“Digitize or die” – this gloomy warning is justified in the highly competitive energy sector: many municipal utility companies and established utilities are lagging behind in the digitization process. As a result, for example, the “time-to-market” of new products is too long and cross- and up-selling is difficult. At the same time, more and more market participants are appearing on the scene. It is therefore high time to modernize your own IT structures – and to do so at maximum speed. How exactly is this possible with powercloud and why does this innovative SaaS solution facilitate the establishment of new products?

 A storm is brewing in the energy industry: Startups as well as large companies from outside the industry are pushing ever faster into the market and creating massive cut-throat competition. At the same time, completely new products and services are emerging – the days when utilities only offered electricity and gas are over. Instead, wallboxes, PV systems or cell phone contracts, for example, are also sold via personalized portals using cross- and up-selling.

The status quo: Why do so many cling to old systems?

It is obvious that this “new world” requires a different IT architecture in the company: The tasks of sales, marketing, accounting and customer service must be seamlessly integrated into the system and all processes from product development to contract conclusion must be highly efficient. However, these demands are often countered by a rigid and inflexible IT inventory system: In more than half of all German companies, the central IT solution has been in use for a long time, at least according to the results of a Deloitte study from 2018. Why are they clinging to them? The respondents to the study cited the existing IT infrastructure (24 percent) and the “length of the modernization process” (21 percent) as reasons for this.

 Both arguments also play a role, especially for the people in charge of this at utilities. Many have experienced that the selective modernization of their monolithic legacy systems sometimes takes months and usually eats up eight-figure sums. This makes it all the more necessary to emphasize at this point: The modernization of the complete IT structure of an utility is much faster and easier than many people think. The motto is: Out of the rigid systems of the past and into a highly flexible platform solution such as powercloud.

 

 

 

 

The modernization process:How exactly does the path to powercloud take place?

The end-to-end approach of powercloud is ready for the customer in a just a few months and implemented very securely in different phases. The exact procedure depends on the current situation of the utility:

• Greenfield setup (for companies without legacy systems) is particularly fast. For example, the complete process up to the market launch took only about eight weeks for the green power startup “stromee” (with its fully digitalized processes) – an enormous achievement in times of “social distancing” and video conferencing.
• Gradual migration is ideal for large PSCs that want to quickly access the advantages of powercloud on the one hand, but also want to review the new processes and consolidate the associated changes within the company on the other. In the meantime, the inventory system remains active at the same time. EnBW and E.ON, for example, chose such a path – individual brands and customer groups were migrated in several phases to minimize risk and disruption. A learning effect can always be observed: The migration steps become more efficient as soon as the entire team became well-rehearsed. In doing so, we supplement the powercloud step by step and continue to optimize the business processes – in ongoing operations on the basis of a continuous delivery principle. With the help of our migration partners’ extensive expertise in SAP IS-U, we were able to prove that migrations are possible within a few months. This also applies to currently planned migrations from other systems: The customer specifies their “cycle time” and decides when they want to shut down legacy systems.
• A complete migration of all data of a system to the powercloud and its use “from day one” (without a parallel legacy system) is recommended for small utilities. The migration is tested and optimized several times in advance, so that only very little manual rework is necessary. The goal is to be immediately ready for use again with the shortest possible downtime – without missing a business day. A full migration like this was implemented for NaturEnergie+ (EnBW) with about 40,000 customers.

Modular system scores points

In each of these cases, however: powercloud uses a standardized best-practice process with defined onboarding modules. This is where the decisive difference to traditional solutions becomes apparent: In the “old world”, highly individualized in-house developments and extensions meant that maintenance and adaptation costs were high – for example, due to changes in regulatory requirements. powercloud makes this a thing of the past. The modular system is tailored precisely to the customer’s needs thanks to our modern integration layer, finished adapters and out-of-the-box apps. The individual elements of this modular system have been tested many times. The implementation is carried out in a joint team with our powercloud specialists, customers and partners. Any further developments are carried out together with customers and are available to all in the powercloud core. As a result, the standard solution grows and expensive in-house development with high maintenance costs is avoided.

A basic workshop is always held as the first step of the migration project, in which, for example, the required scope of services and the division of functions between powercloud, apps and third-party applications are discussed. On this basis we develop a clear project structure and plan the time schedule. For legacy projects, the focus is then on data analysis or selection. The desired data is imported into the powercloud and the system is tested. After a master data consolidation based on standardized market communication, the go-live starts.

 

 

 

 

The repositioning: Why is it possible to develop new products faster with powercloud?

At the end of the day, we focus on the outstanding advantages of our SaaS solution for the market positioning of utilities – the keyword being “new products”. In the future, a great deal will depend on how quickly and precisely the product world is tailored to the individual customer. It is not without reason that reference is often made in this context to the individualized web portal of Amazon. Comparable solutions are an important prerequisite for the success of cross-selling, up-selling and “digital first” service offerings. These three application examples show what possibilities powercloud opens up in this context:

 

1. Start with the commodity combination: Only offer electricity as a single product to customers? This makes market differentiation almost impossible. As a result, many utilities are currently focusing on the bundling of energy contracts. This approach can be put into practice in just a few hours (!) with the commodity backend of powercloud, which includes comprehensive product management – including all complex billing modalities that run almost automatically in the background. This actually includes everything from dealing with any one-off payments to the termination option. Let me put this clearly: You only need a few clicks to fully automatically design a billable product and publish it ad hoc on the market! The entire product management is rethought and consistently follows the agile approach. For example, an electricity/gas bundle can be defined without the need for developers or complex configurations. The recently founded DEW21 subsidiary “stadtenergie” offers a service such as this in the first step.
   
   
2. Positioning with “regional bundles”: For municipal utility companies in particular, a differentiated product portfolio is actually available – i.e. in addition to the classic energy offer, wallboxes, e-scooters or annual swimming pool tickets, for example. There are obvious benefits to creating attractive bundled offers and at the same time exploiting the regional competitive advantage. Municipal utility companies could, for example, combine a “free” family annual ticket for the local indoor swimming pool with electricity tariffs. Those who are given one of these will want to stay with their municipal utility company. The situation is very similar for “e-mobility”, as it is a great advantage for customers if local electricity providers offer a combination of household and charging electricity tariffs and mobility services. Specifically: If a wallbox causes technical problems, the service technician will be there quickly. These and similar products can be implemented in a few steps with the help of the powercloud core. The motto is: uncomplicated data creation and provision for marketing. As a result, the end customer only receives one invoice. All data is conveniently collected in the system under one customer number. This would have been almost impossible with legacy systems. “Regional bundles” are thus only possible with the help of the powercloud – and on the basis of very simple usability.
   
   
3. Develop new business models: The most far-reaching approach conceivable is the complete opening of the non-commodity portfolio. There are no limits to the imagination here: utilities offer customers the opportunity to combine their new energy contract with kitchen appliances, washing machines, smartphones and much more. The only question is: How is something like this possible if you do not want to establish and pre-finance your own warehouse including logistics and service? The so-called “Non-Commodity-Fulfillment” is a powerful solution within the unique powercloud powerApp-Store. Similar to smartphone app stores, users will find ready-to-use and tested extensions for the powercloud that perform all desired functions end-to-end. The offer ranges from AI-based prediction models for energy consumption to the management of charging stations and much more.

 

 

 

 

The “Non-Commodity-Fulfillment” app enables the establishment of a huge product portfolio without tying up capital. All services (naturally in the name of the supplier) are provided by large trading companies – from order processing and warehousing to customer service. And what’s more: The utility undertaking does not have to pre-finance the goods and does not bear the risk of fluctuations in demand. The networking of the PSC accounting system and external merchandise management again ensures the app is automated. It couldn’t be simpler. The powercloud example “sparstom.de” shows how spectacular such a thing can look. New customers have the opportunity to add countless products to their electricity tariff. One click is enough. The effort at sparstrom.de? Minimal – and this applies both when adding new non-commodity products from an external supplier and when it comes to order, delivery and complaints processing.

 

About the author

Steven Dawson, VP powercloud North America, brings more than 15 years of experience in the IT industry, working for SAP, Oracle, and Genesys. He is recognized for building Salesforce Energy & Utilities (formerly Vlocity) in Germany, Austria, and Switzerland from the bottom up. His new mission is focused on migrating energy and utilities companies in North America away from old on-premises/legacy systems to a new, modern architecture and billing platform in the cloud. Dawson established powercloud’s North American operations within the Atlanta Tech Village, one of the nation’s largest technology innovation workplaces. Companies that are dedicated to the growth of the energy and utilities sector in the southeast and especially within the Atlanta area. In all of his endeavors, he has helped energy companies reduce operational and acquisition costs while achieving the best possible Customer Experience.

Switching rates of significantly more than 10 percent of the customer base are now standard in the European energy market. In many countries they are rising very fast. Established energy supply companies in particular are coming under increasing pressure because agile start-ups and providers from outside the industry are stirring up the market with digital channels and individual offers. Against this background, it is essential that many utilities modernize their IT structures immediately. The secret to success: Consider everything from the customer’s point of view and offer products that fit perfectly!  

Since the liberalization of the European energy markets around 20 years ago, the proportion of household customers who regularly turn away from their suppliers has been rising steadily – a trend that can be precisely measured by the market’s churn rate (the proportion of customers switching to another supplier per customer base). To this end, in a Report from November 2019, the Council of European Energy Regulators (CEER) lists, among other things, the following figures:

• Norway has the highest European switching rate in the electricity segment. In 2018, it amounted to over 20 percent.
• Other markets with a relatively high average switching rate of at least 10 percent are Finland, Germany, the UK, Ireland, Portugal, Spain and Sweden.
• Even “stragglers” like France are catching up quickly at the moment. In 2018, the switching rate in the market was already over 9 percent, which is about twice as high as in the period 2013 to 2017.

Over the years, such churn numbers add up to an enormous customer fluctuation. The Federal Association of the Energy and Water Industry estimates (BDEW) that more than 44 percent of all household customers in Germany have changed their electricity supplier at least once since liberalization, many of them several times.

Customer behavior and products change

Completely new customer behavior is required for the necessary change in the market (and the associated increase in customer switching rates). Digital channels provide fast access to new offers and provide comprehensive comparison options. This is not only about prices, but also about the customer satisfaction shown. In contrast, the industry and segment in which a supplier operates plays only a minor role. From cars to insurance policies to energy contracts – everything can be compared, configured and ordered online. As a result, power supply companies in particular must redefine their product world in order to be able to compete against start-ups and new players from other industries:

• With individual electricity contracts, it is no longer possible to break away from the market. As a result, electricity-gas bundles with additional customer benefits, for example, are moving into focus. The new DEW21 subsidiary “stadtenergie”, for example, already offers such services fully digitally.
• The next step is to combine commodity and non-commodity. So customers combine their new energy contract with the purchase of mobile phones, game consoles, washing machines, Netflix subscriptions and much more. The demands on utilities to be able to map such offers are lower than expected: A suitable full-service offer is available in the powercloud powerApp stores in the shape of the “Non-Commodity-Fulfillment” app. The app enables the establishment of a huge product portfolio without tying up capital. All services are provided on behalf of the supplier by large trading companies.
• Fully digital offers such as those from stromee have automated and digitalized processes to the extent that you can get by with a fraction of the cost-to-serve typical for the industry and pass on all purchase prices 1:1 with a basic fee of only five euros.
• Apart from this, regional suppliers such as municipal utilities could score higher than before with their existing product portfolio. This also requires bundled offers: For example, anyone who gets a “free” family annual ticket for the local indoor band together with the electricity tariff will want to stay with their municipal utility. Public utilities can thus secure and even expand their regional supplier dominance.

 

 

 

 

Change rate highest after invoicing

But when exactly do customers actually decide to change? A Deloitte Study provides information on this subject which, among other things, has examined the role of the invoice, as it is often the only annual customer contact point with the energy supplier. According to the study, the vast majority are satisfied with the way invoices are issued. However, according to the study, the following also applies: “The churn rate is highest after the bill is received.” If you want to change this, you have to watch your speed: Inquiries about the invoice should be answered very quickly – regardless of whether they arrive by phone, online portal, e-mail or web chat – and the problem should be solved “within one working day” including a possible invoice correction, according to the authors of the study. They also emphasize that a customer experience that is as simple as possible acts as a “natural barrier to switching” – which ultimately requires automation of the acquisition and service processes within utilities.

But of course, the ideal way is still to send correct invoices to customers. powercloud offers the best conditions for this with its automation and avoids sending incorrect invoices with its extensive checking rules – and the expensive complaint and correction processes that come with it.

powercloud: Rapid product development and automated billing

All in all, the “internal” digitization of the utilities is thus becoming the focus of the discussion at this point. Against the background of new customer behavior the clear directive: Any redesign of the process landscape must take place with “customer glasses”. This includes, for example, a consistent linking of front and back end. This is the only way to ensure that data and actions are presented clearly and that the consumer has the chance to manage and extend his contract independently. This is, moreover, a basic prerequisite for the case-closing processing of transactions with a high quota. What’s more, The new infrastructure must be able to massively simplify the product development mentioned above. E.ON is a good example of the opportunities that powercloud opens up in this context. Since the introduction of the SaaS solution at the multinational company based in Essen, Germany, the development of new products takes only a few days – previously comparable processes took several months. The satisfaction of case workers and call center agents has also increased massively.

 

 

 

 

Slow down and counteract churn

All in all, powercloud contains all the business processes and data necessary for the “energy-economic engine room”. The services can also be booked individually. This includes billing processes, market communication, payment transactions, receivables management, invoice verification, tariff and offer calculation and many other capabilities. In addition, powercloud and various partner companies offer more than 80 apps in an app store to cover individual requirements.

Will all of this bring the churn train to a complete halt? Certainly not. But it will stall it in the right places – and that is with the desired customers. Because something like this is also possible: Identifying customers with above-average contribution margins or further potential, analyzing their situation on the basis of data and making offers before the end of the contract, which lead to a better customer relationship. Many customers are not yet aware of the fact that they receive a message from their supplier at the right time, which for example includes cheaper tariffs and attractive bundle packages. We think: It’s about time.

 

About the author

Marco Beicht, born in Achern, South Baden, is the founder and CEO of powercloud. To this day he lives and works in Achern, the headquarters of powercloud GmbH, which in the near future will have a state-of-the-art and climate-neutral IT campus as its new company headquarters. Right after graduating from high school, Marco Beicht founded his first software start-up, and after his studies he specialized in eCommerce. Today, Marco Beicht is managing director and shareholder of various energy, software and investment companies.