Executive Summary: Electric Utility Billing and Customer Information Systems

RESEARCH REPORT Executive Summary: Electric Utility Billing and Customer Information Systems Billing and CIS Software and Services for Regulated and Deregulated Utilities: Global Market Analysis and Forecasts NOTE: This document is a free excerpt of a larger report. If you are interested in purchasing the full report, please contact Pike Research at sales@pikeresearch.com. Published 3Q 2012 Ralph Finos, Ph.D. Industry Analyst Eric Woods Research Director

Section 1 EXECUTIVE SUMMARY 1.1 The Transformation in Billing and CIS In the past, customers came second as an area of concern for most electric utilities, after the grid infrastructure itself. Many utilities are now undergoing a cultural revolution in the way they handle customer relationships. This is true for large U.S. investor-owned utilities (IOUs) looking to develop new revenue streams, European energy retailers working in a deregulated market, and utilities in the developing world looking to improve revenue collection and energy auditing. As a result, utilities are taking a new look at their requirements for billing and customer information systems (CIS). Distributed energy, smart meters, deregulation, social media, analytics, and growing customer technology sophistication and expectations are transforming the focus of traditional billing and CIS to a more customer-centric approach throughout the entire customer lifecycle. In particular, the deployment of advanced metering infrastructure (AMI) is driving a revolution in utility customer relationship management (CRM). In addition to the tidal wave of usage data that smart meter deployments will generate for basic meter-to-cash processes, AMI is enabling utilities to develop new products and services, such as demand response (DR), electric vehicles (EVs), prepaid metering, and home energy management (HEM). This requires utilities to master the product development, marketing, and customer relationship skills to ensure program and competitive success. In turn, the billing and CIS systems underpinning these business processes will have to step up to the challenge. Consumers have accelerating expectations of their product and service providers for better communication, more flexible offerings and choices, better service, and a higher quality of consumer experience overall. These will appear in full force in the utility industry in the latter part of Pike Research s forecast period (2015-2017), especially when retail electricity becomes more prevalent and regulated utilities accelerate their conservation efforts with customers. Examples of what is coming next can already be seen in the retail, telecommunications service, and banking industries. The billing and CIS challenge will be complex, but industry leaders are already addressing it. Another significant change factor driving billing and CIS change will be customer and business process analytics. This technology will play an important role in guiding utilities in product development and market execution for the targeted offerings and bundles that will have to be created to ensure customer engagement. Today, confusion exists in the market about how and where to apply analytics to business process problems and improving business outcomes, and, therefore, the market is at a relatively low level of maturity. 1

1.2 Is Billing and CIS IT Technology up to the Challenge? Given the technology and market changes already here or on the visible horizon that include smart meters, DR, renewables, EVs, as well as market forces like deregulation that will stress billing and CIS, the question is whether the related business processes and information technology (IT) systems are up to the challenge. Many legacy billing and CIS are regarded as being technically unsuited for the emerging smart grid requirements. The technical and workforce skill risks are high and the investments required to meet the emerging standards of performance will be considerable. Interoperability is a high priority and the span of systems involved, from AMI to meter-to-cash and from marketing and sales to product development and customer service, will make this a challenge. This sort of IT transformation is not unique to utilities banking, insurance, transportation, and telecom are experiencing similar IT challenges. However, the challenge to utilities is the most daunting faced by any industry today. 1.3 What Are the Options for Utilities? Utilities recognize that current legacy billing and CIS are untenable for the long-term and they are developing replacement strategies to avoid obsolescence. Billing and CIS replacement strategies range from wholesale IT transformation, selection of a managed service provider to outsource the function, alignment with providers of integrated software suites like Oracle and SAP, and/or more measured modular roadmaps for instituting billing and CIS functionality to accommodate the new market realities. The latter approach can range from aggressively upgrading key capabilities to embracing cost avoidance by grafting on late life kickers and extensions to legacy systems to avoid process disruption. However, this may only delay the organizational/business operations transformation that they will finally have to face. Regardless of the strategy, utilities need to look at billing and CIS transformation holistically and work with vendors who understand the specific regulatory and government issues they face and have an appreciation of the strategic business situation and aspirations of the utility. Moreover, they should embrace notions of interoperability and assume significant scale and scope challenges to the billing and CIS architecture that they provide. 1.4 What Should Vendors be Doing? The billing and CIS market landscape is populated with a diversity of suppliers. Billing and CIS software and services market leadership is provided by Oracle, SAP, Accenture, and IBM, but other software and services vendors (most with their own approach and market strengths) are also important participants including Infosys, Hansen, Convergys, PWC, SAIC, Itron, Aclara, SAS, and others. ERP software companies like Oracle and SAP offer integrated software suites. Top consulting and systems integrators like Accenture, IBM, or Infosys can provide solutions and help with business and IT transformation. Smaller utilities may seek utility-oriented billing and CIS utility industry specialists such as Harris, Hansen, or Ferranti. MDM suppliers Itron and emeter are also providing some elements of billing and CIS centered around meter data. Telco billing and 2

CIS providers, such as Convergys, also have utility industry offerings, which leverage their experience of handling complex billing and customer service requirements. Vendors are faced with providing complex solutions in a complex landscape with significant diversity in their utility customers IT maturity and skills. One size does not fit all, and the diversity of utility types, goals, and the characteristics of their end customer types requires customized approaches utilizing standard components. In many instances, vendors should expect to lead their customers to the right path including long-term strategy planning, multi-year technology implementation roadmaps, as well as recommending the utility adopt business practices that align with best-in-class software products to enable effective billing and CIS execution. This may take the form of standard application software from SAP and Oracle, as well as serious attention to service-oriented architecture (SOA) principles and methods when interfacing with other smart grid technologies. It may also take the form of point billing and CIS solutions that can deliver significant value, such as bolt-ons to current legacy systems. 3

1.5 Utility Billing and CIS Software and Services Market Forecast Many factors, including technology and regulatory facilitators and barriers, grid deployment, and IT maturity, are playing out across the world that relate to the growth potential for billing and CIS. As a result, the electric utility billing and CIS software and services market will grow from $2.3 billion in 2011 to $4.0 billion by 2017, at a CAGR of 9.5% annually, which will begin to accelerate most noticeably in the latter part of the forecast period. Chart 1.1 Billing and CIS Software and Services Revenue by Region, World Markets: 2011-2017 ($ Millions) $4,500 $4,000 $3,500 $3,000 $2,500 $2,000 North America Western Europe Eastern Europe Asia Pacific excluding China China Latin America Middle East/Africa $1,500 $1,000 $500 $- 2011 2012 2013 2014 2015 2016 2017 (Source: Pike Research) North America is the leading region in terms of smart meter and AMI technology maturity, which generally correlates with billing and CIS modernization. However, the range of billing and CIS modernization in North America is significant with areas like Texas and some Canadian provinces focusing on their retail-related challenges, while regulated vertical utilities like those in California, are implementing CRM to promote demand-side measures to increase energy conservation. Western Europe is the other leading region with significant diversity in practice from the advanced retail focus of the United Kingdom to the more modest efforts of some of the large state monopolies and oligopolies on the continent. Asia Pacific, Eastern Europe, and Latin America each have their own opportunities, challenges, and success profiles. In general, Pike Research expects deregulated utilities to the lead the way with more advanced billing and CIS systems during the decade. 4

Section 8 TABLE OF CONTENTS Section 1... 1 Executive Summary... 1 1.1 The Transformation in Billing and CIS... 1 1.2 Is Billing and CIS IT Technology up to the Challenge?... 2 1.3 What Are the Options for Utilities?... 2 1.4 What Should Vendors be Doing?... 2 1.5 Utility Billing and CIS Software and Services Market Forecast... 4 Section 2... 5 Market Issues... 5 2.1 Billing and CIS Overview... 5 2.2 Billing & CIS Definition... 6 2.3 Billing and CIS Critical Success Factors... 7 2.3.1 Billing Process (Meter-to-Cash)... 7 2.3.2 Robust Billing Platform... 8 2.3.3 Bill Delivery Methods... 10 2.3.4 Cost Efficiency... 10 2.4 CRM & CIS Definition and Trends... 11 2.5 Utility Market Factors Impacting Billing and CIS... 12 2.5.1 Deregulation and Billing and CIS... 12 2.5.2 Conservation and Billing and CIS... 13 2.5.3 Customer Competence and Billing and CIS... 13 2.5.4 Expectations of Better Products and Services... 14 2.6 Billing and CIS IT Systems Today... 14 60

2.7 Next Steps for Utilities... 15 2.7.1 IT Products/Solutions Roadmap... 15 2.7.1.1 IT Transformation Projects... 16 2.7.1.2 Managed Services... 16 2.7.1.3 Suites... 17 2.7.1.4 Modular Point Upgrades... 18 2.8 Billing and CIS Market Segmentation... 18 2.8.1 Regulated versus Deregulated Utilities... 18 2.8.2 Large versus Small Utilities... 19 2.8.3 Residential Customer Types and Behavior... 20 2.9 Utility Billing and CIS Vendor Landscape... 21 2.9.1 Making the Right Vendor Choice... 21 2.10 Regional Market Factors... 22 2.10.1 North America... 22 2.10.2 Western Europe... 23 2.10.2.1 United Kingdom... 23 2.10.2.2 Nordics... 23 2.10.2.3 Germany... 24 2.10.3 Asia Pacific... 24 2.10.4 Eastern Europe and the Middle East and Africa... 25 2.10.5 Latin America... 25 Section 3... 26 Technology Issues... 26 3.1 Smart Grid Technology and Billing and CIS... 26 3.1.1 The Impact of AMI and Related Technologies... 26 61

3.1.2 Demand Response... 27 3.1.3 Electric Vehicles... 27 3.1.4 Prepaid... 28 3.2 Customer Energy Management... 28 3.3 Smart CRM Social Networks, Self-service, and Multichannel Technology... 28 3.3.1 Portals... 29 3.3.2 Mobility... 29 3.3.3 Multi-channel... 29 3.3.4 Social Media... 30 3.4 Smart Grid Interoperability and Standards... 30 3.5 Analytics and Big Data... 30 3.5.1 AMI-related Analytics... 31 3.5.2 Customer and Business Process-Related Analytics... 32 3.5.2.1 Market Segmentation and Product Development... 32 3.5.2.2 Customer Retention... 32 3.5.2.3 Business Process and Strategy Analytics... 33 3.5.2.4 Orchestration and Interaction... 33 3.5.2.5 Market Campaign Planning and Evaluation... 33 Section 4... 34 Key Industry Players... 34 4.1 Overview... 34 4.2 Accenture... 34 4.3 Aclara Software... 35 4.4 Convergys IM... 35 4.5 Hansen Technologies... 36 62

4.6 Hewlett Packard... 38 4.7 IBM... 38 4.8 Infosys... 39 4.9 Itron... 42 4.10 Oracle... 44 4.11 PricewaterhouseCoopers... 45 4.12 Science Applications International Corporation... 45 4.13 SAP... 46 4.14 SAS... 47 Section 5... 49 Market Forecasts... 49 5.1 Electric Utility Billing and CIS Market Definition... 49 5.2 Utility Billing and CIS Market Size and Forecast... 49 5.2.1 Software... 49 5.2.2 Billing and CIS Services... 51 5.2.3 Total Billing and CIS Software and Services Spending... 52 5.2.4 Billing and CIS Software and Services Spending for Regulated and Deregulated Electric Utilities... 54 5.2.4.1 Regulated Electric Utility Market Drivers... 55 5.2.4.2 Deregulated Electric Utility Market Drivers... 55 Section 6... 56 Company Directory... 56 Section 7... 58 Acronym and Abbreviation List... 58 Section 8... 60 Table of Contents... 60 63

Section 9... 65 Table of Charts and Figures... 65 Section 10... 67 Scope of Study... 67 Sources and Methodology... 68 Notes... 68 64

Section 9 TABLE OF CHARTS AND FIGURES Chart 1.1 Billing and CIS Software and Services Revenue by Region, World Markets: 2011-2017... 4 Chart 5.1 Billing and CIS Software Revenue by Region, World Markets: 2011-2017... 50 Chart 5.2 Billing and CIS Services Revenue by Region, World Markets: 2011-2017... 51 Chart 5.3 Billing and CIS Software and Services Revenue by Region, World Markets: 2011-2017... 52 Chart 5.4 Billing and CIS Software and Services Revenue by Regulated and Deregulated, World Markets: 2011-2017... 54 Figure 2.1 Typical Billing and Customer Service Functions... 6 Figure 2.2 Electric Utility Bill Sample... 9 Figure 2.3 Customer Relationship Management and Customer Sales and Service Cycle... 12 Figure 2.4 Customer Profiles and Energy Product and Service Offering Adoption Factors... 20 Figure 3.1 Examples of Customer Analytics Possibilities... 32 Figure 4.1 Convergys Smart Utility Solutions... 36 Figure 4.2 Hansen Technology Billing and CIS Offerings... 37 Figure 4.3 IBM Smart Grid Enterprise Architecture... 39 Figure 4.4 Infosys Utility Billing and CIS Offerings... 40 Figure 4.5 Itron Enterprise Edition Platform... 42 Figure 4.6 SAIC Smart Grid as a Service... 46 65

Table 3.1 Complex Billing Options... 27 Table 5.1 Billing and CIS Software Revenue by Region, World Markets: 2011-2017... 50 Table 5.2 Billing and CIS Services Revenue by Region, World Markets: 2011-2017... 51 Table 5.3 Billing and CIS Software and Services Revenue by Region, World Markets: 2011-2017... 53 Table 5.4 Billing and CIS Software and Services Revenue by Regulated and Deregulated, World Markets: 2011-2017... 54 66

Section 10 SCOPE OF STUDY This report examines billing and CIS and related electric utility software applications and services that are essential to electric utility customer relationships and process success overall. Such systems include:» Billing and M2C processes» Marketing and sales management systems» Portals and other methods of interacting with customers The report covers the current state and readiness and forecasts for the adoption of billing and CIS that can accommodate and exploit smart grid technologies for the years 2011 through 2017 in the regions of North America, Western Europe, Eastern Europe, Asia Pacific (excluding China), China, Latin America, and the Middle East/Africa. It segments the greater billing and CIS market into spending in regulated versus deregulated markets. These forecasts complement those in other Pike Research reports on specific applications, such as the smart grid IT, MDM, smart grid data analytics, and other market segments. Leading vendors are highlighted, as well as the impact of smart grid regulatory, analytics, portal, social media, and other IT technologies on the use of billing and CIS by electric utilities. This report does not address the technical details of the applications and the enabling technologies discussed above. Rather, it addresses the status of billing and CIS in use today and the roadmaps and paths that are available to bring these systems into alignment with smart grid capabilities and trends. 67

SOURCES AND METHODOLOGY Pike Research s industry analysts utilize a variety of research sources in preparing Research Reports. The key component of Pike Research s analysis is primary research gained from phone and in-person interviews with industry leaders including executives, engineers, and marketing professionals. Analysts are diligent in ensuring that they speak with representatives from every part of the value chain, including but not limited to technology companies, utilities and other service providers, industry associations, government agencies, and the investment community. Additional analysis includes secondary research conducted by Pike Research s analysts and its staff of research assistants. Where applicable, all secondary research sources are appropriately cited within this report. These primary and secondary research sources, combined with the analyst s industry expertise, are synthesized into the qualitative and quantitative analysis presented in Pike Research s reports. Great care is taken in making sure that all analysis is well-supported by facts, but where the facts are unknown and assumptions must be made, analysts document their assumptions and are prepared to explain their methodology, both within the body of a report and in direct conversations with clients. Pike Research, a part of the Navigant Consulting, Inc. Energy Practice, is a market research group whose goal is to present an objective, unbiased view of market opportunities within its coverage areas. Pike Research is not beholden to any special interests and is thus able to offer clear, actionable advice to help clients succeed in the industry, unfettered by technology hype, political agendas, or emotional factors that are inherent in cleantech markets. NOTES CAGR refers to compound average annual growth rate, using the formula: CAGR = (End Year Value Start Year Value) (1/steps) 1. CAGRs presented in the tables are for the entire timeframe in the title. Where data for fewer years are given, the CAGR is for the range presented. Where relevant, CAGRs for shorter timeframes may be given as well. Figures are based on the best estimates available at the time of calculation. Annual revenues, shipments, and sales are based on end-of-year figures unless otherwise noted. All values are expressed in year 2012 U.S. dollars unless otherwise noted. Percentages may not add up to 100 due to rounding. 68

Published 3Q 2012 2012 Navigant Consulting, Inc. 1320 Pearl Street, Suite 300 Boulder, CO 80302 USA Tel: +1.303.997.7609 http://www.navigant.com/pikeresearch This publication is provided by Pike Research, a part of the Navigant Consulting, Inc. Energy Practice ( Navigant ). This publication may be used only as expressly permitted by license from Navigant and may not otherwise be reproduced, recorded, photocopied, distributed, displayed, modified, extracted, accessed, or used without the express written permission of Navigant. Notwithstanding the foregoing, Navigant makes no claim to any government data and other data obtained from public sources found in this publication (whether or not the owners of such data are noted in this publication). Navigant does not assume, and hereby disclaims, any liability for any loss or damage caused by errors or omissions in this publication. This publication is intended for the sole and exclusive use of the original purchaser. If you do not have a license from Navigant covering this publication, please refrain from accessing or using this publication. Please contact Navigant to obtain a license to this publication. 69