The coronavirus seems never-ending – experts agree that the consequences of the pandemic will fundamentally alter our society and our economy. One is the accelerating pace of digitization in the working world, with a shift towards home offices, videoconferencing, etc. Furthermore, according to a study by Roland Berger, the overall situation is creating cost pressures at electricity suppliers as their profit margins shrink. The cost-cutting program recently announced by multinational electricity and supply company EDF, headquartered in France, confirms this assessment. What possibilities does a SaaS solution like powercloud offer in this context?
How have electricity suppliers in Europe responded to this crisis so far? Relatively well, according to the assessments of many experts. Nevertheless, major cost-cutting programs have been ongoing for quite some time, as the example of EDF clearly shows. The Group intends to lower its operating expenses by around 500 million euros by 2022 – in part to manage its losses caused by the pandemic. We are seeing similar problems in Germany where, for example, the Munich public utilities have lost hundreds of millions of euros due to the coronavirus crisis. In general, however, many electricity suppliers will “feel the real impacts of the crisis only later” explain the corporate consultants from Roland Berger. Analysts calculate that suppliers’ profits will drop for years to come to below four percent – from around seven percent most recently in 2012 through 2020.
E-commerce and online channels are becoming much more important
At the same time, the overall pace of digitization by suppliers is accelerating rapidly, as shown clearly by the 2020 study “Digital@EVU” by the Bundesverbandes der Energie- und Wasserwirtschaft (BDEW – Federal Association of the Energy and Water Industry). According to it, 77 percent of the energy suppliers surveyed already have a digitization strategy. One of their main goals in doing so is to promote a focus on customers with tools like “omnichannel optimization” (planned by 39 percent) and “personalized digital targeting” (planned by 24 percent). Digital customer self-service portals are another important tool. Users themselves enter on these portals all required information, such as delivery points or consumption. The system makes suggestions regarding optimal contract terms and personalized offers. Automated applications on the back end then create seamless processes through to billing. To implement such solutions, processes within the company must be fully digitized and drafted based on customer needs. Innovative powercloud customers like stromee, stadtenergie and Yippie are good examples of the shift towards digital self service.
Promoting digitization and change management at record speed
Cost reductions through automating many business processes, organizational realignment – these are key areas in powercloud’s mission, and the solution has already been responsible for impressive migration success stories with legacy systems. Over 200 energy suppliers use the platform (including powerApps) to manage around 8 million contractual relationships and process over 6 billion euros in sales. An additional 20 million contracts are currently in the process of migration. In addition, the software conversion with proven best practices is greatly accelerating the shift in participating companies, a change welcomed by employees as well. The Net Promoter Score (NPS – key indicator of satisfaction and engagement) has increased significantly for providers that work with powercloud.
- Standardization and speed:
In addition, the cloud billing system helps lower the cost to serve (CIS) to less than 10 euros per customer per year. Faster standardized and automated processes facilitate this cost reduction:
- Regulatory updates: powercloud delivers format updates free of charge based on changing legal requirements or as part of market partner communication.
- Continuous delivery cycle: Systems are updated twice weekly with our new developments. New requirements are implemented through an agile process and are available for testing and productive use quickly, without customers having to complete complex updating procedures.
- Automation: The system maps regulatory business processes and market communication in accordance with the law, offering a highly automated process. In doing so, powercloud’s principle is to identify errors early on in the process, helping to avoid complex manual interventions and corrections. Ultimately, this not only reduces costs but also promotes satisfaction among energy customers.
- Product innovations: powercloud simplifies the process for quickly creating new products and services. This, then, makes it easier to develop new business models which electricity suppliers can then use to escape commodity pricing pressures. As an example, recently stadtenergie combined a commodity product – in this case electricity – with a non-commodity product from the gaming category (such as gaming consoles), family entertainment (for instance home theaters) and lifestyle (for instance e-bikes) during its e-commerce week “Black Week” – made possible by powercloud.
- Simplicity: The conversion process from legacy systems to powercloud is completed quickly and automatically – keeping the same contracts, bonuses and more if desired.
- Transparent, simple and open licensing model:
A second key advantage of this SaaS solution (in comparison to established legacy systems) is its licensing fees: powercloud uses a transparent license model based on the number of active end customer contracts, with no hidden costs. “Pay only for what you use” is the motto. As is common for cloud services, the fee already includes all services necessary for operation, as well as all future updates. The solution guarantees that there are no added costs – a massive difference from legacy systems, where companies also pay, for instance, for “indirect use” when other systems access the central solution, as well as for adaptations to regulatory changes and new laws. In addition, in the “old world,” the costs for in-house maintenance, for example when handling updates or completing complex system tests, are high.
In light of these costs it is clear how something that seems like an advantage initially can become a major disadvantage over time for IT and for the entire company organization. Initially, on-premise legacy solutions can be customized broadly, using a large number of different modules. Over the years, however, this results in a proliferation of systems, which can be very difficult to control. Every update and addition of new projects requires greater and greater personnel commitments. In addition, the static system blocks the establishment of innovative and digital business processes. The overall cost efficiency of the company falls.
Electricity suppliers can escape this development with the help of powercloud, since the end-to-end system contains all processes involved in the “energy supply utility room” and updates itself as well – although suppliers can expand its core functions with customized, ready-to-use solutions from the powerApp store to meet their specific needs. Similar to other app stores, users will find ready-to-use and tested extensions for the powercloud that are connected through certified interfaces. The offer ranges from AI-based prediction models for energy consumption to payment, the management of charging stations and much more.
Powercloud uses a standardized best-practice process with defined onboarding modules for implementation. The modular system is tailored precisely to the customer’s needs thanks to a modern integration layer, finished adapters and out-of-the-box apps. Everything is completed at record speed: The new system is ready to use, seamlessly, after just a short downtime and with no lost work days. What’s more, it is scalable at any time, which allows it, for example, to be introduced in other countries and markets. Nevertheless, the solution is in no way diminished. Stability, speed, and cost-efficiency all remain excellent. Electricity suppliers are perfectly equipped to handle growing cost pressures in coming years.
About the author
Sam Schubert, a native Rhinelander, has been active with powercloud in the foothills of the Black Forest since October 2019. The Product Manager is a familiar face in the customer environment of the energy industry, having supported German power supply companies for more than 10 years in integrating various regulatory requirements into the existing SAP IS-U. At powercloud he continues to expand the functional scope of the cloud solution – both for existing customers and for meter and grid operators. His focus is no longer only on the German-speaking countries. Various European projects are also under his responsibility.