Magic Quadrant for Utilities Customer Information Systems
We provide updated vendors' positioning in this important utility software market to reflect the emergence of the new regional players and changes in customer buying criteria resulting from evolving business needs and socioeconomics and technology drivers.
The Gartner Magic Quadrant concept is based on a customer-oriented market analysis that defines a market 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.
The customer information system (CIS) market is composed of utility companies looking for commercial off-the-shelf (COTS) software packages that address business-critical utility meter-to-cash (M2C) and customer service business processes.
M2C functions covered include:
- Account maintenance
- Order processing
- Product/service management
- Rate design
- Credit collection
- Accounts receivable
- Statement preparation
- Payment processing
On the customer service side, CISs support multiple client interaction channels — such as call center, interactive voice response/voice response units (IVR/VRUs) and SMS — as well as customer self-service needs. 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 — in the case of contestable (competitive) retail markets — or it may have more emphasis on customer service delivery, such as scheduling and service optimization — in the case of regulated markets.
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).
Out-of-the-box COTS CIS products provide adequate levels of M2C (billing) functionality required by various utility companies operating in different market structures or focused on different customer segments. Integrated utilities or local distribution companies in a regulated market or network companies and retail/supplier companies in a contestable energy retail sector will find their billing needs fully met by leading CIS COTS products. However, packaged CIS products are generally inadequate for the advanced customer-facing functions that competitive retailers need. 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 — such as customer retention, customer acquisition, campaign management and customer analytics.
CIS products on the market today support billing for multiple customer segments — for example, both residential and large commercial and industrial (LC&I) customers. In the past, LC&I customers used to be billed with separate product "complex billing." Most leading vendors also support billing for multiple utility services (such as gas or water), as well as metered and unmetered services/products.
The CIS product requirements defined by electric utilities tend to be more complex than those needed by other utilities because of the intricate nature of the business. Issues such as the inability to store and manage commodity (electricity), more complex market structures (such as retail competition and unbundling), smart grids and the deployment of advanced metering infrastructure (AMI), tend to keep the electric utility at the forefront of business innovation in the CIS market, 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. However some CIS products that have been historical focused on certain markets (such as municipal water utilities) have proven to have more adequate data models and out-of-the-box functionality required for those utility types.
Traditional utility billing needs in general can be met by modern COTS CIS products. However, emerging requirements such as billing for electric vehicle charging or supporting innovative business models, such as prosumer integration through net metering, feed-in tariff, or self-generation charges, may require significant modifications of the CIS product. In addition, needs to address advanced customer engagement models (such as social media or gamification) or energy efficiency initiatives, are forcing utilities to look at alternative methods such as bolting-on point solutions on the CIS products. The overview of the most common point solutions, including their complexity and importance for utilities and end users, is provided in "Utility Retail Domain Strategic Technology Map, an Overview."
Source: Gartner (May 2014)
Asseco Group(www.asseco.com) is a federation of IT companies headquartered in Poland that offers IT product and services in multiple sectors, including utilities. Asseco is focused on utility markets in Eastern and Central Europe, and has been particularly strong in its native Polish utility market, where 55% of utilities' end customers are billed on Asseco solutions.
Asseco CIS product AUMS (Asseco Utility Management Solutions) is built on Microsoft technology stack (with the exception of the database, which in most cases runs on Oracle and Informix). It is bundled with Microsoft Dynamics CRM to support customer service functionality and can be delivered via cloud using Microsoft Azure as the cloud platform. AUMS is architected as collections of modules (including Billing, CRM, eCustomer Service, Meter Data Management, Pre-payment, Work and Inventory Management) that cover core meter-to-cash (M2C), customer service and work management functionality.
AUMS is used by 12 utility companies (one regulated and 11 deregulated) serving a total of 8.7 million customers. The largest implementation site is Polish utility Tauron, with 1.5 million customers, while the largest batch cycle is 130,000 for Polish utility Energa.
- AUMS' modular architecture can provide additional flexibility during the implementation, as it can support phased deployment.
- The product supports billing for multiple utility services (electricity, gas, water and sewer), as well as Internet and telecommunication services.
- AUMS users have rated product usability higher than most other references rated the usability of competing CIS products.
- Buyers outside of Asseco's native region should be aware that the product hasn't been implemented elsewhere. AUMS' ability to support diverse M2C and customer service needs in global energy markets hasn't been proven.
- Microsoft Dynamics CRM bundled to support customer interaction and customer-facing requirements can be functional overkill in regulated market, and can unnecessary increase the cost and complexity of the solution
- Asseco is both an AUMS product vendor and the only professional service organization that implements AUMS. This can create a business issue for Asseco (due to a conflicting focus on resource and revenue between service line and product line) and also limit system integrator options for its clients.
Efluid SAS (www.efluid.com) started as a partnership between French municipal utility UEM and IT services vendor CGI, which jointly designed, developed and implemented utility billing and customer service solution for UEM. In 2012, UEM created a venture — efluid SAS — that is responsible for the development and marketing of the efluid CIS product. CGI is so far the only system integrator involved in implementation of the efluid solution.
Based on Java Platform, Enterprise Edition architecture and Oracle Database, efluid can be configured to address the needs of multiple utility company types, as well as billing requirements for multiple services and different customer segments. Its functionality covers areas from customer service and contract management to billing, payment processing and credit collection activities.
Although efluid currently has a multilingual capability, all customers (five regulated and 15 deregulated utilities) are from French-speaking regions. The cumulative number of all customers billed with efluid is 2.2 million, with the largest utility being EDF SEI (1 million), and the largest batch cycle being 100,000 bills with Electricite de Strasbourg. At the end of 2012, French national distribution network operator ERDF selected efluid SAS as its CIS solution provider and became a 30% owner of the company.
- As a newer product on the market, efluid has been built on a more modern technology platform from the start, unlike some older product that had to migrated its solution from an older legacy platform.
- The combination of the resources of UEM and CGI provides the company with utility business expertise, resource scalability and IT delivery maturity.
- The ERDF deal, in addition to providing diversification from the ownership perspective, offers stability and improves corporate viability.
- UEM is not a software product company (neither is its IT partner, CGI), which may pose challenges regarding developing a COTS CIS product.
- Efluid SAS customers are forced to buy a "packaged deal" because they do not have the option to choose a different system integrator (SI).
- The product hasn't been proven outside of a relatively small number of energy markets (with the exception of EDF SEI, which operates in multiple regions but with a fairly similar business model). There are no guarantees that efluid will be easily configured for business and regulatory requirements in diverse global energy markets.
Ferranti Computer Systems
Ferranti Computer Systems (www.ferranti.be), founded in 1976, is a privately held company with headquarters in Antwerp, Belgium. Ferranti has developed a metering and billing product called Mecoms, which provides an integrated solution for customer information and billing systems, meter data management (MDM), work and asset management (including service management) and market-related process support modules. Ferranti has operations in Europe, India, Asia/Pacific and North America, and delivers its Mecoms product through a channel organization of certified Mecoms partners.
Mecoms is designed to support the customer care and billing needs of companies with different roles (for example, merchant generators, metering companies, energy retailers and network operators), and can be used by companies offering different services (for example, electricity, water, gas and thermal) in regulated and competitive retail markets. Mecoms is built on top of the Microsoft Dynamics AX ERP suite, and is certified for Microsoft Dynamics AX.
Fifty-four utility companies that use Ferranti Mecoms as their CIS product bill have approximately 19 million customers in aggregate. The largest Ferranti CIS client is a water utility in Netherlands, which serves more than 700,000 customers. The largest batch cycle in production delivers 360,000 bills nightly.
- Ferranti's partnerships with larger SIs (such as CGI, Tata Consultancy Services and, in particular, Accenture and Avanade) have enabled the company to build global delivery channel bandwidth and make Mecoms the only other product available globally (in addition to those of the Magic Quadrant Leaders).
- Ferranti continues to be Microsoft "go-to-partner" in the utility sector, which helps it gain access to Microsoft development and marketing resources.
- Due to the overall lower TCO comparing to leading CIS products, Ferranti value proposition is focused on lowering cost to serve, which is attractive to competitive retailers.
- Customers that were the first to implement Ferranti's Mecoms in new utility markets reported higher level of customization required instead of the product being able to be configured out-of-the-box to meet specific regional requirements.
- Some customers, particularly in emerging markets, have expressed concerns with the low level of product expertise from system integration partners.
- Mecom is priced as a suite (CIS, MDM and enterprise asset management [EAM]) based on the number of users, regardless of the functionality/modules that are used by a client. That makes it less attractive for companies looking to address particular needs via bolt-on components, such as a complex billing engine or MDM.
Gruppo Engineering (www.eng.it), 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. Key offering areas are system integration and consulting, outsourcing, and products and solutions. The utility sector contributes approximately to 15% 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 CIS market (156 utilities serving more than 21 million customers). The largest Net@Suite installation site is an Italian energy company serving more than 10 million customers with a batch cycle size of 400,000 bills. In 2012, Gruppo Engineering started its first implementation outside Italy with a Spanish utility and a different SI (Everis), followed by its first Brazilian client in 2013.
- Gruppo Engineering is the leading CIS product provider in the Italian market, as Net@Suite has evolved to address the transformation of the Italian utility market, including unbundling and retail competition.
- Net@Suite addresses CIS needs for multiple services, with particularly large installations in gas and water utilities.
- Gruppo Engineering has access to relatively large developers pool (larger than most of its competitors), which can be used to address specific needs in new target markets.
- Some clients have expressed the need for Net@Suite performance and usability improvement.
- As a service company, Gruppo Engineering has been the exclusive implementer of Net@Suite in the Italian market. The availability of Net@Suite to utilities outside of the Italian market will require a buildup of its system integration partnership network.
- Net@Suite COTS product capability (that is, configurability and packaging to support third-party delivery) has not yet been proven. The implementation in Spain and ongoing implementations in the Latin American market will indicate its COTS product maturity and ability to be easily configured to meet different market needs.
Indra (www.indracompany.com) is an IT solution and service provider headquartered in Madrid, Spain. Indra entered the utility CIS market through the acquisition of Soluziona (a consultancy spinoff of the third-largest Spanish utility, Union Fenosa), which, in addition to IT and engineering services, offered the hosting of legacy CIS solutions. Currently, only 2% of Indra's revenue comes from the utility CIS market. In 2000, Soluziona started marketing the CIS product called Open Utilities Customer Management. Indra's CIS product offering is now rebranded as InCMS (Indra Customer Management System).
Indra customers' run a number of different legacy CIS solutions, which Indra is trying to consolidate in the new InCMS product. The core of InCMS originated from a recent custom CIS solution developed for a large Spanish utility. Indra's InCMS covers the commodity, revenue, and customer-service-related needs of a utility.
Indra's CIS solutions (including legacy products) are used by 86 utilities to bill more than 64 million customers. Although promoted outside the Spanish-speaking world, Indra has not gained much traction in CIS markets in developed countries such as the rest of the EU, North America, and Australia and New Zealand. 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.
- InCMS is a functionally rich product whose footprint extends beyond M2C and customer service into 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, and it continues to gain presence in Africa.
- As an IT services company, Indra is challenged between focusing on service revenue or software product development needs. In some markets, Indra acts as either an SI or outsourcer for competitors in the CIS market, which potentially could create channel conflict.
- Some Indra customers have expressed concerns with the lack of a clear product road map, including a visible release schedule. By consolidating multiple products in the InCMS CIS product, Indra expects to be able to address those concerns.
- Several of Indra's references have rated Indra's CIS product architecture as low. Indra claims that the new InCMS product architecture addressed those issues.
Itineris (www.itineris.net), headquartered near Ghent, Belgium, is a privately held IT vendor founded in 2003 that focuses on offering solutions and related IT services for power, gas, water and multicommodity utility companies. The company operates from three locations: Belgium, the Netherlands and the U.S.
The Itineris offering is centered around its utility product Umax, which is built on top of the Microsoft Dynamics AX ERP product and the Microsoft technology stack (SQL Server, Office, BizTalk Server and SharePoint), and can be delivered in the cloud on Window Azure. Functionally, Umax covers integrated customer relationship management, billing management, payment and collection management, asset management, service management, and meter data management.
Umax is currently in production at 24 utilities (10 regulated and 14 competitive retailers) serving a total of more than 6 million customers. The largest client is a water utility that serves 1.4 million customers and has a batch billing size of 75,000 bills on an earlier Itineris product.
- The Umax solution is an alternative to traditional utility CIS products, in particular for companies with affinity for a Microsoft technology stack. It offers lower total cost of ownership (TCO), and consequently can positively impact the cost of customer service provisioning.
- Through its U.S. subsidiary, Itineris has access to the U.S. municipal and water utility market — a sizable market segment that does not have an appetite for expensive solutions provided by leading vendors and their implementation partners.
- Umax is compliant with Microsoft Smart Energy Reference Architecture, which makes it an attractive solution for companies whose technology strategy is aligned with Microsoft.
- Although Itineris has started building a partnership program, that program has not yet matured enough to support planned expansion in new utility markets.
- Some references that we contacted have expressed concerns regarding out-of-the-box functionality, which they found to be less comprehensive than expected.
- Itineris' Umax users (customer service representatives in particular) rated the user's experience as low.
Nexant (www.nexant.com) is a San Francisco-based, privately held software product and consulting company with a wide range of offerings in the energy sector. Nexant entered the utility billing market, which constitutes just 3% of its revenue, in 2009 through the acquisition of Excelergy in order to pursue opportunities in the in the revenue and commodity management domains in competitive and transforming energy markets worldwide.
Nexant RevenueManager addresses the needs of the competitive retail market for high complexity in product configuration. Nexant is also positioning 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.
According to Nexant, 26 companies (one regulated and 25 competitive retailers) use Nexant RevenueManager to bill 6 million end-user customers. The largest Nexant CIS customer is a North American utility that serves 2.7 million customers. The largest batch cycle is 50,000 bills.
- Nexant RevenueManager can be quickly deployed in modular fashion and tends to result in lower customer service costs for its users, making it attractive to new entrants in the competitive retail sector.
- References express satisfaction with product capabilities to meet their business needs (in competitive retail markets) out-of-the-box through configuration rather than custom development.
- RevenueManager's rate engine supports a number of rate structures used in the competitive mass-market retail and wholesale energy markets, such as locational marginal pricing and pool pricing, and is one of Nexant's main differentiators in the CIS market.
- Nexant's focus on competitive retail markets makes its RevenueManager product unproven for regulated mass markets.
- Although Nexant RevenueManager offers some customer-facing functionality, it has limited capability in the customer service area and does not meet the CRM needs of competitive retailers.
- Clients in markets outside of North American have expressed concerns with Nexant's responsiveness to their needs and lack of local product expertise and support resources.
Open International Systems
Open International Systems (www.openinternational.com), is a provider of business and operational solution in telecommunication and utility sectors. Open International was founded in 1987 in Colombia and is currently headquartered in Miami, with additional offices in Ecuador and Argentina.
Company product Open Smartflex is a multiservice platform used to provide convergent billing and customer service in the telecommunication market, as well as utility CIS functionality under the name Open Smartflex CIS. Open Smartflex CIS is rule-based software, which provides users with high configurability and is delivered preconfigured to standard processes for electric, gas, water and sanitation utilities.
Open Smartflex CIS is used as billing and customer service platform by 27 utilities (11 of those energy utilities in regulated markets and one in deregulated markets), which bill cumulatively almost 14 million customers. All utility clients operate in Latin America. The largest implementation size is a combined utility providing electricity, gas, water and sanitation services to 4.7 million customers in Colombia with a batch size of close to 93,000 bills.
- Open Smartflex's billing engine was built originally for the telecom market; hence, its architecture is built for dynamic billing models that are now emerging in the utility sector.
- Open International provides development framework jointly with its CIS product, which enables users to extend functionality and integrate the product in a more homogeneous technology environment.
- Open Smartflex has been deployed as a cloud offering for 3.1 million end customers.
- Open Smartflex CIS does not offer full customer self-service functionality out-of-the-box.
- The product has been so far implemented exclusively by Latin American utilities, which operate in less complex business environment; hence, its appropriateness for the more mature global energy markets hasn't been proven.
- The product has relatively limited platform choices (Oracle RDBMS and Unix OS).
Oracle (www.oracle.com) is a large, publicly traded enterprise software and IT technology company. 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 the original SPL WorldGroup leveraged CIS product, and has been completely technologically replaformed into a configurable product with rich functionality. CC&B has successfully met the requirements of various-sized companies that provide diverse utility services in markets with different levels of customer choice. 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.
Approximately 200 utilities use the Oracle CIS product to bill more than 206 million customers worldwide. The largest CC&B customer is a U.S. utility serving more than 7 million customers, and the largest batch cycle is 400,000 for an Asian utility.
- Oracle Utilities has a large number of implementation partners, ranging from leading global system integrators to regional players and service providers that focus on a particular utility sector. This network of certified partners helps Oracle Utilities address increased needs for implementation resources and product localizations.
- CC&B uses Oracle Utilities Application Framework to provide consistency over Oracle's vertical applications. CC&B can be integrated (leveraging Oracle's 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).
- Oracle continues significant R&D investment in CC&B, with multiple focuses such as improving operational benefits (reducing TCO and enhancing customer experience) and providing increased functionality to address utility-sector digitalization needs.
- Multiple references contacted by Gartner have rated Oracle support services as very low.
- Some references have rated Oracle training services low.
- A number of Oracle CC&B implementations have been longer than average CIS implementations. In some cases, customers have attributed this to implementation complexity and lack of access to skilled system integration resources.
Phoenix IT Solutions
Phoenix IT Solutions (www.phoenix.in), formed in 2001, is a privately held Indian software solution provider focused on utility-sector needs. Phoenix IT Solutions offers utility products and services, currently serving South Asia and the Middle East, with plans to expand its offerings to other markets.
Phoenix IT Solutions' CIS offering is structured around its mPower software suite, which contains five products (mPower CIS, mPower CRM, mPower AMI, mPower Grid and mPower Insight) with 25 different modules sitting on the top of an enterprise service bus. mPower CIS is Phoenix's flagship product, which, in addition to a standard meter-to-cash and customer service feature set, contains the Revenue Protection module, with enhanced ability to manage metering and billing exception resolution workflows to reduce revenue loss.
The Phoenix CIS solution is implemented at 18 utility companies (16 in India, one in Nepal and one in Afghanistan) that serve a total of more than 23 million customers. The largest customer is Eastern Power Distribution Co. of Andhra Pradesh, which serves more than 5 million customers.
- The mPower CIS Revenue Protection module includes enhanced capabilities to manage metering and billing exception resolution workflows to reduce revenue loss, making it an attractive solution in markets with high nontechnical losses.
- Contacted references gave high marks to the Phoenix support services' dedication and domain expertise.
- The mPower suite, including CIS, is offered on multiple DBMS platforms (Oracle, IBM DB2 and MySQL). In addition, it is IBM PureSystems-ready and can be offered as an IBM cloud solution.
- The mPower suite has not been proven outside of its current target markets, which are regulated energy markets with a reduced set of requirements compared with the competitive energy markets in most developed economies.
- The lack of a well-established implementation partner program could hinder Phoenix's plans to expand in other regions.
- The mPower suite cannot bill additional services commonly offered by municipal utilities, such as sewer, garbage disposal, telco or cable services.
SAP (www.sap.com) is a publicly traded global enterprise software vendor headquartered in Walldorf, Germany. 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 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, 699 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 aggregate number of end customers billed on its installations in production (more than 427 million customers). The largest site in production is a French utility with over 30 million customers and a batch cycle size of 700,000 bills.
- 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 M2C and customer service solution.
- In addition to broadening product functionality to address needs evolving from emerging trends in the energy and utilities (E&U) sector, SAP has migrated CR&B to its in-memory platform Hana, which now provides utilities with real-time analytical capabilities in a production environment.
- SAP has a robust and well-developed network of implementation partners and product vendors that help cover the white space in its utility offering with packaged extensions of CR&B to address needs for improved usability, energy efficiency, self-service or social- and mobile-related requirements, and revenue assurance.
- Several SAP CR&B customers contacted by Gartner expressed dissatisfaction with product UI usability.
- Some long-term SAP utility customers have expressed concerns over a lack of responsiveness to their needs. According to them, SAP's focus is on new revenue producing products and enhancements, rather than meeting the needs of existing clients.
- 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.
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's appearance 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. It may be a reflection of a change in the market and, therefore, changed evaluation criteria, or of a change of focus by that vendor.
This year we have added two new vendors, Asseco Group and Open International Systems. Both vendors currently have limited regional presence and focus, but have established themselves as viable providers in their native regions — Central and Eastern Europe, and South America, respectively — and are positioning themselves for growth and expansion in other regions.
EG Utility and Harris Utilities-Systems & Software have been dropped from this year's evaluation because they didn't meet our inclusion criteria. Neither vendor has reached the revenue threshold of $2 million generated during the past 12 months from new product sales.
To be included in this category, software products must cater to the majority of functional requirements outlined in Market Overview section of this research. The software products evaluated are all marketed as stand-alone customer care and billing solutions — although some of them may be marketed as a part of the broader software suite. To be considered in this Magic Quadrant, vendors must be able to address the diverse needs of global utility markets, as well as the needs of the regulated and contestable retail markets.
Worldwide, more than 200 vendors address utilities' needs 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 limited a geographic reach to be of interest to Gartner clients. Thus, we evaluated only 11 products that meet functional requirements as well as the 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 or 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/Record: Ability and responsiveness in meeting changing market dynamics
- Marketing Execution: Market share (and mind share) in the global enterprise market
- Customer Experience: The 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.
Product or Service
Source: Gartner (May 2014)
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. 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: The 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: The ability to have investment resources, expertise or capital for consolidation, defensive or pre-emptive purposes to address emerging market needs
- Geographic Strategy: The ability to provide products and services globally
Table 2 lists the relative weighting of the various criteria with regard to a vendor's Completeness of Vision in this market.
Source: Gartner (May 2014)
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. They demonstrate the financial viability needed to fuel R&D to support new technology requirements (such as Web services, service-oriented architecture, in-memory computing, and the impact of the Nexus of Forces and the Internet of Things [IoT]), and to enable business process integration across functional silos in utilities. SAP attained leadership status in 2003, and continues to reconfirm it because of the combined effects of its significant market share globally and ongoing product and market investment (through internal R&D, partnership programs or acquisitions). Oracle Utilities (at that time SPL WorldGroup) attained leadership status in 2004, and has retained its status in this Magic Quadrant because of solid business performance, as well as 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 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 2014 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 2014 Magic Quadrant, no vendors have been placed in the Visionaries quadrant.
Niche Players in the utility CIS market are still worthy of consideration. Given the number of players in 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, efluid SAS, Itineris, Open International Systems and Asseco Group are in the Niche Players quadrant mostly because of their limited geographic presence and market segment focus. Nexant's placement in the Niche Players quadrant is the result of its almost exclusive focus on competitive retail billing, while Phoenix IT Solutions for the time being has almost all of its clients operating in regulated sectors in developing countries. Clients should carefully review these vendors' target markets and capabilities, and include them in evaluations if vendors match the client's business scope, geographic areas and specific needs.
CIS applications emerged in the utility sector in the 1970s as internally built custom 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. 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 an account-centric view of customer care and billing — making them, 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" portion. Consequently, this elevated the visibility and importance of CISs, 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 software vendors offering COTS CIS software products. Professional services vendors mostly exited CIS product development and shifted their focus to system integration activities for COTS products.
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, the almost mandatory investment in smart-grid-related activities has 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 advanced metering infrastructure (AMI) — continue to shape market requirements for CIS products. One of the key requirements of a smart grid is to integrate consumers into energy markets. Consequently, CISs as critical customer-focused utility applications play a major role in achieving customer-centric smart grid benefits. However, this requires new capabilities in CIS products that some products on the market have not fully addressed:
- On the M2C side, CISs need to support a new type of billing, such as time of use (TOU), feed-in tariffs (FITs), critical peak pricing (CPP) and self-generation charges.
- The adoption of electric vehicles requires CISs to introduce different billing paradigms (some akin to roaming charges).
- 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 quarterly. This has a significant implication on CISs' product scalability and batch performance requirements.
- CIS products need to enable more frequent updates of consumption and variable energy pricing data to support more active customer participation in the energy market through new means of customer engagement.
- 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 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 (also known as "pay as you go") through a centralized model, using smart meters, mobile device management 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) have a positive impact on legacy system replacement, many of the new requirements are not yet being met by existing vendor offerings.
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 — in theory, 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 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 cycle 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, CISs, as customer-facing applications, are impacted by the Nexus of Forces (cloud, social, mobile and information) that results from global phenomena such as IT industrialization and IT consumerization. The individual impacts of these four forces are:
- Cloud: To be delivered in a cloud (private or public), billing and customer service applications 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: 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 networking right in a few key areas — account management, billing, energy conservation and outage management — that all impact customer care and billing facets of CIS (see "Energy and Utilities Context: 'Top Use Cases and Benefits of Social for CRM in 2013'").
- Mobile: CIS products need to be able to leverage smartphones and tablets as delivery platforms for customer service and billing, to address BYOD needs for internal users, and to leverage contextual and locational information to provide new and differentiating services.
- Big data: Next-generation CISs — in addition to being able to process the significantly larger amount of data that will come from AMI systems (increases of as much as 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. The consumer-driven aspect of the Nexus of Forces (such as social and mobility) will impact customer-facing portion of the CIS product, while cloud and big data will have more significant impact on the back-end processes. Consequently, the combined effect of the Nexus of 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.
IoT and Utility Sector Digitalization Impact on the Utilities CIS Market
Increased adoption of the consumer-owned distributed resources have impacted utility-sector operations. The legacy business model that the utility sector operates under (utility as cloud service provider of metered commodity) begins to break down as an increasing number of customers start relying on energy sources outside of a utility/grid energy. The existing fixed costs for maintaining generation, transmission and distribution capacity have to be shared with fewer consumers and spread over declining kWh sales volumes, creating a potential death spiral for the energy utility sector. To counteract that phenomenon, we see movement in some markets toward new revenue models that are less dependent on the amount of energy being sold and instead take into account the utility role as a provider of required capacity. Those models require innovative, increasingly dynamic, and information-centric rates such as self-generation changes to offset the impact of net-metering and feed-in tariffs, as well as rate structures that take into account capacity and congestion charges.
Consumption information will be useful for establishing different commercial relationships with energy consumers/prosumers. But, even more importantly, it will become a control lever to optimize the use of energy distribution networks. That will be done by creating local energy markets that will congregate prosumers, energy service providers, aggregators, utility companies and market operators engaged in an atomistic and decentralized energy-provisioning model. The model should include information about the cost of grid-provided energy based on production and local congestion prices, asset operation cost, and customer incentive pricing that will impact consumer behaviors, such as when and how to charge an electric vehicle, when to rely on grid power and when to use on-site distributed energy resources (see "Top 10 Business Trends Impacting the Utility Industry in 2014").
As utilities become digital businesses, they will increase their dependency on information. Information about energy will become a foundation of the digital utility business model and will be required to run local energy markets and operate networks. For customers, traditional energy commodity products will have to be infused with new information content, making energy more similar to telecommunication products, which are loaded with information about "when" and "for what" operator bandwidth is used (SMS, data, voice, location/GPS and so on) impacting M2C business processes and consequently enabling technologies and applications such as CIS.
The conflict between emerging needs coming from the smart grid, the Nexus of Forces and digitalization of the utility sector, and the lack of integrated, mature, off-the-shelf solutions capable of addressing the totality of emerging 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.
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 Forces requirements or utility sector digitalization fuel by the IoT). As the current generation of COTS CIS products does not address all emerging needs within the single product, a particular need can be addressed by an add-on module until the next generation of CIS products capable of addressing smart grid, Nexus of Forces and IoT-driven requirements emerges.
That approach architecturally also lend itself to the pace-layering model (see "Concepts of Pace Layering in System Design"), in which a CIS application sits at the bottom "system of record" layer, which tends to be slow-changing, with more dynamic point solutions with shorter life expectancy sitting on top of it in the "system of differentiation" (such as new customer engagements models leveraging social media) or "system of innovations" (such as new consumption analytics and billing paradigms that will support the quest toward new energy provisioning business models and utility-sector digitalization).
To help our clients prioritize investments in retail domain IT capabilities to address evolving requirements and to optimize the execution of strategic priorities, Gartner has considered a host of point technologies. To help make discrete investment decisions to introduce new and improved capabilities for customer and revenue life cycle processes, see "Utility Retail Domain Strategic Technology Map, an Overview."
Key Market Observations
The following observations summarize CIS market dynamics:
- There has been no quadrant-switching among vendors in the 2014 edition of this Magic Quadrant.
- Vendors that are offering CIS solutions are either 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, and Itineris on top of Microsoft Dynamics AX).
- Two products that are part of the large enterprise application providers' vertical offerings — SAP CR&B and Oracle Utilities CC&B — have achieved leadership positions and continue to break away from the rest of the pack.
- The high CIS replacement cost (in particular, regarding leading CIS solutions implemented by the Tier 1 SIs) has resulted in slow market movement with a relatively small numbers of new deals. That has encouraged the emergence of the new entrants, whose value proposition is focused on lowering TCO in comparison to leading CIS products. However, for the time being, new entrants have not been able to move out of the Niche Players quadrant.
- Niche Players are focused predominantly on a particular geography, such as Phoenix IT Solutions (South Asia and the Middle East), Asseco Group (Eastern and Central Europe), or a market for particular languages, such as Gruppo Engineering (Italy), efluid SAS (France) and Indra (Iberia and Latin America).
- The Niche Players are not catching up with enterprise application vendors — 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 the 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 well as the need for utility sector digitalization.
- As a result of Niche Players' struggle to break away from 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).
- Niche Players are starting to bifurcate into two clusters, with upper-cluster vendors (Ferranti Computer Systems, Gruppo Engineering and Indra) starting to expand their presence and gain traction outside their native market.
Ability to Execute
Product/Service: Core goods and services offered by the vendor for the defined market. This includes current product/service capabilities, quality, feature sets, skills and so on, whether offered natively or through OEM agreements/partnerships as defined in the market definition and detailed in the subcriteria.
Overall Viability: Viability includes an assessment of the overall organization's financial health, the financial and practical success of the business unit, and the likelihood that the individual business unit will continue investing in the product, will continue offering the product and will advance the state of the art within the organization's portfolio of products.
Sales Execution/Pricing: The vendor's capabilities in all presales activities and the structure that supports them. This includes deal management, pricing and negotiation, presales support, and the overall effectiveness of the sales channel.
Market Responsiveness/Record: Ability to respond, change direction, be flexible and achieve competitive success as opportunities develop, competitors act, customer needs evolve and market dynamics change. This criterion also considers the vendor's history of responsiveness.
Marketing Execution: The clarity, quality, creativity and efficacy of programs designed to deliver the organization's message to influence the market, promote the brand and business, increase awareness of the products, and establish a positive identification with the product/brand and organization in the minds of buyers. This "mind share" can be driven by a combination of publicity, promotional initiatives, thought leadership, word of mouth and sales activities.
Customer Experience: Relationships, products and services/programs that enable clients to be successful with the products evaluated. Specifically, this includes the ways customers receive technical support or account support. This can also include ancillary tools, customer support programs (and the quality thereof), availability of user groups, service-level agreements and so on.
Operations: The ability of the organization to meet its goals and commitments. Factors include the quality of the organizational structure, including skills, experiences, programs, systems and other vehicles that enable the organization to operate effectively and efficiently on an ongoing basis.
Completeness of Vision
Market Understanding: Ability of the vendor to understand buyers' wants and needs and to translate those into products and services. Vendors that show the highest degree of vision listen to and understand buyers' wants and needs, and can shape or enhance those with their added vision.
Marketing Strategy: A clear, differentiated set of messages consistently communicated throughout the organization and externalized through the website, advertising, customer programs and positioning statements.
Sales Strategy: The strategy for selling products that uses the appropriate network of direct and indirect sales, marketing, service, and communication affiliates that extend the scope and depth of market reach, skills, expertise, technologies, services and the customer base.
Offering (Product) Strategy: The vendor's approach to product development and delivery that emphasizes differentiation, functionality, methodology and feature sets as they map to current and future requirements.
Business Model: The soundness and logic of the vendor's underlying business proposition.
Vertical/Industry Strategy: The vendor's strategy to direct resources, skills and offerings to meet the specific needs of individual market segments, including vertical markets.
Innovation: Direct, related, complementary and synergistic layouts of resources, expertise or capital for investment, consolidation, defensive or pre-emptive purposes.
Geographic Strategy: The vendor's strategy to direct resources, skills and offerings to meet the specific needs of geographies outside the "home" or native geography, either directly or through partners, channels and subsidiaries as appropriate for that geography and market.