By Fred Angel
In the customer information system (CIS) world, there are numerous vendors -- some utility experts place the number at over 100 -- who offer CIS solutions to utilities. Utilities have an array of vendors from which to select -- from one- to two-person shops to mid-size companies to international corporations with offices worldwide. CIS vendors market to different sized utilities depending upon their organizations' business strategies and objectives. Some vendors concentrate on utilities with small customer bases; others specialize in mid-size utilities; some focus on only large utilities; while still others target any size utility. In addition, some CIS vendors cater to the electric, gas, and/or water/wastewater industries, while others specialize, for instance, in only water and wastewater utilities.
In the CIS marketplace vendors can be categorized in a multitude of ways. To keep things simple, I have categorized vendors into three types: Utility-Based Product Solution Providers; Application Service Providers; and Outsourcing Service Providers.
Utility-Based Product Solutions -- With this type of package, vendors offer a product solution that is a standard configuration with minimal modifications, which is operated and managed by the utility. This type of application remains the most popular CIS solution model, accounting for between 70% and 85% of new installations. One advantage of using a utility-based product solution is that the utility maintains control and responsibility for operating and maintaining the system and operating maintenance costs decrease over time as the utility's customer base grows. The disadvantages of using a utility-based product solution include:
• The vendor's capability to perform and meet the requirements of a utility is based upon scale and transaction volume;
• Installation costs can be high;
• Project timelines can be lengthy, anywhere from 12 to 24 months.
Application Service Providers (ASP) -- ASPs host technology off-site. Connectivity is provided between the vendor's hosted data center and the utility's network through the Internet. ASPs charge clients on a negotiated fee and/or per-transaction basis. ASPs have become a more popular solution but currently have less than 20% of the market.
Using an application service provider provides a few advantages: It allows the utility to focus only on core business processes, costly upgrades to systems may be avoided, installation costs may be lower than utility-based product solutions installations, and the utility does not have to focus on operating and maintaining the system.
The disadvantages of using an ASP include:
• Pricing models for "per click charge" may not be competitive;
• Stability of vendors in the marketplace may be questionable;
• The utility gives up control of its customer data;
• Long-term costs and ongoing fees, often referred to as hidden costs, may be greater than CIS costs over time.
Outsourcing Service Provider (OSP) -- In an OSP environment, a third party is responsible for handling a utility's business processes such as customer telephone calls, billing, or hosting mainframe, data center, or software applications. There are generally two outsourcing models: the licensing model and the service bureau model. The licensing model enables an outside provider to host the software of the utility and the service bureau model enables the outside provider to handle customer telephone calls or billing. Outsource service providers, although growing in sales, have less than 5% of the market for new CIS installations.
Since the outsource service provider is a specialist in its business competencies, the advantages of using an outsourcer include: enabling a utility to focus only on core business processes; avoiding costly upgrades to systems; and reducing staffing and associated costs. In addition, the initial cost of the outsource agreement may be less expensive than a CIS implementation, discounts over a period of time arrangements can be attractive, and service levels expectations and measurements can be established through agreements.
The disadvantages of using an outsourcer include: the utility giving up control of customer data; increasing security concerns; service levels may not be met; increasing customer complaints; and current costs may not be reduced as much as anticipated, decreasing the effectiveness of the outsourcing initiative. Also, many outsourcing installation timeframes are equal to the timeframes required for a CIS implementation and although short-term costs may appear lucrative, long-term costs and ongoing maintenance fees may be greater than CIS costs.
As a utility manager, you are challenged with finding the right vendor with the right product and solution to meet your existing and future business needs.
About the Author: Fred O. Angel, Jr. is the Customer Operations Administrator for Chesterfield County Department of Utilities. He can be reached at 804-748-1861 or by email at [email protected]
###
