The State of the Utilities Industry

ASUG Research The State of the Utilities Industry 1

Executive Summary

Utilities companies are looking for opportunities to streamline their operations by making more business processes digital. Customer service demands attention, yet other areas including grid operations, back-office systems, and supply chain management also would benefit from digitally driven efficiencies.

Unique Industry DemandsUtilities that use SAP experience the challenges of maintaining a strong customer focus. Yet they’re limited by tight budgets, a lack of resources to dedicate to technology, aging workforces, and a patchwork of regulatory controls.

This is likely why industry-specific and industry-agnostic concerns play an equal role in technology decisions, at 53 percent and 47 percent respectively. Still, their unique circumstances mean that utilities customers need technologies designed to serve their industry, like SAP’s Industry Solution for Utilities (SAP IS-U).

Customers at the CenterA lack of resources means that many utilities must optimize the technology assets they already have. When asked what is most important, respondents said upgrading or maintaining existing technologies is their largest planned area of focus in 2019. Utilities that are looking ahead are searching for new technologies to help them conserve resources while better serving their customers through digital channels.

Figure 1: Where Utilities Need Help in 2019

optimizing current products exploring new products

30%implementing new products

20%50%

Source: ASUG research, January 2019

Trends

Pressures

Using analytics and reporting to drive business decisions

Little agility for rapid innovation

Managing multichannel customer interactions

A lack of resources for technology

Moving to the cloud

High-stakes cybersecurity risks

ASUG Research The State of the Utilities Industry 2

Key Technology Topics

Using Analytics and Reporting to Drive Business Decisions Driving better decision-making through data is high on the list of priorities for utilities. One respondent described this desire as “using data effectively to manage the enterprise and make decisions based on predictive analytics.”

Big data has the potential to be a big challenge for utilities as the industry uses more connected devices that collect information 24/7. Smart meters, the smart grid, and Internet of Things (IoT) devices all generate large volumes of data. For this data to drive value, these customers need analytics, dashboards, and reporting to consolidate information and surface important insights.

Managing Multichannel Customer InteractionsToday’s utilities companies must be in the business of serving customers through their preferred channels, whether that’s via phone, email, or online chat—on their devices of choice. In 2018, Cognizant research discovered that three-quarters of utilities customers interact with their utility provider through more than one channel. Missed opportunities in this area definitely hit the bottom line. In a 2018 study, NewVoiceMedia found that poor customer service costs companies more than $75 billion each year.

Moving to the CloudAs more IoT devices collect big data, storing and making this data accessible in the cloud is becoming a necessity. The same Cognizant research also predicts that the global smart grid as a service (SGaaS) market, which is dependent on the cloud, is expected to leap from $1.3 billion in 2016 to $6 billion in 2025.

SAP customers across industries are considering moves to the cloud. ASUG research from August 2018 found that 88 percent of members have some form of cloud footprint within their companies. A majority, or 54 percent, are adopting a hybrid cloud approach versus 28 percent with a full private deployment and 18 percent with a full public deployment.

43+57

46+54

57%

54%

of those planning a move to SAP S/4HANA identify “faster access

to analytics” as a motivator

of SAP customers on the cloud are adopting a hybrid approach (a mix of on-prem and cloud)

ASUG Research The State of the Utilities Industry 3

Major Pressures

Little Agility for Rapid InnovationHistorically, utilities have heavy capital investments and little to no competition, making rapid evolution difficult. “The ability to innovate and react for utilities is slow and lower than the rate of change for technology. Focusing on five-year plans or 10-year plans with large capital technology investments is not a feasible model, yet that is how utilities still approach change,” one respondent observed.

SAP utilities customers want to keep pace with the changes in technology and business. They want to be agile and scale quickly to better serve customers and employees. But lingering issues from the past leave them at a disadvantage. “We are still trying to regain trust with our users who deal with gaps from a 2010 implementation. Our department never seems to get ahead, just further buried,” another respondent noted.

A Lack of Resources for TechnologyA lack of resources to invest in maintaining or enhancing technology also concerns SAP utilities customers. They don’t have extra money to hire or train staff, a budget for upgrades, or the in-house talent to migrate to the newest systems. Respondents told us they don’t have the training or support available to help them implement new technology or make upgrades.

61%of those who have already

completed their SAP S/4HANA transition found “lack of skilled

staff” to be a challenge

“ We are still trying to regain trust with our users who deal with gaps from a 2010 implementation.”

SAP utilities customer

39+61

ASUG Research The State of the Utilities Industry 4

Many respondents operate in a reactive state. As one respondent put it, “The issue is the lack of support resources for these systems, the constant break-fix operations, and the ability to keep these systems functioning until we have the ability to replace them in the coming years.” The essential nature of utilities, however, means they require 24/7 support. “As we shift to more 24/7 operations (customer self-care, etc.), we need to have support all of the time,” another respondent wrote.

High-Stakes Cybersecurity RisksWith new technology comes new risks, including a significant threat from hackers taking down the grid or shutting down critical systems. Foreign actors have hacked into the U.S. electrical grid in the past. Only preventative measures are possible. “With more operational technology (OT) automation, we need to be very wary of cybersecurity concerns within our distribution and transmission systems,” one respondent warned. And, of course, there is the cost issue. SAP utilities customers already operate with budget constraints and security investments can be very expensive.

2xmore often than any other major challenge, security is mentioned by IT professionals as their top

infrastructure concern

“As we shift to more 24/7 operations (customer self-care, etc.), we need to have support all of the time.”

SAP utilities customer

ASUG Research The State of the Utilities Industry 5

The Secrets Behind Satisfaction

Critical Factors for SatisfactionWe asked about the factors that are important to utilities customers and evaluated how strongly they correlate with SAP information that’s available. Respondents told us these critical factors are predictive analytics/maintenance, access to data/data management, operational integrity/asset management, field operations, and migrating to SAP S/4HANA.

As noted in the executive summary, these factors represent a mix of industry-specific and general technology concerns. This reflects how utilities companies are grounded in managing their current assets—although they are looking toward the future.

For example, utilities have an opportunity to take a big leap forward with SAP S/4HANA, but there is the question of whether they will have the time, budget, teams, or infrastructure needed for an implementation.

Hidden Motivators Driving SatisfactionRespondents didn’t initially identify these factors as critical, but they associated them with high satisfaction. Only one surfaced and it’s industry-specific: technology to help adapt to environmental regulations. This is a more precise need that’s also tied to asset management and field operations, which are critical factors to this audience.

Bare-Minimum ExpectationsSAP customers in the utility industry identified two minimum expectations for available SAP information: workforce management (particularly age and skill set challenges) and customer relationship management (CRM). Although there’s a strong focus on CRM, the customers in our study told us it doesn’t move the needle on their satisfaction levels. This could be because it doesn’t offer a competitive advantage, given that customers don’t always have a choice to switch utilities if they’re no longer satisfied.

Critical Factors

Hidden Motivator

IMPORTANCE SATISFACTION

IMPORTANCE SATISFACTION

Predictive analytics/maintenance

Access to data/data management

Operational integrity/asset management

Field operations

Migrating to SAP S/4HANA

Technology to help adapt to environmental regulations

ASUG Research The State of the Utilities Industry 6

Products of Interest

Despite their interest in SAP S/4HANA, the majority of SAP utilities customers are still on SAP ECC, at 71 percent. Compared with other industries, utilities companies use a greater variety of utilities-specific SAP products. More than half (55 percent) depend on the industry-focused SAP Industry Solution for Utilites (SAP IS-U). Other SAP products mentioned give a nod to this group’s interest in better managing data and serving customers.

Workforce Support

Respondents reported higher use of SAP SuccessFactors than we’ve seen in other industries, which could tie back to the importance of workforce management, indicated as a bare-minimum expectation. SAP Fieldglass, which helps alleviate workforce shortages, also made the list at 7 percent use.

Looking to What’s Next

Approximately one-quarter (28 percent) of customers who participated in our study are currently live on SAP S/4HANA, and only a small percentage are using SAP Leonardo Industry Innovation Kit for Utilities, at 6 percent. Yet nonusers are highly interested in SAP S/4HANA, as well as SAP Leonardo. It’s clear these companies want to innovate, but they need to understand how these technologies will fit within their industry and support best practices.

71%SAP ECC

28%SAP S/4HANA

44%SAP

SuccessFactors

55%SAP IS-U

20%SAP Ariba

71+55+44+28+20Source: ASUG research, January 2019

Figure 2: Key Products Used by SAP Customers in the Utilities Industry

38+62

55+45

62%

45%

of nonusers expressed interest in SAP S/4HANA

of nonusers expressed interest in SAP Leonardo

ASUG Research The State of the Utilities Industry 7

Getting the Most from SAP’s Utilities Solutions

Based on our research, SAP utilities customers are interested in both optimizing current technologies and exploring new ones, such as driving decisions with data and moving to the cloud. They also want to make customer service more efficient, shore up their cybersecurity, and learn how to bring more innovation into their day-to-day work.

The companies that participated in this study offer services including 59 percent power, 49 percent gas, 37 percent water, 32 percent wastewater, and 25 percent renewables. (Note that numbers exceed 100 percent because participants operate in multiple sectors.)

At the SAP for Utilities conference, you’ll come together to discuss these topics and more, as well as connect with others who have solved similar challenges. You’ll hear presenters representing all segments of the utilities industry such as Duke Energy, the City of San Diego, Snohomish County Public Utility District, E.ON, DC Water, and National Grid.

Our speakers cover topics like SAP HANA, digital customer engagement, real-time grid management using virtual reality, automation, robotics, and smart city initiatives. We address these industry issues and trends through real-life customer case studies, interactive discussion sessions, demos, and SAP expert presentations. We connect you with other utilities customers who have experienced similar challenges and have the answers you’re looking for.

Join Us in Fall 2019

Oct. 21–23, 2019 San Diego

The trends that surfaced from this study will inform the agenda for the 2019 SAP for Utilities conference, where thought leaders and industry experts will share their insights and experiences to help you get the most out of your SAP investments. Join Eventful Conferences, ASUG, and SAP Oct. 21–23, 2019, at the Manchester Grand Hyatt San Diego to connect with your peers and take new ideas back to your business.

Visit the SAP for Utilities website to find updates on speakers, keynotes, training sessions, sponsorship opportunities, and more.

www.sapforutilitiesconf.com 914.509.5354 katie.walker@eventfulconferences.com

About ASUG Research ASUG research captures a unique view of what SAP customers are doing, thinking, and planning for the future. We apply traditional quantitative and qualitative methodologies and research best practices to deliver insights on relevant technology topics. The information in this report came from a quantitative survey of SAP customers in the utilities industry conducted in January 2019.

© 2019. Americas’ SAP Users’ Group. All rights reserved. All SAP products are the trademarks or registered trademarks of SAP SE in Germany and in several other countries.

conversational user interfaces

20%analytics/dashboards Internet of Things (IoT)

39%59%

Source: ASUG research, January 2019

Figure 3: Technologies Expected to Affect the Utilities Industry in 2019