Market Focus: Energy/Utilities: A Lightbulb Moment for Customer Interaction
Jim Hackett, manager of credit and collections at PECO Energy, a Philadelphia-based electric and natural gas utility subsidiary, is no stranger to the economic realities facing his consumer base today. He knows it’s harder for people to pay their utility bills. He also recognizes that if the money doesn’t get collected, his business will suffer, too.
“We’re in the middle of a major initiative to reduce our bad debt,” Hackett says, an effort that includes proactive phone calls to delinquent customers. “It will give us a much better handle on our collections and is relatively inexpensive compared to a field visit.” (The feared field visit, or truck roll, involves turning off a customer’s electricity or other utility.)
According to Jonah-kai Hancock, utilities marketing manager for Varolii, PECO’s provider of automated-communication applications, the collections process can be painful, and regulations require utility and energy companies to reach out to a delinquent customer a certain number of times before they can turn off service. “The truck roll is a last resort for utilities because it’s not cheap,” Hancock says.
Proactive messaging in this market is on the rise, Hancock says, in part because of an economy that has made collections a prime target for improving a company’s bottom line. Proactive messaging, he adds, is a way to achieve that without damaging customer service. “There are four ways our customers use this: demand response, outage notifications, revenue assurance, and contact center agent management,” he says. “It’s not a new technology, but whenever something happens, the need for the utility to get in touch with people is important.”
Driving the contact center to a Voice over Internet Protocol (VoIP) infrastructure can also provide a great boost to this sector, particularly in times of crisis. When tornadoes ravaged Jackson County, Tenn., in 2008, the Jackson Energy Authority (JEA) was able to handle approximately 8,000 calls in a one-week period, 96 percent of which were answered in under seven seconds partly due to its upgrade to Siemens’ VoIP network.
“We needed flexibility so we could respond to customer needs immediately,” recalls Michael Johnston, vice president of information technology and broadband at JEA. “It also gives us faster recovery ability and the wherewithal to add staff to handle massive increases in call volume. The night of that tornado, we cranked up every agent we had to handle those calls.”
With the promise and potentially tremendous benefits that can be gained from investing in updated technology, research from Gartner finds that many energy and utility companies, particularly in North America, are lagging behind European counterparts. Zarko Sumic, vice president and distinguished analyst at Gartner, says that particularly when it comes to replacing legacy customer information systems (CIS), which among other things address customer service, “the cost of replacement is prohibitively high.”
“In a competitive retail market where you need to have advanced customer-facing functionality such as customer acquisition, retention, and analysis, you can justify the investment now,” he says. “In a regulated market, you don’t deal with acquiring customers, because once they are in your territory, more often than not they become your customer.”
This is important because the North American market is predominantly regulated, which has caused the region to fall behind Europe and potentially even Asia/Pacific. According to his research, year-over-year CIS worldwide revenue will increase by 2.6 percent, from $2.7 billion in 2008 to $3 billion in 2013. During this time, Sumic forecasts Europe will remain the largest regional market, and the Asia/Pacific region will have the fastest five-year growth.
In North America, however, Sumic is pinning his hopes on recent calls for energy sustainability, mitigating impact on the environment, and the notion of a smart grid—all of which might deliver some upside to the sector. “Enabling consumer-driven energy efficiency initiatives [and] smart appliances, and setting up consumers to become producers of their own energy…is enabling a new set of business requirements,” he says.
Oracle and SAP have the functionality to address these emerging requirements, Sumic says, and the two are large enough to shoulder the research-and-development costs required by a shifting North American market. His outlook for the sector’s smaller players, however, is less promising. “There’s a bifurcation in the CIS market,” he says. “I don’t believe niche vendors will make it to the next generation of products.”
For the small start-ups without an installed base or legacy product, Sumic says that he expects to see developing point solutions address energy-efficiency needs. He notes Google’s PowerMeter offering and the debut of Microsoft’s Hohm—both consumer-focused, energy-efficiency products that are being touted as leaders in a developing overall trend.
“They can also play in this space because they can manage the level of investment required,” Gartner’s Sumic says. “These changing business requirements, this new focus on customers and energy efficiency…are the biggest drivers that will reinvigorate the North American market.”