Although there are a few exceptions, utilities have not seen energy-load growth greater than 1-2 percent per year since the Great Recession. To compensate, many acquired other utilities, expanded further into renewable energy, accelerated commercial activity, or undertook cost-reduction measures.
Today, as utilities emerge from another recession—driven by the pandemic—they will again have to address investors’ growth expectations. Looking forward, many utilities recognize that, more than ever before, information technology has become a key driver of growth. In this paper, we seek to illustrate how the utility industry compares to other industries in terms of information technology investments, provide lessons learned from other industries, and outline the steps CIOs and their teams can take to becoming a future-ready Platform Utility.
A platform business is one that bases its value on the connections it facilitates between producers and consumers. All platform businesses use platform computing as a foundation, which facilitates connections between applications in ways that create greater business value.
The utilities that have progressed furthest down the digital transformation path are driving improved business performance through technology, and enabling better customer engagement, cost reduction, and new business opportunities. Those that lead the industry in technology innovation are also 4.3 times more effective at increasing their companies’ valuations.
- Implement an ERP for IT
A Platform Utility’s IT organization should ru itself as if it were an independent business, and well-run businesses leverage ERP systems. An ERP for IT connects front-, middle-, and back-office functions to integrate business processes and provide real-time business intelligence to management.
- Modernize the architecture
A Platform Utility has to be built on a flexible and reliable technical foundation to rapidly adapt to the evolving digitalization of applications connecting suppliers, producers and consumers. With much of an organization’s data currently locked in disparate operational systems, modernizing means extending the foundation to seamlessly unlock the data and generate insights.
- Rationalize the application portfolio
The most progressive IT organizations have embedded application rationalization into their business relationship management, IT business management, and IT operations management functions. The goal is to decide what to do with applications currently in the portfolio and under evaluation—but the process is ongoing.
- Scale the workforce
Aligning your people to optimally serve business customers and service technology assets is critical to building the Platform Utility. The line between business strategy and technology strategy is blurring and, consequently, the skillsets of business and IT professionals increasingly overlap. This trend should be embraced because it expands the delivery capabilities of the IT workforce and more closely aligns IT with the business.
- Differentiate with digital
The utilities industry employs an interesting mix of technologies that range from mature to evolving to emerging. While there may eventually be uses for all digital technologies, most utilities are already invested in Mobile and Social, while some are exploring evolving capabilities like Augmented Reality. However, since utilities’ pace of digital transformation has been disappointingly slow compared to other industries, building a platform utility requires a much faster pace.
- Transform IT funding
Matching the average IT spend across all industries will be insufficient to build a Platform Utility. For an investor-owned utility to outpace its peers, its IT organization has to outperform them by, for example, by augmenting investment capital and increasing their IT budgets, and taking a dynamic investment approach to funding, through which organizations spread investments across many smaller efforts that are delivered in an agile fashion.
In our full report, we look at each of the six building blocks CIOs and their teams can use to move the organization toward becoming a platform utility.