From maximising the lifespan of existing infrastructure, to delivering on sustainability goals and improving services for customers, utility companies face several well-publicised concerns. And the stakes are high, as the National Infrastructure Commission (NIC) estimates the UK needs an extra £25-35 billion per year of accelerated investment to enable the National Grid to deliver 50% more electricity demand by 2035, and more than double that figure by 2050.
While the water companies in the UK await a provisional decision from OfWat after the Election, they are adamant they must increase customer bills or they will not be able to meet their investment targets. Naturally, this is met with significant resistance from the public and politicians promising economic stability to their constituents.
With so many competing demands, utilities leaders are challenged to make strategic decisions and investment priorities that balance the books, improve services, decrease the burden on consumers and the environment, and satisfy shareholders – all at the same time.
One key area of the business that holds more potential for cost savings, improved margins and an accelerated timeline for innovation than many CIOs and CFOs recognise, is one that is often mistaken as inflexible – your existing enterprise resource planning (ERP) application.
ERP: Mission-critical, not strategic
Core business applications have long played a key role in running back-office functions for utility companies which makes them mission-critical to the smooth running of their operations. While mission-critical, ERPs are not the drivers of strategy; strategic decisions are made in meetings and boardrooms and then applied to determine which technology investments are needed to realise business objectives.
Qualifying the difference between mission-critical and strategic IT investments can be addressed through a time-to-value exercise. This will help to achieve consensus about where investment will deliver the most value and therefore, where resources should be prioritised. Based on our experience working with scores of utilities around the world, back-office applications are less likely to deliver competitive advantage, so there is a danger that upgrading them will waste precious resources. You’ve invested significant resources to make ERP fit-for-purpose for you and your business. If they’re stable, why disrupt them?
Free up IT funds for strategic priorities
A time-to-value exercise should enable utilities to better navigate the conflicting forces of demand for maximising the value of existing IT investments and impending deadlines such as those imposed by enterprise software vendors. Take SAP for example.
Customers on the latest versions of the SAP’s ECC6 software face an imminent deadline of 2027 (or 2025 for earlier versions) when SAP intends to end mainstream maintenance support. Utilities must make decisions about whether to keep their existing ERP applications (and potentially risk being de-supported), or go through the long, and potentially disruptive exercise of reimplementing these systems, or pay SAP an additional fee for extended or customer-specific support that may not fit with budget objectives – or turn to an alternative outside of the SAP vendor mandate.
There are many benefits in choosing independent, third-party support for enterprise software, including lower support costs which can significantly lower operational expenses; extended asset lifespans which can avoid costly reimplementations and improve margins by enhancing the utilisation of existing investments; and freedom from vendor constraints, allowing organisations to innovate at their own pace more quickly and without disruption.
