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Today's IssueAlert Sponsors:
[IMAGE] We are providing the industry with the first open platform for third party application development and easy access to the critical usage data stored in your MV-90 Data Collection and Management System. Visit our booth at the CIS Conference to learn more about our new MV-90 ENTERPRISE EDITION information exchange server. Learn more about the "new" Itron at www.Itron.com [IMAGE] Are you looking to invest in, attract investors for, provide services to or understand the business and technology dynamics of the hottest companies emerging in the energy sector? Attend the Energy Venture Fair, June 25 & 26, 2001, in Boston, MA and hear CEOs from 75 hot energy companies present their business plans. Complete event description available at www.energyventurefair.comor call Nannette Mooney at (818) 888-4445, ext. 11. [IMAGE] "Global Power & Western U.S. Coal: Domino Factors at Play in Today's Energy Markets" is the theme of the 2001 Spring Pacific Coal Forum (Coal Forum'2001) to be hosted by the Western Coal Council, June 4-6, 2001 in Park City, Utah. Keynote Speakers include: Honorable Mike Leavitt, Governor, State of Utah; Hitoshi Tagawa, Tokyo Electric Power Company; Eng. Jesus Buentello, Comision Federal de Electricidad; Malcolm Thomas, Kennecott Energy Company; Manfred Raschke, International Strategic Information Services (ISIS). Contact Janet Gellici at (303) 431-1456 or info@westcoal.org www.westerncoalcouncil.org. [IMAGE] [IMAGE] May 18, 2001 Many Challenges Ahead for the CIS Market By Will McNamara Director, Electric Industry Analysis [IMAGE]The 25th Annual CIS conference closed today in Albuquerque. Over the past three days, the conference focused on the changes that deregulation will continue to necessitate alongside the IT side of the energy industry. As various software and customer management companies identified their unique service offerings in the exhibit hall of the conference, an important dialogue exchange also occurred that highlighted new trends and challenges that utilities and retail companies will continue to face with regard to customer care. At the conference, I spoke with executives from a good number of the companies that are directly involved in the CIS space, including Excelergy, Peace Software, LODESTAR, Orcom, Enlogix, and Itron (among many others). Through these conversations, several common denominators emerged that highlight a list of key drivers that will continue to shape this market. The CIS space has become intensely competitive over the last two years, and will continue to offer additional opportunities for new business models. In the exhibit hall, over 100 companies were featured, some of which have been around since before deregulation and others that have just emerged within the last year or so. The vast majority of the companies represented fell into one of two categories: software license companies or operations that offer total customer management support on an outsourced basis. In particular, we are finding that companies capable of multi-service offerings across multiple verticals (electricity, gas, water, waste management, etc.) have a market edge over competitors that are more squarely focused on a single commodity. In addition, opportunities for CIS implementation appear to be far greater in Europe and Asia when compared to North America. Although activity in North America is expected to increase, many of the companies I spoke with are currently more aggressive across Europe and Asia. The debate over software licensing versus outsourced customer management support continues within this segment of the energy industry. A utility or retail operation basically has three choices: build its own CIS (modify existing legacy system), purchase best-of-breed capability (software licensing) or outsource the full customer management. Much of the decision between software licensing / outsourcing lies within the business model that the utility or retail company has established for itself, and its own capability of managing customer data without external support. Many customer management support companies would offer that, as retail operations begin to expand into various markets, the complexities among various state regulations require outsourced customer management support. Certainly, the cost investment is another key factor driving the CIS decision made by a utility or retail company. Many energy companies are hesitant about CIS and customer management implementation because they fear the system will become obsolete in three to five years and the company will be forced to write off its investment. Consequently, most energy companies are aggressively searching for an off-the-shelf product that is adaptable and can be expected to still be around in 15 years (if such a product exists). The overall hesitancy to invest in a CIS solution is part of the explanation why only a handful of significant contracts among utilities and software license companies / outsource companies have been announced to date. Within the various business models, utility operations have a different approach to CIS. Generator companies, which typically have less than 100 customers, have a primary need to store customer information that is easily accessed, and therefore do not typically need a large-scale CIS. However, wires and retail operations are the key markets for advanced CIS and CRM platforms. Wires companies, which need to administer the data for a large number of customers, need CIS systems that focus on work management, outage processing, and billing of either end-use customers or market participants. Wires companies only have a need for CRM if state law allows marketing by the incumbent wires affiliate of the utility. This trend may subside in time as more retail operations assume the responsibility for marketing. Like wires companies, retail operations also need to administer the data for many customers. The requirements of retail operations focus on commodities plus value-added products and services. Within the systems employed by retail operations, innovative and robust pricing applications are a must. Retail companies also use CRM systems, in which market intelligence, sales automation, campaign management, and customer profiling are high priorities. EDI will be replaced by XML. As the transition is made from legacy systems to fourth-generation client service solutions, XML will replace for communicating large complex documents and information. This process is currently taking place and will most likely continue for the next year or so. XML is a common language used on the Internet that makes it easier and more cost-effective for buyers and sellers to exchange data between applications and data sources that otherwise might have been incompatible. However, the future remains open and it is anyone's guess what will eventually replace XML. California has thrown a real scare into the IT industry nationwide. Most of the CIS executives present at the conference agreed that the uncertainty of deregulation that emerged as a result of the California crisis has cast a pall over the near-term future for CIS opportunities. As other states possibly slow down or abandon their restructuring plans, many software and outsource companies admit that this could have an impact on their business and the CIS market as a whole. A number of factors impact whether or not a company operating in the CIS space would be impacted by a return to regulation. These include limitations put into place by legislative and regulatory bodies, the business model of the company, and its technical capabilities to operate in both a deregulated and regulated environment. Ironically, despite the slowdown, new competitors continue to emerge, mostly based on the belief that the need for a new CIS is building under "pent-up demand" and will break soon. In addition, the renewed emphasis on power supply as included in the Bush administration's energy plan has positive IT implications, according to some of the attendees at the conference. As more power is produced and delivered to end-use customers, the need for data management and billing solutions also increases. Other trends that will continue to drive the CIS market include: The rapid growth of the Internet as the primary form of communications media. FERC's Order 2000, which is sparking the continuing emergence of RTOs / ISOs / transcos. The simplified rate structures will make it easier to bill a transmission tariff. The business lines among utility companies will become more clearly separated, and consolidation among the lines will most likely occur. This separation and consolidation process will impact the opportunities available for CIS companies (the available market will shrink). Retail customers will be turned over to new entities outside of the incumbent utility, which will also impact CIS opportunities. Outsourcing efficiencies should improve, which will heighten the ongoing debate between software licensing or outsourcing full customer management support. Moreover, attendees at the CIS conference generally agreed that customer relationship management begins with effective management of the customer as its core. Customer management includes the millions of transactions that must be accurately recorded; bills that must be disseminated, recovered and stored; and competitive customer data that is critical to a the operations of a utility or retail company. As deregulation not only opens up new opportunities for the companies operating in the CIS space, it also is forcing these companies to become more flexible, adaptable and opening to forming partnerships that would have seemed quite unlikely in past years. Consequently, the CIS market continues to change at a very rapid pace, and it is hard to predict what players will become visible at next year's 26th Annual CIS Conference. One thing remains clear, however. As the complexities of customer billing and management become more intense, the role of software providers and data management outsource companies should take on a greater prominence in this industry. An archive list of previous IssueAlerts is available at www.scientech.com [IMAGE] The most comprehensive, up-to-date map of the North American Power Systemby RDI/FT Energy is now available from SCIENTECH. Reach thousands of utility analysts and decision makers every day. Your company can schedule a sponsorship of IssueAlert by contacting Nancy Spring via e-mail or calling (505)244-7613. Advertising opportunities are also available on our website. SCIENTECH is pleased to provide you with your free, daily IssueAlert. Let us know if we can help you with in-depth analyses or any other SCIENTECH information products. If you would like to refer a colleague to receive our free, daily IssueAlerts, please reply to this email and include their full name and email address or register directly on our site. If you no longer wish to receive this daily email, send a message to IssueAlert, and include the word "delete" in the subject line. SCIENTECH's IssueAlerts(SM) are compiled based on the independent analysis of SCIENTECH consultants. The opinions expressed in SCIENTECH's IssueAlerts are not intended to predict financial performance of companies discussed, or to be the basis for investment decisions of any kind. SCIENTECH's sole purpose in publishing its IssueAlerts is to offer an independent perspective regarding the key events occurring in the energy industry, based on its long-standing reputation as an expert on energy issues. Copyright 2001. SCIENTECH, Inc. All rights reserved.
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