Utility companies are under substantial margin pressure due to growing capital expenditures, borrowing costs and regulatory controls on pricing for electric and gas services. It is essential for utilities to maintain healthy margins to allow them to reinvest in the latest technologies to stay competitive and provide cost-effective services. Traditionally, utilities have relied on mergers and acquisitions to generate cost synergies, and only recently have focused on technology-enabled cost improvements (e.g., SAPenabled finance transformation initiatives) but have not tapped into those opportunities completely. SAP’s recent technological innovation, Enterprise HANA, offers exciting new opportunities for utilities. Many of these companies collect vast amounts of customer and usage data on a daily basis through smart grids, smart meters and other technology-enabled activities. HANA enables the processing of this data with speeds not available before, opening up possibilities to extract value out of previously underutilized data. Opportunities to generate or recapture revenue through data analysis exist in the areas of energy fraud, collections, rate structuring and outage management, among others.
Challenges and Opportunities
Most utilities maintain customer data, such as name, address, type of business and contact numbers, to provide basic services and conduct regular business. Companies may also collect additional details about their commercial customers, such as space square footage, number of employees and franchise association. Usage data from smart meters is another rich set of data, as is financial information, such as billing and payment history, for each customer. The problem is that existing analytics technology does not always support the ability to process such a large volume of data quickly for actionable insights. Large numbers of transactions, distributed systems and speed of processing are major constraints. Harnessing and analyzing all of this information, however, can benefit companies in a number of ways:
- Fraud detection: Electricity theft is a real problem for utility companies, with estimates in the U.S. as high as $6 billion a year.1 Fraud detection models generally fall into two categories: peer comparison and characteristic analysis. Account characteristics combined with peer comparison analysis and meter reads can provide insights into likely consumption patterns and variance with actual reads to facilitate fraud detection.
- Collections: Analytics can play a significant role in processing and analyzing overdue receivables and in providing collections representatives with targeted customer lists with a higher likelihood of success. Based on these lists, companies can establish payment plans for delinquent customers, with immediate positive effect on the company’s cash flow.
- Peak usage: Companies can monitor and analyze interval meter reads by large commercial and industrial customers and use the information to structure rate contracts based on peak usage, in addition to normal consumption, to account for large capital expenditures (peak demands that strain the utilities’ infrastructure or supply). Consumption information obtained with multiple intra-day reads and analyzed in the context of peak load on the grid capacity is precisely the kind of big data analysis utilities need in order to structure rate contracts more accurately and bill large commercial or industrial customers appropriately.
- Outage information: Interval meter read analysis can also enable utilities to discover outages early, before they are contacted by customers, helping to reduce outage times and improve customer service. Outage management analytics can also help utilities calculate the true cost of the outage, by combining data from various systems, such as cost of supplies, cost of labor and lost revenue, resulting in more efficient management of resources and reduced cost of service restoration.
Our Point of View
The next generation of business applications designed to run simple in a digitally connected world is here, and forward-looking organizations should rethink their information technology strategy to seize on the opportunities that come with new technologies. Utility companies looking to harness the power of big data analytics to solve business challenges like the ones outlined above should consider SAP’s latest in-memory solution for large volume data analysis, Enterprise HANA. HANA delivers advanced processing capabilities and powerful features that enable analysis of multiple datasets across various regions and systems with greater speed and frequency than previously possible, delivering timely and actionable insights to apply to the challenge at hand. HANA’s capabilities include:
- Real-time data replication from the underlying data sources and the ability to process complex business logic for an instant view of results
- The ability to process large volumes of data sourced from disparate systems for integrated analysis
- In-memory storage for speed of access
- Geo-spatial features using visualization technologies, such as Lumira or Tableau, to allow business users to identify hidden patterns in the data and spot opportunities for revenue growth or cost optimization
- Intuitive data modeling framework with lean architecture supporting rapid changes to business needs
SAP already has a strong footprint in the utilities industry with solutions to automate all major segments of business processes, including customer care, service, billing, asset management, supply chain and shared services functions. HANA’s ability to connect to SAP and non-SAP systems seamlessly, along with its advanced visualization capabilities, makes a strong case for utilities to adopt the solution as a means of addressing some of their most critical business and strategic issues listed above.
How We Help Companies Succeed
We help companies assess their SAP landscape, including integration between SAP and non-SAP systems, to define a roadmap that would enable long-term success leveraging innovation and maximizing technology investments.
Our Data and Analytics team of experts can demonstrate direct impact and value with improved performance and efficiency in addressing business issues. We have helped industry-leading utility companies setup analytics Centers of Excellence to streamline analytics processes and respond to requests from the business to optimize revenue and reduce costs. IT leaders who understand the growing demand for data within the organization will take advantage of technology innovation to address these business demands now and help their organizations to navigate economic and market changes with confidence.