Figure 1. The traditional customer information system is antiquated in the new deregulated markets
As utility industries around the world go through deregulation and implement competition, a number of lessons have emerged for countries that are facing change. One of these lessons involves the changing role of customer management within a utility operation.
The introduction of competition changes the focus of a utility. Traditionally, utility companies have held a ‘captive’ customer base and have therefore been unburdened by customer complexities associated with consumer choice. Conventional customer management in this simplistic model has been supported via a Customer Information System (CIS). CIS has typically been associated with back-room monolithic billing with an obtuse front end viewed as a necessary evil in order to do business.
Now, customer management is becoming a core component of utilities looking to become industry leaders in national and international markets. The impact this has on traditional customer systems is enormous. Customer management solutions of the future must adapt to changing business models and must, in parallel, unbundle and reassimilate to respond to ever changing business rules and data sets.
Over the next decade, the increasingly competitive global landscape will drive utilities toward a new customer management model, built on a set of flexible, robust, and highly integrated customer management components, assuring that utilities will be able to quickly meet and respond to customer expectations, differentiate themselves through innovation and product offerings and provide a competitive edge through ‘first to market’ strategies unheard of in the traditional world of utility business.
Figure 2. The customer management core is a combination of best-of-breed components and adaptable technology architecture, and is the logical replacement of the traditional customer information system
There are three target areas that next generation customer management solutions must address to achieve realized business benefit and provide competitive advantage. These target areas will deliver hard value and place the savvy utilities ahead of the pack.
Be enabled for mergers and acquisitions: With the introduction of deregulation, markets often see a flurry of new retail entrants. Newly opened markets also force prices to true competitive levels. This generally forces retail margins down. As a consequence, we see trends toward takeovers and the selling of business segments. The end result is an environment where the opportunity exists for well-geared organizations to merge and acquire other retail operations and benefit from economies of scale.
Be responsive to new service models that focus on both customer retention and customer acquisition: The bottom line for tomorrow’s utilities and service providers is that to remain competitive, customer retention and acquisition will be key. By focusing on the customer, utilities and service providers can obtain the knowledge necessary to be proactive in providing new products and services, thus establishing a competitive advantage. The full extent of the use of such knowledge is to be able to influence the interaction with the customer today based on their activities of yesterday.
This movement toward customer care requires the mining and maintenance of customer information in order to identify target markets and to develop an understanding of customers’ buying preferences and drivers. Once new markets are identified, a utility must be able to rapidly deliver new products and services, with time-to-market a critical goal. Quick, effective, and accurate performance measurement of these new products and services will allow the utility to adjust its tactics and marketing strategies as required. It is then possible to implement either acquisition or retention campaigns.
Be flexible to adapt to rapid changes in regulations and market operations: The fact that existing customer management systems are not customer focused is not surprising, considering that utilities have traditionally been regulator focused. Customer and premise information, and sales and marketing functions in a utility were not viewed as strategic. As deregulation, privatization and competition challenges the traditional values of a utility, the focus of the industry is changing.
Despite the common use of the term ‘deregulation’ it is important to remember that some regulation does remain. In fact, a better term would be ‘re-regulation’. In contrast to the deregulation of the telecommunication and airline industries, the utility industry remains unique in its social obligations. Whether the term is deregulation, privatization or re-regulation, the major business driver impacting the core functions of the new CIS is the customers’ choice of energy retailer.
This re-regulation places unparalleled demands on a utility. Couple this with increasing cross-border industry activity then the demand on an organization to adapt rapidly to change becomes a major priority. The new focus of customer management must be the agility to implement new business processes to support rapidly evolving business models.
Figure 3. Building out from the customer management core are the components additional customer management functionality
To enable success in competitive markets utilities must establish a framework that supports new business models. Utilities of the future will invest in component-based solutions created around a technical infrastructure that supports growth and change.
Once a company vows to redirect its business course, legacy CIS technology and applications become a barrier to progress.
The CIS is a jumble of overlapping and intricately integrated functionality and supporting technology architecture strongly resistant to modification and enhancement. Often the CIS includes sub-optimal functional components that would be best developed as external applications such as trouble management, asset management, usage acquisition and data management.
Meanwhile, the adaptable customer management core model uses a best-of-breed core set of components incorporated by a technical architecture that allows communication among the logical components in a many-to-many relationship. Embedded in the logical component core set is the essential functionality required to handle customer management.
There are six line-of-business models emerging in the energy sector. These models share common business requirements:
- Bill calculation
- Order processing
- Business partner communications and management
- Bill printing
- Remittance processing
- Credit and collections management.
Without the means to execute these basic core functions along with customer service, any of the six lines-of-business will likely cease to exist as a viable business. Simply providing the core functionality satisfies part of the need. However, companies must allow core functionality to be rapidly upgraded at the component level, or accommodate new components to keep pace with industry best practices without causing the other components to operate erroneously.
The independent action of best-of-breed components does prompt a higher level of complexity. However, energy companies can mitigate this complexity by considering pre-integrated and optimized component-based offerings developed by reputable vendors.
Customer management core (CMC) is the emerging term for this combination of best-of-breed components and adaptable technology architecture. CMC is already the logical replacement of CIS for the emerging energy lines-of-business. By the end of 2002, CMC will become the dominant term for identifying the basic core of customer management.
An evolving model
CMC is not a complete solution for all customer management needs. Its role is to be the stabilizing core that provides the necessary ‘blocking and tackling’ for other added functional customer management layers. CMC is the necessary starting point in building a coherent strategy for customer management and leveraging the other value added layers.
Figure 3 illustrates a complete picture of customer management by building out from the CMC the additional customer management functionality. Each additional layer is integrated with the core and other layers via the same adaptable technical architecture model that is used in the core.
This extension of the architecture maintains the integrity and flexibility of each additional layer in the same manner as with the core components. This approach is designed specifically to enable continual adaptation to business change through the entire customer management spectrum.
Figure 4. Matching business models with customer management.
The additional layers that are added to the CMC will vary in depth and scope by the energy line-of-business model. Figure 4 indicates three classifications of energy customer management: basic, lite, and full. Each of these classifications shares the need for the CMC, but the need for additional customer management functionality is governed by the line-of-business. For example, Retail, Services, and Municipal would need all of the layers while Distribution does not need the Analytical layer and only minimal Sales Automation capability. Of course, these three models represent the current needs of the line-of-business and will change as new models and needs continue to emerge.
The details of the CMC include:
- Transaction Event Processor – this is the entry/exit point (via the user interface, external component interface, and business partner transaction manager) of transactions external to the core. This function determines the core components to be utilized in the processing of the transaction.
- Work Flow Manager – this works in concert with the Transaction Event Processor to determine the logical timing of component execution to complete the desired tasks. An example of this would be to control the flow of a customer change order to a distribution company from a retailer to insure all involved parties are informed and receive the necessary data.
- External Component Interface – this is the primary technology that allows external applications to interact in a secure manner with the exposed business objects of the core.
- Analytical Data Extractor – this is a tool that provides data about customers primarily to an external analytical environment (data warehouse, corporate critical measurements, reporting, etc.) on a continuous basis. Its role is to facilitate analysis of customer data while protecting the operational environment.
The primary user interface to the CMC is the Functional Universal Interface (FUI). It is represented as being an independent external component to the CMC because the CMC provider may not supply the user interface and a fully integrated system would hinder the adaptability of the CMC.
Although this concept is still emerging, the interface should be browser based and will be provided by various sources. The source of the FUI will be for the most part a choice made by the energy companies. But, they will be available from a CMC provider, an external component layer provider, (e.g. Siebel, PeopleSoft, Clarify, etc.) or a systems integrator (e.g. Accenture, PwC, Logica, Cap Gemini Ernst & Young, Deloitte & Touche, etc.).
Tangible benefits to the business in the critical areas of cost reduction and time efficiencies result from an effective technical framework. The goal of the technical architecture is to address several critical issues.
Flexibility and configurability: Flexibility is the key to effectively supporting customer requirements in the evolving regulatory environment. Solutions must be architectured to rapidly respond to market changes and unpredictable business situations. This generally translates into table driven application design, which allows the user to configure their business to suit their markets. Solutions must successfully support new businesses and respond with agility to regulatory change. They must be able to define new products dynamically and concurrently perform a different mix of functions.
Open and portable: There is no one ‘killer’ application that can singularly support a utility operation in a deregulating market. Consequently all modules within a total solution must be able to co-exist together. Customer management applications must not dictate business process but rather, enable them.
Applications must support a wide variety of standards with any process or object easily accessed by other internal or external systems. Businesses will not be required to re-engineer processes but can tailor the product to suit their current systems. Implementation of customer management solutions must occur with minimal disruption to staff, workflow and business systems.
In support of such a goal there are two tool-sets available to assist in seamless integration with external applications. The first is a tool-set that enables real time interaction between other applications. The emerging standard upon which these tools are based is XML. This allows a company to integrate call centre solutions, e-commerce B2C solutions, WAP solutions or any similar solution where information interchange is required between applications.
The other enabling tool-set is a set of interface design standards that streamline to processes involved in B2B processing such as direct access service requests, meter reading uploads and downloads, interchange of details with remittance and collection agencies, and so on.
Scalable and efficient: With merger and acquisition activity a key business condition it is critical to current business and future growth plans for a system to be able to perform and expand. Speed and performance improvements can be realized through considerations such as:
- All background processes being multi-threaded allowing greater processing efficiency.
- The infrastructure tools and application languages all being based on industry accepted standards for large scale systems.
- Highly clean data models enabling ease of access, understanding and navigation.
- The normalization of databases, resulting in effective memory management and improved indexing efficiency.
Upgradable: All applications must be designed for upgradability so that any configuration that is established to operate in a utility’s market is preserved even when new features are made available.
Upgradability leads to the minimization of ongoing operational costs. The ability to upgrade allows the business to keep pace with market trends, protect its investment in customization and minimize ongoing application maintenance costs.
Competition changes the landscape for utility companies around the globe. The way business is done changes rapidly and survival depends on the ability to innovate around emerging business models. Utilities that have been through the early stages of deregulation have learned that the traditional CIS is antiquated and must be replaced by a new breed of customer management solutions. – Figure 4. Matching business models with customer management
Customer management solutions will continue to evolve into component driven modules that support utility and service provider business strategies and will provide the immediate ability to adapt as business models change. Critical to the success of these business strategies and the customer management solutions that deliver them is a strong and adaptable technical architecture.
Customer management systems hold the promise of the flexibility, agility, and adaptability demanded of the emerging customer-centric energy competitors. Though CIS is dead, customer management is alive, well and growing among successful global energy companies.