IssueAlert Emerging Technologies ~ Aug 2005

UtiliPoint® International recently completed a report that analyzes the North American utility customer care industry. The report is based on primary research gleaned from our fourth annual survey of North American utilities that resulted in responses from over 300 utilities. The survey respondents consisted primarily of managers or directors of billing and customer care at North American utilities and were completed in the spring.

While the survey covered several aspects of customer service in the utility industry, one area of particular focus was that of customer information systems (CIS). The results of the study indicate that since the survey's inception in 2002 the number of utilities that have been in the market for a new CIS has grown significantly. This year 16.7% of respondents indicated that they are in the market for a new CIS. While this year represents the largest saturation that the survey has ever seen for CIS, it also was the slowest amount of growth that we have seen.

In this analyst's opinion, the 16.7% saturation represents a “ceiling” of for the true saturation that will occur over the next year. There are several reasons for this. First, the time table for the decision making process is quite lengthy. In our recently concluded survey, approximately two-thirds of utilities indicated that the time frame for the decision making process would take over nine months, and 39% of these utilities indicated that the time frame would take over a year.

Secondly, while a utility may be in the market for a CIS today, developments such as new budgetary constraints and executive changes can easily put a halt to these plans.

As a case in point, while last year 16% of respondents indicated that they were in the market for a CIS, at the end of the year only fifteen CIS deals were completed for utilities serving over 75,000 customers.

With these caveats in place, let's take a look at where the growth is in the CIS market.

Where is the Growth
While growth is coming from all of the regions of the U.S., Southern respondents did report a slight decline from the previous year. Of all the regions, Canada has a higher percentage of utilities that are in the market for a new CIS, and the Midwestern U.S. has the lowest percentage. Even so, all regions reported double-digit growth.

Looking at the information by commodity type shows that water utilities have the highest percentage of utilities in the market for a new CIS with over 21%. Gas utilities had the lowest percentage of utilities in the market for a new CIS with less than 10%.

Looking at the information by company type reveals that all of the growth over last year is coming from co-operative utilities, but they are still adopting at a slower rate than the other utility types.

This marks the third consecutive year that municipal utilities had the highest percentage of respondents that are currently in the market for a new CIS. In North America municipals have been often overlooked by an industry that focuses attention on the activities of investor-owned utilities.

Municipal utilities are truly unique both in the range of sizes they come in and in the diversity of the services they provide their customers. Municipal utility governance and structure, although tuned for the service provider business, often reflects the kind of thrift characteristic of governmental organizations. Likewise, municipal utility organizations and budgets are far smaller, more directed, and less flexible than those of investor-owned utilities and cooperatives. UtiliPoint® International sees the municipal CIS market as being more robust in the municipal space because of this extreme pressure to control cost.

The survey, along with the many conversations that UtiliPoint® has had with both our utility and non-utility clients, indicates that the CIS marketplace is improving and that the market continues to change at a very rapid pace. Look for this year to be a deciding one for many CIS vendors in the area of utility customer care.