CIS Transformation: Unlocking The Value Of Utilities .

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Cognizant 20-20 InsightsCIS Transformation: Unlocking the Value ofUtilities’ Customer Information SystemsTo remain competitive amid continuing economic uncertainty andregulatory change, utilities must accelerate the replacement of inflexiblecustomer information systems and add new capabilities that enhancecustomer service and enable consistent, successful up-sell andcross-sell capabilities.Executive SummaryThe customer information system (CIS) is a vitalcomponent of the meter-to-cash (M2C) valuechain for electric utilities and other industriesthat provide metered delivery of commoditiessuch as water and natural gas. It is the glue thatbinds the consumption and metering process topayments, collections and other downstreamprocesses that affect a company’s top line. YetCIS transformations carried out in the 1990s arequickly proving inadequate for handling the influxof changes brought about by regulation and innovations such as the smart grid, electric vehicles,mobile technologies and self-serve portals.At the same time, the recent economic downturnand sluggish recovery has placed even morepressure on utilities to achieve greater costsavings, heighten process efficiencies anddemonstrate faster meter-to-cash conversion.Consumers — both residential and commercial/industrial (C&I) — have become increasingly costconscious, and more intolerant of system inefficiencies and inflexibilities. Not surprisingly,customer satisfaction has become a pressingcognizant 20-20 insights december 2013issue in an industry marked by high churn — theresult of little product and service differentiation.Nonetheless, the complex nature of CIS initiatives has resulted in many failed or underperforming CIS implementation projects. Given thisbackdrop, utilities will have to regroup and devisean approach that mitigates the risk and challenges of CIS transformation initiatives, and deliversa superior customer experience. Pike Research,a unit of U.S.-based Navigant’s Energy Practice,projects that transformational initiatives willfuel growth in the electric utility billing and CISsoftware and services market, with expendituresrising from US 2.3 billion in 2011 to US 4.0 billionby 2017.1In this white paper, we will explore the challenges utilities face in modernizing their CIS environments, and how these companies can effectbusiness transformation through a more configurable, efficient and easier-to-deploy CIS. Wewill also offer a path for assessing next steps andfuture needs, as well as recommendations forachieving intended business results.

CIS Shortcomings: The Case forReformation Smart grid innovations: Today’s CIS systemswere designed to handle flat tariffs or volume-based tariffs, and monthly, bi-monthly orquarterly usage data. Many are not equippedto handle the complexities that accompanythe smart grid, such as dynamic or time-of-usetariffs, or the deluge of usage data gathered inhalf-hourly or hourly intervals by today’s smartmeters. Resource-intensive: Inefficient CIS systemsconsume a lot of system and infrastructureresources. Likewise, inefficient billing systemscan sap IT systems, with the potential tointroduce multiple points of failure. A compartmentalized approach to customerfacing functions: Utility companies, often as aresult of acquisitions, use different billing andcharging systems for various business unitsand services; thus, they transmit different bills,with different payment channels and options.What is ideal from a customer experience andscalability perspective is a single billing systemthat aggregates all charges and presents asingle bill to the customer. Batch as opposed to real-time processingand information availability: Older CISsystems take a batch approach to billingprocesses; they do not provide customers anddepartment managers with real-time access tobill and usage information.The challenges utilities face in developing CISstrategies can be boiled down to the following: Legacy systems: Given the extremely centraland critical position that legacy systems occupyin the meter-to-cash process, utilities are waryof overhauling their billing systems — fearingthat any changes to their CIS could disrupt thebilling and revenue-collection processes. Thisconcern has led to the propagation of antiquatedCIS systems that are tightly integrated withothers, with hard-coded business rules thataren’t reconfigurable. These systems receivelittle or no support from vendors, and requirean army of development and support engineersto maintain. This can cause a huge drain onfinances, and negatively impact businesscontinuity and competitiveness. Moreover, ITinfrastructures that support CIS/billing batchruns have in many cases reached or are closeto reaching their limits regarding scalability. Atypical large electric utility with seven millioncustomers will have a batch run size upwards of500,000 bill calculations. If stretched too thin,this can easily bring down the entire batch run.Glacial time to market: Product managersfrequently complain that the products andservices they develop in response to the competition take too long to launch. The problemcan often be traced to supporting IT systemsthat require costly customization and development work.The case for transforming utility CIS systemstypically comes down to the following: The Most Serious Cause of UtilityCustomer ComplaintsOther30%An efficiently designed and built CIS backedby able business processes can reducemanual intervention — significantly loweringthe cost to serve customers. Companiesthat have implemented such a system havereported a 35% reduction in the cost to servecustomers from replacing the utility’s legacyCIS with a packaged solution.3 By introducingefficient self-serve capabilities and incentivizing customers to adopt low-cost customerengagement channels like the Web, mobile,text and interactive voice response (IVR),utilities can implement electronic bill presentment and payment. As a result, precious dollarscan be diverted from routine and e: UK Energy OmbudsmanFigure 1cognizant 20-20 insightsThe cost to serve: A utility’s customer serviceprocesses carry substantial potential to reduceexpenses. According to figures from the UK’sEnergy Ombudsman, billing-related issues werethe most serious cause of complaints amongresidential customers in 2011.2 (See Figure 1).2

able operations, and used to improve marketanalysis, devise better products and enhancemarketing strategies. The cash flow: Analyses of customer behaviorhave shown that an easy-to-follow utility billraises the probability that customers will paythe bill on time and in full. A simplified billcan also reduce inbound customer complaintcalls and increase the adoption of Web selfservice.4 A bill that is tailored to the specificneeds, formats and financial resources ofa customer or demographic can encourageprompt payments and lower defaults and delinquencies.The principal vehicle of customer satisfaction and engagement: A utility’s CIS andits processes have a profound effect on thecustomer experience. For instance, customersform opinions about their utility based onthe accuracy and clarity of their utility bill.Processes built around billing and payment —bill inquiries, resolution and customergrievance policies, for example — greatlyshape customers’ perceptions and satisfactionratings. Customized products and services thatare efficiently placed on the bill with an easyto-follow Web link or toll-free sales numberhave the potential to boost sign-up rates.Integration raises complexity: Utilities in theU.S. are increasingly partnering with thirdparty suppliers of utility services, energyefficiency programs, home-repair services andwaste-collection services. On-bill financing(OBF)5 is another vehicle that is becoming apreferred method for billing small businessesfor loan repayments on capital-intensiveenergy efficiency programs.6, 7, 8 Alternatively termed as PAYS (pay as you save), thisfinancing model has been one of the moresuccessful in convincing commercial andsmall-business customers to embrace capitalheavy energy efficiency programs.9 For theutility, this creates more avenues for providingintegrated services to customers, therebyaiding retention, reducing peak demand andpostponing capacity expansion. However, thiscan also introduce challenges in the collectionand allocation of revenues between the utilityand its partners. Furthermore, legacy CISsystems are not equipped to handle thesecomplexities without substantial developmentefforts. Mergers and acquisitions: Merger and acquisition activity presents utilities with the opportunity to reduce redundancies and achieveeconomies of scale by either modernizing orconsolidating redundant CIS systems. Policy and regulation: For utilities in regulatedmarkets, regulations sway processes related toaccount delinquency, service termination, billpresentment and payment, as well as associatedrecordkeeping and audits. In these cases, billcalculation and account management modulesshould be configured to take into account thevarious nuances of regulation. Reporting and analytics: The CIS holdsvaluable trend information on billing andpayment history, as well as payment patterns.Harvesting this information can uncoveractionable information on usage and paymenthabits, and enable the utility to promotetailored, own-brand and affiliate products andservices on the bill.Assessing the State of CIS SystemsTo understand the state of the CIS and chart acourse of action, an assessment of the existingCIS system, process and infrastructure is typicallyneeded. This type of assessment should beperformed along the following dimensions. People: It is important that people within thecompany are knowledgeable about the CISsystem and processes, and are capable andempowered to carry out their responsibilities.The questions pertinent to this assessmentinclude: Is there a clear delineation of roles and responsibilities of the various individuals in thebilling and customer care departments? Arepeople trained and informed enoughabout their roles to deliver their duties efficiently? Domultiple people perform the same activity within the same or different departments? Is there a concerted effort to disseminateand decentralize information regarding processes and systems? Are people adequately empowered to makedecisions, or do they look outside their rolefor approvals before they take action? Is it extremely expensive to find support andmaintenance resources for the existing system?cognizant 20-20 insights3

Processes: Business processes lend distinctiveness to an organization, and are animportant component of a utility’s competitive advantage. Department leaders mightwant to build custom business processesto ensure that the organization maintainsa leadership position in the industry. At thesame time, it is essential that the processesare well understood, documented, monitoredfor inefficiencies, and commonly understoodamong users. Processes should also be easyto incorporate into the CIS system. Amongthe pertinent questions that should be askedbefore implementing new processes:interface. This means that business users willhave limited use of the system, and will have tofall back on application support staff and development teams to perform system configurations and day-to-day operations. This adverselyaffects the responsiveness of the functionas a whole, increases the cost to serve, anddelays time to market. Figure 2 shows how CISsystems stack up when it comes to technologyand ease of use.Pertinent questions for assessing the effectiveness of CIS technology include: Is the network, database or code base proving to be a bottleneck for the CIS system? Is there accountability in each step of the Is it extremely difficult to find support andprocess and segregation of duties in eachbusiness unit?maintenance resources for the system? Does the integration architecture allow for Is there an audit trail for recreating everyloosely coupled components and plug-andplay modules and services — both inside andoutside the organization?step of the process if required by auditors orregulators? Are necessary checks and balances in place Are the systems interoperable, and do theyto prevent and alert in cases of attemptedfraud or exception conditions — such as anunprecedented bill amount generated for acustomer — before it is communicated to thecustomer? Are business processes so rigid that theycompletely prevent manual override — evenin situations where this is desirable? adhere to the latest standards for technology and security? Are the latest innovations in Web, voice, mo-bile and text technologies harnessed to deliver the best possible customer experience? Technology: Often, a CIS system is rich incapabilities, but the underlying technology andinfrastructure presents a bottleneck. Legacymainframe-based billing and customer servicesystems often have scalability and processingmuscle, but are not intuitive to use due to theabsence of a well-designed and user-friendlyCapability: Does the company’s existing system support the most critical functions thathave a bearing on the cost to serve and satisfy customers? Smart grid innovations, suchas EV charging and net-metering arising fromdistributed generation, time-of-use tariffs andthe deluge of meter data are inevitable — theresult of competitive pressures spawned byderegulation. They must be supported eitherUtilities’ Satisfaction With their CIS SystemsEase of IntegrationEase of ModificationEase of ImplementationMaintenance and SupportOverall Satisfaction1.02.0Source: Five Point Partners10Figure 2cognizant 20-20 insights43.03.0

An Aging CIS12%22%28% Installed in the last 1 to 2 years Installed in the last 3 to 5 years Installed in the last 6 to 10 years17%21% Installed in the last 11 to 19 years Installed more than 20 years agoSource: Five Point Partners14Figure 3“out-of-the-box” by the system, or by simpleintegration with supported partner solutions.Figure 3 shows that 40% of CIS systems currentlyin place lack the capability to bring about theinnovation necessitated by the Energy Policy Act,200511 and the Energy Independence and SecurityAct, 2007. 12, 13A Suggested Plan of ActionA step-by-step plan is essential to ensure thatthe entire CIS transformation initiative is effectively managed, governed and delivered. Figure4 depicts an indicative roadmap — from businesscase preparation to post-implementation supporthandover.CIS Transformation Roadmap Assess currentstate of CIS. Performbenchmarking. Define future state. Determine solutionscope. Determine solutionapproach andquick wins. Assess solutionalternatives. Determine keysuccess factors andacceptance criteria.SystemDevelopment andImplementationPre-Implementation Select implementationpartner. Gather functional andtechnical requirements. Develop data migrationstrategy. Develop integrationstrategy. Obtain requirementsign-off. Develop solutionprototype. Validate solutionprototype.Post-Implementation Develop/customize/configure solution. Test and validatesolution. Migrate data. Integrate solutionwith external systems(GIS, MDM, EAM,WM, OM). Obtain sign-off. Pilot solution. Observe andimplement coursecorrections. Go-live. Monitor new system. Train users andsupport staff. Handover to support. Feedback andcontinuousimprovement. Complete cutoverto new CIS andretirement of old CIS.Effective Project ManagementKey Enablers AcrossDifferent PhasesTransformation PhasesBusiness Caseand RoadmapDefinitionExecutive Sponsorship and OversightBest Practices, Standards and InteroperabilityChange Management andOrganizational ReadinessProcess ImprovementsFigure 4Key Enablers AcrossDifferent Phasescognizant 20-20 insights5

Implementation OptionsCost, risk, complexity andpotential for competitive differentiationHighBesst of BreedVanilla COTSPhasedTransformationOne-offenhancementA oneo timeeffort toeffeliminate orease a singlepain area.LowIncrementalA wavedwaandrisrisk-mitigatedapproach atintroducing widerchanges to thesystem landscapethat addressmultiple pain areas.Repplacing customandd legaclegacyapplications withan off-the-shelfapplication without-of-the-boxfeatures andfunctionalities thataddress all or mostbusiness needs.A completeoveerhaul of tthesystem lansyslandscapeby carefullyarefselectingctthe bestsolutions that are fitfor each processand business area.Degree of ChangeRadicalFigure 5Figure 5 depicts the various options for a transformation regarding the degree of change that autility requires.tomization. The utility also loses a measure ofcontrol over data and the code. Typically suitedfor municipal utilities.Utilities have several choices when selecting animplementation partner:Given the available approaches and options,selecting one kind of partner over another willdepend on a utility’s budget, business goals, pastexperiences in transformation initiatives and theavailability of the partner of choice. Yet more oftenthan not, the best results are realized througha hybrid approach. For instance, a large utilityserving a million-plus customers might choosea CIS package solution implemented in full or inpart, with necessary customizations provided bythe solutions developer or by a systems integrator. The utility can then employ its in-house teamto build a critical component that provides differentiation and marketplace advantage (such asbundle management). The system integrator canincorporate the CIS with other applications, andbuild necessary overlays and user interfaces thatdrive meaningful business advantages. Package implementers bring best-practiceexperiences in implementing best-of-breedpackage solutions and reducing risk; however,they can be costly, and lack the ability toprovide high levels of customization. System integrators/consultants offer diverseexperience in implementing disparate systems,as well as integration expertise vis-à-vis otherinternal and external systems. They are alsoa favorable option for custom developmentefforts. In-house implementation teams have thebest knowledge of custom business processes.Nonetheless, with limited availability andpossible little exposure to best practices,in-house resources also bring the risk ofdisrupting transformation activities. Managed solution providers can significantlylower the cost of end-to-end processes and thecost to serve, but lack differentiation and cus-cognizant 20-20 insightsActivating the Plan:Key CIS CapabilitiesA modern and progressive CIS must have certainhigh-level features in order to enable truebusiness transformation (see next page).6

Configuration Ratherthan CustomizationBusiness users should be able to perform their daily activities, such as time ofuse tariff setting, product configuration and campaign management (configuringand marketing new energy efficiency programs sliced per customer usage data,bill layout, design and presentation) with the least dependence on cost-intensive ITsupport and development staff.ConvergenceThe system makes it possible to provide billing for disparate market segments suchas residential, C&I and various services through a single system. This can delivermaximum benefits from economies of scale, and reduce support and maintenanceoverhead. The CIS should also be able to support multiple “own brand” and partnerservices and products on the same bill, thereby delivering a consistent and satisfying customer experience, apart from the benefit of providing value-added servicesto customers via service partners.Product SupportThe system must be able to support the latest smart grid innovations, distributedgeneration, net metering, time-of-use tariffs and the resulting complex billing calculations.Support for PaymentChannelsThe system must provide support for the most popular payment methods (ACH,credit card, check and also diverse channels of payment, such as the Web, mobileapps, text, IVR and kiosks) apart from more conv

habits, and enable the utility to promote tailored, own-brand and affiliate products and services on the bill. Assessing the State of CIS Systems To understand the state of the CIS and chart a course of action, an assessment of the existing CIS system, process and infrastructu

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