Water Journal : Water Journal April 2012
feature article water APRIL 2012 75 Companies contemplating a new CIS and billing system need to be informed -- not just about their own needs, but about the market they are entering. There are many examples of troubled and expensive system implementations that underline the importance of early engagement with providers, and understanding what is available. Often, smarter systems procurement is based on asking the following key questions: • What systems are procured in my industry segment – and is a best-of-breed or an ERP philosophy more effective? • What are the procurement costs and characteristics of a successful implementation? • When should we make the decision to replace? • How should we prepare to engage the market, and whose experiences can we learn from? What Systems are Procured in my Industry Segment? The size distribution of the utility industry in Australia (Figure 1) leads to distinctly different markets for CIS and billing systems. As the chart shows, the majority of water businesses have less than 100,000 customers. These smaller organisations are mostly spin-offs from councils or other state authorities, or occasionally still exist within them. Therefore, historically, this market has been dominated by local authority billing and CRM applications. The small scale of these businesses makes even mid-tier bespoke systems difficult to justify, with high establishment costs and little commercial incentive to adopt more sophisticated marketing tools. However, the commercial pressures on systems providers may drive a focus on this group, with stripped-down offerings and more commercially- astute licensing arrangements over the next few years. Small utilities interested in new systems should be looking to drive a hard bargain while ensuring long-term maintenance support. For these smaller utilities, high value tends to be placed on replicating successful peer implementations rather than experimenting with new entrants. AquaRate and Technology One are the most successful providers here. As some of these small utilities have been aggregated and corporatised through recent industry reform, a new 'mid-tier' segment has emerged. Recent years have seen several new billing system implementations in this segment (many of which were Gentrack's), as legacy systems become more costly to maintain and struggle to keep pace with regulatory and community expectations. This segment has tended to opt for modular, best-of-breed CIS and billing systems that can be implemented relatively easily. Priorities include interoperability with existing systems, and the ability to provide a 'single view' of customer data. Flexibility is valued, although the scale of these businesses allows business processes to work around system constraints where required. While further industry reshuffing may yet occur in Tasmania and Queensland, there has been a significant decline in new implementations, with the next round expected to commence in 2020. This will place pressure on the providers to be competitive in responding to future market opportunities, but may also restrain continuing support capability -- now is the time for utilities to check that their support arrangements and expectations are clearly understood, refected in their support contracts, and that their providers are committing to long-term resourcing where required. The largest energy utilities, meanwhile, are predominantly employing SAP as a business platform that includes CIS and billing modules, in preference to retaining best-of--breed integrated solutions. These solutions offer organisations full ERP functionality and, therefore, the ability to tightly integrate their Finance, HR and Asset Management functions to provide end-to-end services. Oracle, believing that the energy industry's logic should hold equally well in water, is making a clear play for large water utilities. Evidence from overseas, where larger water businesses are moving towards full ERP implementations, suggests that they are right. Over the last 20 years there has been little regulatory change or innovation in Australia of the sort that would necessitate new systems with new capabilities. Ageing legacy systems, therefore, have 'done the job'. But we are now seeing the beginnings of interval metering being rolled out in the Australian water industry, and its data storage and processing requirements are orders of a magnitude higher than the simple metering it is replacing. This should gradually move more water businesses down the replacement route. The broad range of systems adopted in the water industry, compared to the energy industry, suggests that no one product is universally applicable or suitable. As Figure 2 (overleaf) clearly shows, the market for billing systems in water is diverse. Nevertheless, our research (based on interviews with over 30 utility industry Smarter Systems Procurement Understanding the CIS and billing systems market gives water businesses an investment head start By Alex Coe, Senior Consultant, Marchment Hill Consulting 0 5 10 15 20 25 30 35 40 45 50 Very Small 1000+ 3000+ 10,000+ 30,000+ 100,000+ 300,000+ 1m+ 3m+ Number of utilities Number of customers per utility Size Distribution of Australian Utilities Energy Distribution Energy Retail Water Figure 1. Trends in the Australian water sector CIS and billing space.
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