by Jorone Taylor-Lewis
Jorone Taylor-Lewis of AMT-SYBEX explains how business change can be delivered with a focus on total cost of ownership, helping energy retailers prosper in challenging market conditions
Over the past five years, the UK’s energy sector has become increasingly challenging for energy suppliers. The pace of change has been intense as the industry adapts to new realities. Britain’s big six firms saw their profits dive by 10 percent last year as over 1 million customers left them for new entrant brands. Market share for new entrants now accounts for 25 percent of gas and 24 percent of electricity supplies. And the recent news that Extra Energy and Spark Energy are exiting the market shows the challenges faced by incumbents and new entrants alike.
Across the industry, decarbonisation and renewable energy initiatives have required significant capital investment. At the same time, energy suppliers have been assigned a steady stream of change programmes by the regulator: smart metering, centralisation of registration and next-day switching, as well as a variety of government-mandated energy efficiency schemes. These change programmes have required further capital expenditure and put additional strain on already tight budgets.
In the past, raising prices to offset the cost of these investments might have been a viable option, but Ofgem has mandated a price cap per household, which will be in place until 2023. As a result, the only option is to restrict expenditure wherever possible.
At the same time, the industry is continuing to evolve at a rapid rate, and energy suppliers can’t afford to stand still. We’re seeing the rise of automated switching providers, who will switch customers automatically when a better deal is available. Meanwhile, solar panels, energy storage, distributed generation and electric vehicles are becoming more mainstream, creating a new generation of “prosumers” who are looking to generate their own energy and sell it back to the grid.
If established energy suppliers don’t seize the opportunity and work to define new modes of interaction with these better-informed, more demanding customers, it will open up opportunities for a wave of disruptive new players to rush into the market.
So how can we resolve this dilemma, where energy suppliers must focus on the cost to serve customers, while still retaining the flexibility to evolve with constant industry change? The key is for suppliers to ensure that they have the right IT systems, architecture, internal resources and partnerships in place not only to execute business change projects in the most cost-efficient way, but also to transition those projects into business-as-usual processes that will deliver value at scale. We recognise that total cost of ownership (TCO) will be an important litmus test for all business decisions.
In many cases, this will mean that project teams need to adapt to new ways of working. The key is to enable them to start with smaller projects where failures won’t have a significant negative impact on the business, but successful ideas can be operationalised quickly and cost-effectively.
Moving to this kind of flexible delivery model is no easy task, especially for organisations that are accustomed to delivering business change in “big bang”, multi-year programmes with budgets in the millions. The best way to move forward is to bring in innovative ideas from outside the organization, and test the water in a controlled, low-risk environment where the business can explore new ideas without requiring significant up-front investment.
At the same time, it’s critical to establish a tight, efficient core of systems and processes that are both cost-efficient and flexible, so that new projects can be delivered without requiring major changes to existing infrastructure. Rationalising existing IT assets and eliminating unnecessary complexity is often a vital first step to both cutting baseline operational costs and reducing friction for new change programmes.
At AMT-SYBEX, we have a long term and “whole of industry” perspective. We are focusing on helping our clients build for the future by simplifying their enterprise systems landscape, whether they operate in distribution, transmission, metering or supply. Our software solutions provide a flexible and scalable foundation for core energy processes, from meter data management and industry data flows to field data collection and distributed energy resource forecasting. With everything we build, our goal is to empower clients to navigate future change and disruption while delivering the lowest possible TCO.
From a services perspective, we can also help suppliers deliver change rapidly, cost-effectively, and at minimum risk. We can bring the technology, personnel and expertise needed to spin up a small-scale project almost instantly, and if an experiment doesn’t work out, we can scale those resources back down immediately. On the other hand, when the results are promising, we can help you move your prototypes seamlessly into enterprise-scale production.
If you are seeking to rationalise your current IT landscape or want to find a low-cost, low-risk way to explore new ideas and innovative solutions, please get in touch. We’ve been at the heart of the industry since 1990, and now we’re working to shape the future. We’d be delighted to help you turn these challenging times to your advantage by finding new ways to optimise cost to serve and outperform your competitors.