By Fred Angel
In the water and wastewater industry, determining the cost of a Customer Information System (CIS) installation can be a difficult, arduous, and demanding task for any utility executive. CIS vendors offer a variety of pricing models unique to their market approach, licensing philosophy, and their organizations' profitability objectives. But utilities must identify product solutions that meet the their business objectives, customer needs, budget constraints, and functionality and technology requirements.
It can be difficult for utility staff to accurately budget for CIS implementation costs because industry pricing data can be difficult to analyze. Vendors often provide distinctive solutions to individual utilities and comparing projected costs with another utility can be risky due to different utility demographics, market conditions, vendor financial requirements, implementation success or failure, unrealistic projection of project costs, and unscheduled and lengthy project delays.
When pricing your CIS project here are some guidelines to follow.
Vendor hardware, software, and installation services for utility-based product solutions should average between $20 and $30 per customer. License fees should average between $2 and $8 per customer. Once the new CIS system is installed and functioning properly, monthly maintenance costs should average between $0.15 and $0.30 per customer. Application software license fees should average between 18% and 24% of the market value of the software license. It's important to note that utility-based product solutions often have high installation costs, but after installation, maintenance costs should decrease as the customer base continues to grow.
If a utility chooses to have an Application Service Provider (ASP) host the CIS technology off-site, the cost of the hosted solution may be 5% to 10% less than a utility-based product solution. When selecting an ASP solution, remember to account for additional costs and fees, including on-going operating costs, per customer, fixed, and variable charges, and license and software maintenance fees.
Some utilities may choose a third party Outsourcing Service Provider (OSP) who is responsible for handling business processes such as call centers or data centers. With this selection, initial costs maybe reduced by 20% to 40% compared to a utility-based product solution. However, utilities must be aware of other costs and fees, such as operating costs for ongoing monthly click charges per customer, which could increase over the life of the contract. More examples include application solution, bill production, additional services, pass through, and other per click charges.
Both the application service provider and outsourcing service provider solutions have lower installation costs than the utility-based product solutions. However, maintenance costs may increase over time with additional customers due to other costs and per click charges. If direct and indirect costs can be eliminated, either of these pricing alternatives is attractive.
When choosing a new CIS System the pricing alternative you select must meet your business, budget, customer, technology, and functionality needs. Finding the correct pricing model for your utility is a delicate balancing act between your project expectations and the selected vendor’s ability to realistically meet those expectations.
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]
June 2009
###
