Why is the Utilities Space Hot?

Worldwide, the Utilities sector is increasingly looking at IT investment as part of the overall business strategy, as IT has emerged an enabler of management control and operational excellence. Worldwide, there are certain trends in the sector which indicates an enhanced investment in IT in the sector:

Capacity addition: The demand-supply mismatch in the utilities services is skewed towards demand and hence companies are involved in capacity addition (in terms of putting in power plants, distribution lines, search for more oilfields, laying gas pipelines, efficient distribution etc.). In fact, when it comes to additional capital investment, we assume 1% of the investment is towards IT for running or managing these new capacity additions.

Cost reduction: With the top line growth of companies under pressure, there is emphasis on savings that can be derived from lowered cost of operations. The MRO (maintain, repair and operate) cost is a major expense associated with the running of utilities firms and hence firms are putting in efforts to minimise this cost. IT is playing a major role in this initiative as deployment of IT across the organisation can streamline maintenance processes, enhance asset management, reduce inventory, minimize transaction time (internal/external), streamline workflow management and provide reliable information for decision support among others. 

Emerging trends: The utilities sector is itself undergoing major transformation with the emergence of newer concepts—from energy trading, risk management and an asset management program (AMP) to merit order generation, securitization of bills receivables, customer relationship management (CRM), waste water management and time of day (ToD) pricing of utilities services. And while most of the utilities companies are moving towards adopting these, it is important that they have a robust IT
system with knowledge management in place.

Restructuring Initiatives: Restructuring is a pre-condition for receiving grants from the World Bank, DFID and other international funding agencies for the state run utilities in developing countries. Further, the governments of these countries have taken initiatives to encourage restructuring of the state run utilities by suitable legislation and statutory provisioning like
Power Bill 2000 and accelerated power development program (APDP) in India. IT will play a major role in these restructuring initiatives, be it in billing and charging (distribution activity) or operation and materials management (generating activity) or minimizing the transmission and distribution losses (transmission activity).

Convergence: Convergence of power, gas, oil (as also with telecom) business areas has thrown open new opportunities for IT.

The convergence makes a mammoth company to be better managed and efficiently operated and thus IT would play a major role towards achieving this end.

Regulations: Utilities throughout the world are heavily regulated as they form a part of the essential services. Business and financial prudence are guiding lawmakers across the globe to formulate new policies for the utilities sector in their respective countries so that utilities provide better customer and stakeholder value e.g. the BETTA initiatives of UK, Power Bill 2000 of India.

These major regulations impact the organizations as a whole and for compliance towards these regulations or harnessing the opportunities arising out of these regulations, the firms need to have an enhanced IT system.

Source: Tata Consultancy Services