. Cloud changes the game by offering utilities economies of scale that reduce total cost of ownership and operations (TCO)— while also enabling them to shift their investment profile away from capital expenditure and toward operational expenditure. Cloud based SaaS environments enable utilities to rapidly deploy internal and external facing applications across their business, cost-effectively and without significant up-front investment. Also, cloud platforms mean system changes and refinements can be implemented in a fraction of the time compared to traditional systems and at a significantly reduced cost. Cloud services provide utilities with a new level of flexibility in how they manage and organize their IT capabilities. At the same time, cloud services’ usage fees and cost structure provide predictability and transparency that support cooperation with business partners, joint ventures, alliances, consolidation, spin-off and post-merger integration.

Given the many benefits of the Cloud based SaaS delivery model, one would expect companies to rapidly move towards SaaS. Yet we have seen reluctance in adoption, with security topping a list of concerns that also includes availability and performance. It is interesting to note that many of people who express concerns about the security of Cloud-based applications are actually using them in their own personal lives. Like the friend I mentioned, they participate in on-line banking, may share medical information through healthcare and doctor portals, and do on-line stock trading with brokerage and investmentfirms. What can be more sensitive than those personal activities? Considering that level of comfort, there should not be an obstacle to adopting cloud-based solutions at work, provided they use the same financial industry grade security for data, network and physical protection. As for availability, many other functions that the utility is involved in rely on communications that also use the internet infrastructure as a delivery platform. As a result if internet communication is down then those functions couldn't be carried either, even with the software application installed on-premise at the utility.

As the adoption of cloud-based, software- s-a-service offerings starts to rise among utilities, it is realistic to recognize that a portion of a utility’s systems landscape will continue to be operated in-house. Utilities will likely test cloud-based solutions in areas outside their core processes before considering moving these critical applications to the cloud. So, an important step in a utility’s journey to cloud enablement will be the integration of their legacy applications with those provisioned from the cloud. Utility CIOs will be looking for cloud solution providers that recognize just how uniquely complex their businesses are, and who can therefore address legacy system integration challenges head-on. It is clear that the utilities industry will continue to change, and cloud-based solutions will impact this change. SaaS as a category is overtaking traditional software because it is fundamentally a better business model, for consumer, utility and the vendor. Utilities that have not yet considered migration toward their cloud-enabled future should make it a priority to examine the potential of cloudbased applications—and also take a close look at what their competitors are doing in this space. Utilities can begin with small steps testing out cloud models in specific areas of their business. Over time, their cloud maturity and comfort levels will increase, while at the same time their software infrastructure will provide higher value at lower cost.

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