Magic Quadrant for Utilities Customer Information Systems
For buyers of customer care and billing solutions in the energy and utility sector, we provide an update of vendors' positioning in the utilities customer information system market.
The Gartner Magic Quadrant concept is based on a customer-oriented market analysis in which the market is defined as a set of actual or potential customers, for a given set of products or services, who have a common set of needs or wants, and who reference each other when making a buying decision.
Accordingly, the customer information system (CIS) market is composed of utility companies looking for commercial off-the-shelf (COTS) software packages (commonly known as CISs) that address business-critical utility meter-to-cash (M2C) and customer service business processes. The CIS products cover two core utility life cycle processes: revenue management and customer management. In addition, CIS products also reach into two adjacent business process areas: commodity management and service delivery management.
The CIS functional footprint primarily covers the M2C functions, such as:
- Account maintenance
- Order processing
- Product/service management
- Rate design
- Credit collection
- Accounts receivable
- Payment processing
On the customer service side, CISs support call center interaction — including customer self-service needs, as well as some aspects of customer service delivery, such as scheduling and tracking service orders. Depending on the vendor's retail market focus — that is, competitive or regulated markets — a CIS may include some customer- and financial-related analytical capabilities, such as customer churn and customer profitability analysis, or it may have more emphasis on customer service delivery, such as scheduling and service optimization.
In a competitive market, a CIS product also needs to enable data exchanges with other market participants (such as metering service companies, network companies, competitive retailers/suppliers and market operators).
Source: Gartner (June 2012)
EG Utility, headquartered in Hjorring, Denmark, is a utility-focused IT solution provider owned by Scandinavian IT service vendor EG A/S (formerly known as EDB Gruppen). EG Utility's focus is on ERP solutions for different vertical industries built on its own ERP platform, Aspect4, or on third-party products, such as SAP ERP or Microsoft Dynamics AX. EDB Gruppen has been providing utility solutions since 1979. In 2001, EG Utility was formed as a wholly owned subsidiary of EDB Gruppen and focused on the utility sector. In 2002, EG Utility developed and started marketing a vertical solution called Xellent by adding several vertical modules on top of the Dynamics AX product. Xellent's functionality covers M2C and project management's need for a utility.
EG Utility's CIS solution is composed of Xellent Billing and several other modules, including Xellent Customer Portal, Xellent EDM, Xellent ebIX, Xellent FlexPricing, Xellent CRM, Xellent Payment and Xellent PDA. EG Utility has 125 customers, the majority of which are small and midsize Scandinavian utilities. The Xellent product's reliance on Microsoft applications and technology makes it affordable to smaller IT organizations that may find the complex IT requirements of leading CIS products to be prohibitive. Xellent is a good candidate for companies whose application strategies are based on Microsoft products. Currently, more than 5 million customers are billed on EG Utility's CIS product, with the largest installation being a Nordic utility company serving more than 1 million customers.
- EG Utility's Xellent CIS product is built on and leverages Microsoft's ERP solution, Dynamics AX, which enables it to ride on the coattails of Microsoft's marketing effort in the utility sector.
- Xellent is fit for small and midsize utilities, including municipal utilities.
- The Xellent product offers lower implementation and operation costs compared with leading CIS solutions that address diverse energy market needs and various company sizes.
- EG Utility has not released Xellent on the latest Microsoft Dynamics AX 2012 platform yet.
- Users serving a large number of customers and/or having large billing batch cycles should scrutinize Xellent's billing scalability, because customers continue to express concerns with the product's batch performance.
- The Xellent product lacks COTS maturity and implementation partners, and it is usually delivered as a leveraged product, mostly by parent company EG's subsidiaries in different Nordic countries.
Ferranti Computer Systems, founded in 1976, has been a member of the Nijkerk Group (a Benelux-based industrial IT provider) since 1994. In the Benelux region, Ferranti acts as a system integrator (SI). Outside the Benelux region, Ferranti delivers its Metering and Contract Management System (Mecoms) product through a channel organization of certified Mecoms partners. Mecoms is Ferranti's solution for the M2C process in competitive and regulated energy and utility markets. Mecoms is built on top of the Microsoft Dynamics AX ERP suite, and it is certified for Microsoft Dynamics AX.
Ferranti's Mecoms is designed to support customer care and the billing needs of companies with different roles (for example, merchant generators, metering companies, retail companies and network companies). Mecoms can be used by companies offering different services (for example, electricity, water, gas and heat) in different markets (regulated and deregulated). As a Microsoft Gold Certified Partner, Ferranti leverages the Microsoft Dynamics AX partner network to expand beyond its home market (Benelux). Forty-seven utility companies that use Ferranti Mecoms as their CIS product bill approximately 19 million customers in aggregate. The largest client is a European metering service company with almost 7 million meter points, while the largest utility client that uses Mecoms CIS is a water utility company with more than 475,000 customers.
- Mecoms is built on top of the Microsoft ERP platform Dynamics AX and leverages its n-tier architecture. In 3Q11, simultaneously with the release of Dynamics 2012 AX, Ferranti made Mecoms available on the same platform (Dynamics AX 2012).
- Ferranti's partnerships with larger SIs (such as Logica, Tata Consultancy Services and Accenture) have built delivery channel bandwidth. Its global independent software vendor agreement with Microsoft as a platform vendor for Mecoms ensures access to development and marketing resources, and makes Ferranti Microsoft's "go-to partner" in the utility CIS market globally.
- Ferranti's CIS product has a lower total cost of ownership compared with leading CIS products, which positively affects the overall customer cost to serve. This makes Mecoms attractive to the smaller energy retailer that is concerned with low margins in competitive energy retail markets.
- Reliance on the Microsoft Dynamics AX ERP platform may make Mecoms less attractive for clients that own or plan to acquire a different ERP package.
- As a relative newcomer in the CIS product market, Mecoms is still going through initial product maturation. Some customers have reported concerns with batch performance, as well as with training and implementation services.
- Although Mecoms can be configured in components (by partial configuration and partial data population), it is sold as a whole. The pricing, which is based on the number of users, regardless of the functionality/modules they use, does not make it attractive for companies looking to address particular needs via bolt-on components, such as a complex billing engine or meter data management (MDM).
Gruppo Engineering, founded in 1980, is an Italian IT product and service provider composed of 13 companies that specialize in different market segments or lines of business. The company employs 6,500 professionals and reported revenue of more than €775 million for 2011. Two-thirds of the company is privately held by the founders, and one-third is floated on the Italian stock market. Key offering areas are system integration and consulting, outsourcing, and products and solutions. The utility sector contributes approximately 12% of the company's revenue — mostly from system integration and consulting activities.
Gruppo Engineering's CIS product, Net@Suite, is built as a modular solution. It has two components: Net@SIU, which addresses revenue management needs, and Net@CRM, which addresses customer service back-office and front-office needs. Gruppo Engineering owns 30% of the Italian utility market, and more than 19 million utility customers in Italy are billed using Net@Suite. The largest installation site is an Italian energy company with 3 million end users and batch cycle size of 250,000 bills.
- Gruppo Engineering is the leading CIS product provider in the Italian market and is used by 164 utility clients.
- Net@Suite addresses CIS needs for multiple services, with particularly large installations in gas and water utilities (serving more than 30% of Italian municipal utilities).
- Net@Suite has evolved to support energy and utility market transformation (in Italy), including unbundling and the introduction of retail competition. In addition, in 2012, Gruppo Engineering started its first implementation outside Italy with a Spanish utility and a different SI (Everis).
- So far, Gruppo Engineering has been exclusively focused on the Italian utility market and its liberalization needs. It has not been proved in other national and regional energy markets. The implementation in Spain will be an indication of whether the product can be easily configured to meet different market needs.
- Less than one-quarter of Net@Suite clients are electric utilities. Electric utilities — particularly those operating in regulated markets or network companies operating in competitive markets — should scrutinize Net@Suite's service management functionality.
- Some clients continue to express concerns with Net@Suite's online performance and usability.
Indra is an IT solution and service provider headquartered in Madrid, with a reported $3.6 billion in revenue in 2011. In the IT services space, it offers consultancy services and systems developed for the energy and utility markets. Indra entered the utility market through its acquisition of Soluziona (a consultancy spinoff of the third-largest Spanish utility, Union Fenosa). In addition to IT and engineering services, Soluziona offered hosting of legacy CIS solutions (mostly for Latin American utilities that the parent company acquired). In 2000, Soluziona started marketing the CIS product called Open Utilities Customer Management.
Despite the name, Open Utilities Customer Management is not a CRM product. Rather, it covers the entire commodity-, revenue- and customer-service-related processes of a utility. Open Utilities Customer Management, although aggressively marketed outside the Spanish-speaking world, has not gained much traction — with some exceptions in Eastern Europe and Asia. Following the acquisition by Indra, Open Utilities Customer Management has been gaining traction in Africa, with eight implementations since 2008.
Indra's CIS solutions in production are used to bill 48 million utility customers. However, a significant number of those customers are billed on Indra legacy solutions, rather than the COTS CIS product Open Utilities Customer Management. Indra is in the process of developing a custom solution for a Spanish utility and is considering bringing that to market as a leveraged product for future customer engagements. Currently, 83 utilities are using Indra CIS solutions (both legacy solutions and Open Utilities Customer Management) to bill 63 million customers. The largest implementation site in production is a Spanish utility with 4.7 million customers and a batch cycle size of 250,000 bills per night.
- Open Utilities Customer Management is a functionally rich product whose footprint extends into customer service, outage management and commodity management areas.
- According to clients, Indra's CIS has good usability and a familiar Microsoft Windows "look and feel" user interface.
- Indra has a good presence in Spain, Latin America, Eastern Europe and Asia. It is gaining presence in Africa.
- As an IT services company, Indra is challenged between focusing on service revenue or software product development needs, which can negatively impact COTS product directions.
- A large number of Indra's utility clients still run Soluziona's legacy CIS product.
- Some contacted Indra customers have reported concerns with the quality of the product development methodology and the lack of a clear product road map, including a release schedule.
Nexant, founded in 2000 as a spinoff of Bechtel, is a San Francisco-based, privately held energy technology consulting and solution company with a wide range of offerings in the energy sector. Nexant entered the utility billing market in 2008 through the acquisition of Excelergy (a U.S.-based vendor founded in the mid-1990s) to pursue opportunities in the competitive and transforming energy markets — particularly in the revenue and commodity management domains.
Nexant RevenueManager for utilities addresses the needs of the competitive retail market for high complexity in product configuration and relatively low deployment costs. In addition to its significant presence among North American retailers, Nexant RevenueManager has achieved some traction among retailers in Western European competitive retail markets. Recently, Nexant started repositioning its product as an add-on billing engine to legacy CISs for utilities seeking more complex rate structures based on interval or dynamic billing, or complex product offerings — including demand response and energy-efficiency rebates. Seventy-two companies (68 of them are competitive retailers) use Nexant RevenueManager to bill 28 million end-user customers. The largest Nexant CIS customer is a North American utility that serves 1.7 million customers.
- Nexant RevenueManager can be quickly deployed by new entrants in competitive energy markets, and it tends to result in lower customer service costs for its users. In addition, it can be delivered in a true modular form as a set of discrete components.
- Users accustomed to dealing with large enterprise product vendors find the Nexant CIS team responsive and easy to deal with when addressing service needs or future product functionality.
- The new Nexant offering, FlexRate, is addressing new functionality resulting from smart grid and energy technology consumerization trends.
- Nexant's focus on competitive retail markets makes its RevenueManager product inappropriate for regulated mass markets.
- Although RevenueManager offers some CRM capabilities, it does not meet the full CRM needs of competitive retailers.
- Nexant RevenueManager has been used by a U.S. utility company that serves more than 1.7 million customers and processes 85,000 accounts in one batch cycle. Scalability beyond that has not been proved in production.
Oracle is a large enterprise software and IT technology company headquartered in Redwood Shores, California, with revenue exceeding $35.6 billion for FY11 (which ended 31 May 2011). Oracle entered the utility application market through the acquisitions of SPL WorldGroup and Lodestar in 2006 and 2007, respectively, and the subsequent formation of its Utilities Global Business Unit. Oracle Utilities offers a wide range of IT applications in the utility sector.
Oracle Utilities' CIS product Customer Care and Billing (CC&B) has evolved from SPL WorldGroup's leveraged product CIS Plus, which SPL WorldGroup productized and started offering as a COTS product renamed CorDaptix in early 2000. Through the Lodestar acquisition, Oracle obtained the Lodestar CIS solution Customer Choice Suite, which is not marketed as a complete CIS, but rather as a set of individual products (such as Billing Component, Load Profiling and Settlement, and Quotation Management) in a broader M2C market space. Because of Oracle Utilities' longtime focus on the CIS COTS market, CC&B (which is completely technologically replatformed from the original SPL WorldGroup CIS Plus) is a configurable product with a rich functionality set that has successfully met the requirements of various-size companies that provide diverse utility services in markets with different levels of contestability. More than 110 million utility customers worldwide are billed using the Oracle Utility CIS product in production, with the largest one being a U.S. utility serving more than 7 million customers.
- Oracle Utilities has structured CC&B as a series of modules that can be assembled into specific market segment solutions to address the needs of competitive retailers, fully integrated utilities, water utilities and others.
- CC&B uses Oracle Utilities Application Framework to provide consistency over vertical applications. It can be integrated (leveraging Oracle's service-oriented-architecture [SOA]-based Application Integration Architecture) with other Oracle products (vertical and horizontal) to provide an extended environment that includes customer self-service, mobile workforce management, meter data management, business intelligence and CRM (Siebel).
- In addition to being successfully used by smaller utility companies (particularly water utilities), Oracle has proven performance in large Tier 1 energy companies and can address scalability with up to 550,000 billing services per batch cycle (currently in production).
- Some smart-grid-related requirements (such as net-meter billing programs, electric vehicle billing and advanced metering infrastructure [AMI]-based prepayment) are not fully supported out of the box with the current generally available version of CC&B that was evaluated in this Magic Quadrant.
- Although CC&B has a proven performance record in large utility companies, some midsize companies reported issues with product performance, and had to buy separate batch applications to automate batch processing.
- Some Oracle Utilities' customers have reported that their CC&B implementations were longer than the average COTS CIS implementation (18 to 24 months). Some also expressed concern with support services from Oracle.
Founded in 1972, SAP is a publicly traded global enterprise software vendor headquartered in Walldorf, Germany, with revenue in 2010 exceeding €14.23 billion. In addition to its horizontal ERP offering, SAP has been providing utility-specific software since the mid-1990s, initially focusing on the revenue cycle and then following with asset management. Current SAP for Utilities solutions are part of Business Suite 7 Innovations 2010 and cover a wide set of functionality for companies focused on different segments of the energy value chain, operating in a variety of markets and offering different commodity services.
SAP's utility M2C offering is composed of SAP Customer Relationship Management and Billing (CR&B) for Utilities, as well as adjacent products (SAP Energy Data Management for Utilities, SAP Customer Financial Management for Utilities and SAP Collaborative Services Management for Utilities), which companies can assemble to address the specific needs of their markets and a specific domain focus. According to SAP, 660 utilities worldwide are using its CIS solution. Because of its traditionally strong presence among large energy companies, SAP has the largest market share, defined by the aggregated number of end customers billed on its installations in production (more than 390 million customers). The largest site in production is a U.K. energy retailer serving 17 million customers. Its largest batch cycle size is 500,000 for a European energy utility company.
- SAP CR&B is offered as a part of Business Suite 7 Innovations 2010, which makes it attractive for users seeking an integrated horizontal ERP solution and a vertical billing solution.
- SAP continues to invest in broadening product functionality to address the needs emerging from smart grid initiatives, such as smart grid analytics in utility retail and smart metering sectors through its in-memory Hana offering.
- SAP has a well-developed network of implementation partners and technology product vendors that help cover the white space in SAP's utility offering. For example, by successfully leveraging ecosystems of vendor partners and customers, SAP developed AMI@SAP as an off-the-shelf integration framework to support utility companies' needs for CIS and AMI integration. It also leverages SIs to develop packaged extension of CR&B to address end-user, energy-efficiency, self-service or social- and mobile-related requirements.
- Even though SAP has attracted a substantial number of implementation partners, the large numbers of concurrent implementations can strain the SAP Industry Solution for Utilities (IS-U) organization's ability to get close involvement and oversight of the implementation project, which can cause project budget overruns.
- Customers continue to give low grades to overall product usability and e-service functionality for CR&B; however, customers who are on the latest generally available release (Business Suite 7 and CRM 7) have reported improvements.
- Several large utility companies have found that the increased agility and flexibility required for large, commercial and industrial (LC&I) or competitive retail needs (or even smart grid pilots) cannot be economically met by CR&B. Although CR&B performs satisfactorily for mass-market billing for those companies, complexity and a relatively high cost per bill (because of the small scale of those operations) make CR&B a less attractive solution.
UEM-CGI is a partnership between French municipal utility UEM and IT services vendor CGI, which they entered into in 2003 with intention to jointly develop and market multiproduct utility billing and customer service solution. UEM-CGI — which jointly designed, developed and implemented the solution to UEM — now markets the solution, under license from UEM, as efluid. Based on Java Platform, Enterprise Edition architecture and Oracle Database, efluid can be configured for multiple users' needs (retailers and distribution network operators), multiple customer segments (LC&I, SMB and residential) and billing, and it functionally covers areas from customer service and contract management to billing, payment processing and credit collection activities. UEM and CGI have jointly devoted a team of 120 professionals to the efluid venture.
Although efluid has a multilingual capability for the time being, all customers (eight deregulated utilities and one regulated utility) are utilities from French-speaking regions. The cumulative number of all customers billed with efluid is 2 million, with the largest utility being EDF SEI (1 million), and the largest batch cycle being 100,000 bills with Electricite de Strasbourg.
- Built on the modern architecture, efluid can meet billing requirements for multiple metered commodities (such as electric, gas and water) and services (such as cable, Internet and district heating).
- The UEM-CGI partnership leverages internal utility business process expertise from UEM and product delivery capabilities from CGI.
- The partnership brings access to scalable resources, as well as mature IT development and delivery methodology.
- Neither UEM nor CGI are software product companies, which may pose challenges regarding developing and deploying a COTS product.
- UEM-CGI customers are forced to buy a "packaged deal," because they do not have the option to choose a different SI.
- The product hasn't been proved outside of relatively small regions, so there are no guarantees that it will be easily configured for business and regulatory requirements in different energy markets.
We review and adjust our inclusion criteria for Magic Quadrants and MarketScopes as markets change. As a result of these adjustments, the mix of vendors in any Magic Quadrant or MarketScope may change over time. A vendor appearing in a Magic Quadrant or MarketScope one year and not the next does not necessarily indicate that we have changed our opinion of that vendor. This may be a reflection of a change in the market and, therefore, changed evaluation criteria, or a change of focus by a vendor.
UEM-CGI has been added in 2012. In addition, several new candidates were considered. Convergys (with its Smart Utility Solutions product) was originally considered for inclusion because of Convergys' ability to address the emerging requirement for incremental or real-time billing, which was introduced by smart grid initiatives through its Rating and Billing Manager. However, because the product was not in full production at three utilities at the time of the evaluation, Convergys was not included in the 2012 evaluation.
No vendors have been dropped from the Magic Quadrant in 2012. Vendors that were dropped in 2009 — Hansen Technologies (Hub and Peace) and Ventyx (Customer Suite) — were reconsidered for inclusion this year, but again didn't meet the $2 million license fee threshold from new product sales.
To be included in this category, software products must cater to the majority of functional requirements outlined in this Magic Quadrant. The software products evaluated are all marketed as stand-alone customer care and billing solutions. To be considered in this market, vendors must be able to address global market needs, as well as the needs of the regulated and contestable retail markets.
Worldwide, more than 200 vendors address utilities' need for customer care and billing through a variety of product/solution offerings. Most of these vendors are too small — in terms of company size or product scope — or have too small a geographic reach to be of interest to Gartner clients. Thus, we evaluated only the top products that meet an estimated license fee revenue threshold (from new product sales) of $2 million (generated during the past 12 months). To be considered, vendors must have had systems in production with at least three utility clients.
This axis evaluates CIS software application vendors on the quality and efficiency of the processes, systems, methods or procedures that enable their performance to be competitive, efficient and effective, and to positively affect revenue, retention and reputation. For utilities seeking CIS software, a vendor's Ability to Execute is primarily a combination of factors driven by product functionality, architecture and performance, and by the ability to meet customer expectations during product delivery and operation. Software application providers are judged on their ability and success in capitalizing on their vision. Our evaluation of a vendor's Ability to Execute is based on the following criteria:
- Product/service: The breadth and availability of the vendor's products that compete in and serve the CIS market
- Overall viability: Product quality and consistency, as well as the vendor's financial strength, including the likelihood of continued investment in CIS software for the energy and utility market, and advancing the state of the art within the provider's portfolio of products
- Sales execution/pricing: Capabilities of presales structures and management activities, including pricing and negotiation, as well as the overall effectiveness of sales channels
- Market responsiveness and track record: Ability and responsiveness in meeting changing market dynamics
- Marketing execution: Market share (and mind share) in the global enterprise market
- Customer experience: Ability to provide technical and relationship support and services that drive customer satisfaction
- Operations: Structure that is put in place to effectively meet organizational goals and commitments
Table 1 lists the relative weighting of the various criteria in terms of a vendor's Ability to Execute in this market.
Source: Gartner (June 2012)
This axis evaluates CIS application vendors on their ability to convincingly articulate logical statements about current and future market direction, innovation, customer needs, and competitive forces, and on how well those statements map to Gartner research positions. CIS application providers are rated on their understanding of how market forces can be exploited to create opportunities. For utility companies seeking CIS COTS software, vendors' Completeness of Vision is primarily a combination of vendor domain expertise in different retail markets and customer segments, an appropriate go-to-market strategy, and a focus on innovation in product functionality and enabling technology. Table 2 lists the relative weighting of the various criteria with regard to a vendor's Completeness of Vision in this market. Our evaluation of a vendor's Completeness of Vision is based on the following criteria:
- Market understanding: Competitive position, market knowledge and mechanisms for customer feedback, combined with the ability to articulate market direction and aligned product direction
- Marketing strategy: Ability to articulate market direction and aligned product and service offerings with market requirements
- Sales strategy: A vendor's ability to work with customers through its sales force and sales tools
- Offering (product) strategy: A vendor's strength of R&D, capability in product design and ability to offer image stability
- Business model: Soundness and logic of the underlying business proposition
- Vertical/industry strategy: Ability to provide a vertical-specific product and service for the market with a different level of contestability, and serving different products (for example, electricity, gas and water)
- Innovation: Ability to have investment resources, expertise or capital for consolidation, defensive or pre-emptive purposes to address emerging market needs
- Geographic strategy: Ability to provide products and services globally
Source: Gartner (June 2012)
Leaders are vendors that are normally included on shortlists for CIS products for all types of utilities worldwide. They perform profitably, grow their revenue and have a presence in all major markets. Their functionality is above average, and their technology and scalability are leading edge. They offer solutions for retailers in different market models (such as regulated and competitive) and support large utilities with multiple commodity offerings, as well as small single-commodity utilities, along with utilities focused on different customer segments. These vendors are followed and tracked by other CIS vendors.
Leaders in this market pair advanced technology with broad offerings and rich functionality. They are utility vertical businesses of the leading enterprise application vendors (such as SAP and Oracle). They demonstrate the financial viability needed to fuel R&D to support new technology requirements (such as Web services and SOA) and to enable business process integration across functional silos in utilities. SAP attained leadership status in 2003, and has reconfirmed it because of the combined effects of its significant market share globally and continuing R&D investments in integration technologies and productized competitive market interface extensions. Oracle Utilities (then SPL WorldGroup) attained leadership status in 2004, and has retained its status in this Magic Quadrant because of improved corporate viability following acquisition by Oracle, solid business performance, and access to a strong corporate technology platform and sales and delivery channels.
These vendors perform well in their selected markets or industries. Although they have a high capability and performance (in sales and growth), they may not be targeting all segments or geographies of the energy utility industry, or they may have a more limited vision of their functionality or technology. Clients with a conservative approach to business will find lower-risk options in this sector.
In our 2012 Magic Quadrant, no vendors have been placed in the Challengers quadrant.
These vendors have unique functional or technical offerings, but also have constrained capabilities in geographic or financial terms. Visionaries are characterized by their ability to anticipate market transformation, such as increased analytical functionality or integration, and by their optimization of commodity and service management business processes. Clients that have a tolerance for risk and are seeking a differentiating product should consider vendors in the Visionaries quadrant.
In our 2012 Magic Quadrant, no vendors have been placed in the Visionaries quadrant.
Niche Players in this market are still worthy of consideration. Given the size of the market (more than 200 billing and customer care software products), potential buyers should consider that any listing on this Magic Quadrant is a good indication of vendor/product credibility. Nevertheless, vendors in the Niche Players quadrant are situated there because of a geographical shortfall, narrow focus or lack of financial strength (that is, they have not achieved financial viability compared with the Leaders), or they have not come as far as the Leaders in advancing their technologies or functionality. This prevents them from being universally suitable to all customers.
Indra, Gruppo Engineering, Ferranti Computer Systems, EG Utility and UEM-CGI are in the Niche Players quadrant mostly because of their limited geographic presence and focus. Nexant's placement in the Niche Players quadrant is the result of its almost exclusive focus on competitive retail billing. Clients should carefully review these vendors' target markets and capabilities, and include them in evaluations if the vendors match clients' business scope, geographic areas and specific needs.
Gartner has covered utilities CISs since 2000 to address the needs of clients seeking IT solutions to improve M2C and customer service processes. We are updating the Magic Quadrant to reflect changes in customer buying criteria that have resulted from emerging business and regulatory trends, as well as socioeconomics and technology forces, which subsequently impacted vendor offerings and, consequently, their market positioning.
Out-of-the-box COTS CIS products cover utility M2C business processes with a level of functionality adequate for an integrated utility, and support customer service needs for utility companies operating in regulated markets. In contestable energy markets, CIS products also cover billing needs for network companies (focused on asset management) and retail/supplier companies (focused on customer management and commodity management). However, packaged CIS products are generally inadequate for the advanced customer-facing functions that competitive retailers need — functions such as customer retention, customer acquisition, campaign management and customer analytics. In competitive markets, therefore, retailers tend to supplement packaged CIS products with an add-on CRM solution to enhance customer-facing business processes beyond customer service.
Current COTS CIS products support billing for multiple customer segments — for example, residential, and large commercial and industrial customers — that were previously addressed with separate product-complex billing. Most leading vendors also support billing for multiple utility services, as well as metered and unmetered services/products. The CIS product requirements defined by electric utilities tend to be more complex because of the intricate nature of the business. Issues such as the inability to store and manage commodity flow, more complex market structures (such as retail competition and unbundling), smart grids, and the deployment of AMI tend to keep the electric utility at the forefront of business innovation and IT investment, compared with other utility sectors. As a general rule, configurable COTS CIS products developed for electric utility markets can accommodate the business rules and rate structures required by utilities that offer other commodities (such as water or gas) or combined services, because they are built for the superset of business requirements.
From an IT application portfolio perspective, a CIS represents a core investment focused on supporting a "run the business" strategy. As the largest ticket item among energy companies' IT applications (particularly for regulated utilities or competitive retailers), CISs can account for up to one-third of a utility CIO's IT application operations and maintenance budget.
CISs tend to have a long life expectancy. Therefore, when CIS users select technology partners, they must not only weigh criteria that will foster operational efficiency and cost reduction (which are usual focus of the run-the-business applications), but also evaluate the capability of vendors' products to ensure the scalability and flexibility needed to accommodate changes in still-evolving retail markets, the impact of emerging energy sustainability requirements and the impact of the nexus of IT forces (cloud, social, mobile and big data) discussed in the next section in detail. In addition to having long-term viability, successful CIS vendors should also:
- Have deep domain expertise and long-term commitment to the utility industry.
- Be able to make the necessary R&D investments to address emerging needs, such as the increased focus on energy efficiency and energy provisioning transformation, the emergence of prosumers and e-mobility, and the impact of the nexus of IT forces on existing product architecture.
In addition, utilities operating in different markets may have specific needs. For example, in regulated markets, they need a product capability to:
- Reduce the cost of customer service provisioning — for customer care and M2C.
- Provide end-to-end business process integration to achieve operational excellence by supporting service delivery optimization.
In a competitive market, utilities need a product capability to:
- Support advanced CRM analytical functions (such as customer churn and profitability analysis).
- Manage interactions among retail market participants.
CIS Market Evolution
CIS applications emerged in the utility sector in the 1970s as internally built customer solutions focused on customer service and billing. Contrary to its name, early CIS software applications had a meter-centric view structured around a delivery point, rather than a customer. In the mid-1980s, IT professional services organizations — which were, in most cases, IT practices of large accounting firms focused on the energy and utility sector — entered the CIS market. Utilities' customer care and billing solutions, delivered by IT services vendors at that time, were created as a custom-made product during an engagement, which vendors took as a starting point for the next assignment. The products evolved from an engagement to the next engagement, resulting in numerous one-off custom implementations. As vendors leveraged code created in previous engagements for the subsequent engagements, those products (such as Customer 1 or Service 2000) became known as leveraged CIS products. Because of the predominantly accounting background of the IT services vendors, CIS products delivered at that time had predominantly an account-centric view of customer care and billing — making it, as some like to point out, "glorified accounts receivable" applications.
Global retail market restructuring activities in the late 1990s created a need for customer-centric CIS. Compounded by Y2K concerns, this created a surge of legacy CIS replacements. The new need for CISs to act as enablers of the contestable retail market temporarily elevated CIS products from the run-the-business portion of the IT application portfolio to the grow-the-business or even the transform-the-business segment, and also elevated CISs' visibility and importance, consequently attracting a host of product vendors into the utility billing market, and fostering market development and maturation. This resulted in what is now a mature replacement market, with numerous players offering COTS CIS software products, and professional services vendors mostly exiting CIS product development and focusing on system integration activities for COTS products.
Following the downturn of the market restructuring in the U.S. in early 2000, and after almost a decade of preparation for retail competition in the EU (where most utilities have updated their customer care and billing platforms with COTS CIS products), a majority of the global energy market's CIS products have gone back into the run-the-business portion of the utility IT application portfolio. Consequently, in most global energy markets, utilities have reverted back to seeking CIS solutions that can help them improve operational efficiency and reduce customer service costs.
Despite the current focus on reducing the cost of customer service (and the potential benefits of replatforming legacy billing and customer care solutions with COTS CIS products), utilities operating in the regulated retail environment are still struggling to justify costly CIS replacements. Although the demand for new CIS products is improving, when compared with the trough of the global financial crisis, the smart grid "irrational exuberance" and, in some cases, the almost mandatory investment in smart-grid-related activities have not reinvigorated the CIS market to the extent that the retail restructuring of the late 1990s did.
Implications of the Smart Grid on the Utilities CIS Market
The increased emphasis on energy sustainability and security of supply — and the resulting focus on the smart grid and AMI — has made an impact on the CIS market in the past several years, and will continue to shape market requirements for CIS products in the years to come. Following are examples of some emerging capabilities expected from CIS products:
- One of the key requirements of a smart grid is to integrate consumers into energy
markets, and to enable better asset utilization and more efficient energy use through
programs such as economic demand response. CISs play a major role in achieving these
smart grid benefits; however, this will require new capabilities in CIS products:
- On the M2C side, CISs need to support a new type of billing, such as decoupling of commodity and distribution charges, time of use (TOU), feed-in tariffs (FITs), critical peak pricing (CPP) and interval billing for mass-market residential customers.
- To provide "instant gratification" to consumers regarding energy-efficiency activities, CISs should be able to make an up-to-date bill estimate available to consumers daily, rather than monthly or even quarterly. This has a significant implication on CISs' batch performance requirements.
- On the customer-facing side, CIS products need to enable more frequent updates of consumption and energy pricing data, and to support more active customer participation in the energy market through new means of customer engagement via multiple channels and social computing environments.
- The anticipated consumer adoption of electric vehicles, and the subsequent buildup of electric charging infrastructures (at home and publicly available), will require the introduction of different billing paradigms (some akin to roaming charges). Other models of energy technology consumerization, such as on-site renewable generation and storage, which are promoted in many markets through subsidized residential generation tariffs, will also require new billing models, such as FITs.
- The mandatory rollout of energy-efficiency programs in some jurisdictions also poses new requirements, such as energy-efficiency program management, consumer enrollment and participation tracking.
- Many markets that have already started AMI deployments expect to realize business benefits through tight AMI CIS integration to support processes such as out-of-service meter reads and credit collection enforcement through remote turn on/turn off.
- Although not as a direct result of the smart grid initiative, but rather a consequence of AMI deployment and availability of daily meter reads, more utilities (particularly in the U.S.) are interested in enabling prepayment functionality (aka pay as you go) through a centralized model using smart meters, MDM and CIS products for daily account balance checking, rather than locally installed on-premises prepay meters.
Legacy CIS solutions are unable to meet many of these new requirements, and are often perceived as barriers to attaining benefits from smart-grid-related investments. Furthermore, scalability and performance needs arising from the increased volume of metering data are challenging legacy CIS solutions.
Although smart-grid-related initiatives (particularly AMI deployments) should have a positive impact on legacy system replacement and garner increased demand in the CIS market, many of the new requirements are not yet being met by existing vendor offerings.
In addition, the prevalence of interval metering will enable the transition from traditional batch process billing to an incremental billing model, wherein the status of the account can be updated incrementally after every metering interval. This billing model — also known as event billing or real-time billing — is akin to how rating engines operate (incrementing account status after every transaction) in some other markets (particularly the telecommunications market). Leveraging CISs to support more frequent consumption calculations will require significant rearchitecting of the billing engines that are optimized for monthly batch processing.
Nexus-of-Forces Impact on the Utilities CIS Market
In addition to the smart grid, which is a vertical phenomenon resulting from environmental and energy sustainability concerns, there are other forces impacting CIS markets that are resulting from global phenomena such as IT industrialization and IT consumerization. Gartner research shows that the confluence of four technology forces (see "Re-Imagine IT Using Insights From Symposium's Analyst Keynote"), each already innovative and disruptive in nature, will revolutionize business and society, including having a major impact on energy and utility organizations and consequently their business processes and enabling IT applications.
The four technology forces are:
- Cloud: This leads to the industrialization and progressive commoditization of IT capabilities, forcing the IT organization to rethink its role in the value chain and giving business users new options to source their technology requirements. To be delivered in a cloud (private or public), billing and customer service applications will need to be architected to provide discrete services over the Internet and to be scalable. If provided as external cloud, CIS platforms will need to have multitenancy capabilities (see "A Quick Look at Cloud Computing in Energy and Utilities, 2012").
- Social: This leads to much broader and deeper involvement of customers (and employees in the way that energy utilities operate), and causes business models to change. To deliver significant value, social CRM needs to be integrated with key customer-facing business processes and underlying IT systems, such as CIS. For utilities, the initial focus should be on getting social media right in a few key areas — account management, billing, energy conservation and outage management — all impacting customer care and billing areas of CIS (see "Social Media Provides Utilities a New Channel for Customer Engagement").
- Mobile: An explosion of devices (such as smartphones and tablets) has already surpassed the PC as the primary means for accessing information, and is leading the charge for the consumerization of technology in the enterprise. CIS products need to be able to leverage smartphones and tablets as delivery platforms for customer service and billing, to address bring your own device needs for internal users, and to leverage contextual and locational information to provide new and differentiating services.
- Big data: This takes a prominent role in any organization, as data in multiple formats and from diverse sources, from both inside and outside the enterprise, provides opportunities to perform more-accurate analytics supporting better predictions of, or reactions to, events. Next-generation CISs, in addition to being able to process a significantly larger amount of data that will be coming from AMI systems (increase up to five orders of magnitude), should be able to extract new value by combining consumption patterns, social/contextual and operational technology data. Thus, CIS will be forced to address the volume, velocity, variety and complexity aspects that jointly characterize a big data project.
These four forces are reaching comparable levels of maturity during the same time frame, creating an inflection point for energy and utility organizations to leverage IT in more strategic and transformative ways. Consequently, the nexus of IT forces will render existing utility applications' architecture obsolete — the same way as the emergence of the client/server architecture caused many legacy CIS products (such as Tres, which was a dominant CIS product in the 1980s) to become extinct.
Return of the Bolt-On Architecture
Similarly, because CIS vendors are slow to address smart grid requirements in their packaged offerings (because it requires a large level of R&D investment), there will be even slower movement to address future requirements as a result of the nexus of IT forces. That is because the nexus of IT forces will have a more profound impact on application architecture in general and CIS product in particular. Realistically, because we do not see vendors in other COTS application areas already rearchitecting their applications to address the nexus of IT forces, we should not expect CIS vendors to lead that process.
The conflict between emerging needs coming from the smart grid and the nexus of IT forces and the lack of integrated, mature off-the-shelf-solutions capable of addressing the totality of those needs will result in the return of the complex billing architecture. Complex billing — or a bolt-on architecture — used to be a dominant way of addressing legacy CIS products' inability to deal with LC&I complex billing requirements by bolting on a separate billing engine, while leveraging other satisfactory capabilities of legacy products. That approach, among others, let users extend the life of legacy solutions until the emergence of the current generation of COTS CISs capable of addressing the billing needs of all customer segments within a single billing engine.
To address that challenge, and take advantage of the incremental market opportunity, vendors are adjusting their CIS product offerings — making sure that they continue to sell existing products until they manage to deliver next-generation solutions:
- To address smart-grid-related billing requirements, large vendors either have acquired add-on billing engines (such as SAP Convergent Billing, which is based on the Highdeal solution) or are planning to "dust off" complex billing products that were not actively marketed (such as Oracle Billing Component — formerly known as Lodestar Complex Billing).
- To address some of the nexus-of-forces requirements, large vendors have done acquisitions to address the needs across their overall product portfolios (such as Oracle's acquisition of Endeca Technologies, which can address the combination of social and unstructured big data coming from the consumer environment) or are encouraging SIs to build packaged extensions of their products (such as SAP's CR&B product extension through packaged offerings by Sparta Consulting and HCL Technologies in social and mobile for customer service and billing).
Niche Players — which are challenged to make large R&D investments, conduct acquisitions to address current product deficiencies, or find a partner to extend their products to address upcoming needs — will have a more difficult time making it to the next round. Consequently, some of them will be forced to focus on particular market segments, geographies or functionality — creating a host of bolt-on offerings capable of addressing niche functionality. Examples are Nexant RevenueManager or HansenTechnologies' acquired NirvanaSoft (both are capable of dealing with interval billing), which offer bolt-on billing solutions to legacy systems to support pilot and small-scale implementations of the smart grid programs.
Many utilities perceive the bolt-on approach as a lower-cost alternative to the full replacement of a legacy CIS product that is unable to address smart-grid-related requirements (or upcoming nexus of IT forces requirements) with a COTS CIS product that cannot address all emerging needs.
Key Market Observations
The following observations summarize CIS market dynamics since Gartner published the previous "Magic Quadrant for Utilities Customer Information Systems" in 2011:
- There has been no quadrant switching among vendors in the 2012 edition of this Magic Quadrant.
- The vendors that are offering CIS solutions are global enterprise application software providers or Niche Players with a predominantly regional focus.
- Enterprise application vendors have extended their horizontal ERP applications in the vertical sector through native build (SAP CR&B), acquisition and subsequent integration (Oracle Utilities CC&B), or via partners that have built a vertical extension on top of the horizontal platform (Ferranti Computer Systems, EG Utilities and Itineris [not rated this year] on top of Microsoft Dynamics AX).
- Niche Players are focused predominantly on a particular geography or speaking region, such as Gruppo Engineering (Italy), UEM-CGI (France) and Indra (Iberia and Latin America).
- Two products that are part of the large enterprise application providers' vertical offerings — SAP IS-U CR&B and Oracle Utilities CC&B — have achieved leadership positions and continue to break apart from the rest.
- The Niche Players are not catching up with enterprise application vendors — that is, not for lack of functionality or inferior product quality, but rather because their positions are a consequence of lower corporate and product viability compared with the Leaders.
- Niche Players tend to have a small market share, and their maintenance and support revenue from their installed bases does not allow for adequate R&D investments to address emerging needs. As a result, in the long run, they will functionally and architecturally fall behind and be unable to address emerging customer care and billing market needs coming from the smart grid and nexus of forces.
- As a result of Niche Players' struggle to break out of their native markets, some are increasingly seeking service opportunities in the CIS sector, including custom development and CIS platform hosting, as well as offering their solutions as bolt-ons to address a particular billing need (such as prepayment or interval billing).