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The Results Are In: What Do Utilities Really Think of the Cloud?

This article was originally published in the CS Week Summer Newsline and can be viewed here

As a provider of customer experience solutions purpose-built for the utilities industry, Vertex is always taking pulse of technology in the industry. The reason? We need to know what they’re thinking in order to better serve them. And, not surprisingly, one of those hot technology issues that comes up over and over is the Cloud. Is it finally time for utilities to embrace the cloud for their technology infrastructure and systems? Or should they still proceed cautiously, waiting for the industry’s concerns to be settled first?

Knowing how utilities answer questions such as these is important both for the utilities themselves and their customer service solution providers. For utilities, whatever direction they choose today will likely be with them for a decade or even two. And for solution providers, the answers are essential so that we can provide what the industry needs today, while keeping an eye on what’s to come.

Two decades into a century where cloud technology has been adopted by almost every other industry, we wanted to know:

What do utilities really think of the cloud?

 

The Vertex/TMG Perceptions of the Cloud survey

In early 2019, we commissioned the Vertex/TMG Perceptions of the Cloud survey to answer that question. TMG surveyed executives and IT management from utilities across the United States. The survey contained a list of questions about the respondents’ current CIS and other internal systems, their beliefs about numerous recent technology developments (such as cloud, SaaS, cyber security, and more), and their plans for the future.

Here’s how the respondents and their respective utilities break down:

Utility type represented:

 

 

Response Ratio

Investor-owned utility

22.5%

Municipality

41.9%

Cooperative

6.4%

Competitive retailer

3.2%

Public utilities commission

6.4%

Provincial

0.0%

State

0.0%

Federal

0.0%

Other

9.6%

No Responses

9.6%

Total

100%

 

Number of customers served:

 

 

Response Ratio

10,000 or fewer

3.2%

10,001 - 50,000

6.4%

50,001 - 100,000

16.1%

100,001 - 250,000

35.4%

250,001 - 500,000

3.2%

500,001 - 750,000

3.2%

750,001 - 1 million

3.2%

1 million - 2 million

9.6%

2 million - 3 million

3.2%

Greater than 3 million

6.4%

No Responses

9.6%

Total

100%

 

Here are some of the key findings and trends that emerged. We hope they will help guide utilities on their journeys to provide their customers the ultimate in customer service with the ultimate customer information system.

 

#1: More utilities are using cloud or hosted services.

Question: Does your utility currently utilize any Cloud or hosted services?

According to the survey, 74.1% of utilities currently utilize some kind of cloud or hosted services. This number was higher than expected, but what type of applications are utilities entrusting to these models?

On reviewing the detailed responses, we found utilities’ use of cloud or hosted systems varied widely from individual functions (like payment processing, HR systems, project management, productivity software) to major components like Salesforce CRM and customer web portals. While the latter is still in the minority, this still indicates a shift from the traditional reliance on a utility’s systems all being installed on-premise.

shutterstock_258783284

 

#2: More utilities believe cloud CIS implementations are faster than on-premise.

Question(s):

Estimate how long a CIS implementation will take using a cloud or hosted model.

The same question was asked for using on-premise model.

Despite the expected perception that a cloud or hosted model is more complicated, 54.7% said a cloud/host CIS implementation would take less than 18 months. Not surprisingly, the same number believed an on-premise CIS implementation would take 19 months or longer.

 

#3: There is confusion about what *-as-a-Service vendors provide.

Question(s): Select all of the following that you believe should be provided by a vendor with the purchase of a SaaS (Software-as-a-Service) model.

The same question was asked about purchases of PaaS (Platform-as-a-Service) and BPaaS (Business-Process-as-a-Service) models.

With few exceptions, all *-as-a-Service offerings provide virtual infrastructure in the cloud. However, there were wide variations in whether respondents believed the vendor should handle infrastructure, hardware, hardware refreshes, operating system support, and service level agreements (SLAs).

Examples:

  • 4% believed SaaS and PaaS vendors provide infrastructure, but only 19.2% believe a BPaaS vendor provides the infrastructure on which the application runs.
  • Perception of whether vendors should provide SLAs:
    • SaaS (80.7%)
    • PaaS (61.5%)
    • BPaaS (50.0%)

Such responses indicate that there is still confusion about what solutions built on various *aaS models should include, who is responsible for what, and how they are delivered.

 

#4: Security is the #1 factor for a utility’s enterprise IT systems.

Question: Rank the following characteristics from most to least important to your utility for an enterprise IT solution. 

Respondents were asked to rank: Scalability, customization, security, ownership of hardware/software, annual updates, business process automation, business intelligence, and (of course) cost.

Security ranked as the most important characteristic of an IT solution, with 48% ranking it #1.  16% of respondents rated both scalability and business process automation as their top pick. Only 4% ranked cost as the most important factor.

 

#5: Utilities still believe on-premise solutions are more robust.

Question: How well do cloud or hosted solutions vs on-premise solutions rate on…

When we asked respondents how on-premise and cloud/hosted compare in delivering some core system characteristics, cloud/hosted solutions did not fare as well as their on-premise counterparts.

  • Despite security expertise of cloud providers, only 28% believed cloud/hosted models provide better security than on-premise solutions.
  • 72% believe that cloud models provide less flexibility and application customization.
  • Only 40% feel a cloud solution can be easily integrated with a utility’s other applications.

 

#6: And yet more utilities are likely to choose cloud for their next CIS.

Question: During your next CIS replacement project, which model will your utility likely choose?

Surprisingly, despite perceptions of cloud/hosted solutions on the above characteristics, it appears that perceptions of the cloud and its benefits are slowly but surely changing. With 52.2% of that responded to this question selecting Cloud/Hosted, the cloud model edged out on-premise by a small margin. However, even a small margin could indicate a trend that utilities are moving towards cloud adoption.

 

Conclusion

What can we conclude from all this?

For one thing, we can tell that utilities are gradually starting to explore using the cloud. However, when it comes to making the leap to a cloud or hosted enterprise solution like a CIS, they still have some reservations.

Some of those reservations stem from the way utilities have traditionally operated and the way they are regulated. For a variety of reasons, utilities have historically been cautious when adopting new technology. For example:

 

  • System longevity: Many utilities keep the same customer information system (CIS) for 15 to 25 years. With tight budgets, they can’t replace their infrastructure every few years, meaning the latest and greatest technology isn’t always an option.
  • Rate base (capitalization): Utility rate case justification has always been based on capital investment. Since cloud and SaaS services could only be treated as operational expenses, their adoption is difficult from a budgeting standpoint.
  • Security: Utilities are concerned with the security of their systems and customer data and believe (still) that security in the cloud can’t match that of on-premise infrastructure.
  • Loss of control and ownership: Utilities don’t want to lose control of their data or their capital investment.
  • Flexibility and customization: Utilities believed that to meet their unique challenges, they required an on-premise system custom-built to the exact requirements.

Some of these “reasons” remain valid, while others are fading.

For example, a utility will probably still keep its CIS around for decades before replacing it. But capitalization of cloud-based projects and services may happen sooner rather than later, if recent FASB recommendations are adopted.

On the other concerns, the survey shows there is still a lot of misunderstanding about the cloud and hosted solutions. Respondents believe that cloud security is less comprehensive and effective than for on-premise systems. However, cloud providers consistently maintain more security expertise and certifications than most utilities could hope to have internally. As for concerns that cloud solutions are inflexible, difficult-to-customize, and hard-to-integrate, truthfully, this speaks more to the need for better education by industry vendors with robust utility CIS solutions for both cloud and on-premise implementations. For example, the VertexOne model in the cloud allows for customizations and integrations to meet utility-specific needs.

Utilities now believe a cloud or hosted CIS implementation can take significantly less time than an on-premise solution. That is a recognition of the time and costs they can save by exploring such an option. More significantly, the survey concludes that slightly more than half of respondents now think it likely they will choose a cloud or hosted solution for their next CIS implementation.

What is your roadmap to reach the ultimate in customer information systems?

Whether your utility’s representative had a chance to participate in the Vertex/TMG Perception of the Cloud survey, I hope its findings were food for thought as you consider what’s next for your CIS.

The truth is that, while most every utility seeks to provide excellent customer service, not every utility can or needs to implement a new CIS today. Every utility has its own unique systems, challenges, and timetable. What’s important is to have a clear roadmap to get from where you are today to where you want to be.

That’s why VertexOne has just published The 2019 Guide to the Ultimate Utility Customer Information System: A Technology Roadmap for Reaching Your Utility’s Customer Experience Goals. Wherever you are in your journey, and whether your ultimate CIS destination is in the cloud, on-premise, or somewhere in between, our eBook can help you create the roadmap to take you there.

Download the free guide today.