TMG Industry Perspective

1
CIS Conference 2002 - Baltimore
CIS INDUSTRY UPDATE
Activity, Architecture, Vendors, Pricing
Greg Galluzzi, President TMG Consulting, Inc.
Monday June 10, 2002 1000 am to 1100
am
2
SPEAKER
Greg Galluzzi, President, TMG
Contact Information P 512-288-2655 x10 F
512-288-2622 E TMGGreg_at_att.net
TMG grants use of this material if TMG is clearly
identified as the information source.
3
MARKET ACTIVITY

• 1. Market Activity

• 2. Utility Initiatives

• 3. Trends Solutions

• 4. Procurement Examples

• 5. Items For Consideration

• 6. Final Thoughts

4
TMG Active Clients
Anchorage
EPCOR
Winnipeg
Portland General
Chicopee
United Illuminating
Sierra Pacific
Springfield, IL
Questar
Sacramento
Fairfax County
Kansas City, BPU
Virginia Beach
Nevada Power
ElectriCities
Peoria
Georgia Natural Gas
El Paso Electric
Investor
Public
West Palm Beach
Brownsville, PUB
5
TMG Active Clients By Utility Type
Retail Energy 10
Public Water 35
Public Electric 20
Investor Electric Gas 35
Significant Water Utility and Investor Owned
Distribution Utility Clients.
6
TMG Active Clients Customers Served
Public Electric 3
Public Water 11
Investor Electric and Gas 53
Retail Energy 33
20 Utilities Serving 7.6 Million Customers.
Low 30,000 High 2,000,000
7
TMG Active Clients Customers Served
Public Water/Electric Serve Fewer Customers
Compared to Investor or Retail Energy
8
TMG Active Clients By Life Cycle
Study 15 or 3
Installation 45 or 9
Selection 40 or 8
9
TMG Active Clients By Life Cycle
10
Market Activity
11
Potential Revenue Customer Metered Services
Public Electric 4 or 18M
Public Water 29 or 125M
Investor Electric 21 or 91M
Retail Energy 29 or 123M
Investor Gas 13 or 55M
Coop Electric 3 or 14M
Approximately 426 million metered customer
services provided
12
Potential Revenue Total CIS Revenue
Potential for 47 Billion In Sales and Payroll
Costs
13
Potential Revenue Total CIS Revenue
Extended Products 18
Core Hardware 6
Core Software 5
Core Services 16
Extended Services 27
Utility Staff 13
Utility Expenses 15
Core CIS 27, Extended CIS 45, and Utility
Cost 28 of 47 Billion In Revenue.
14
Potential Revenue A Vendor With 10 Market
Share
Assume 10 of Services Enter the Market, With A
10 Vendor Market Share.
15
UTILITY INITIATIVES

• 1. Market Activity

• 2. Utility Initiatives

• 3. Trends Solutions

• 4. Procurement Examples

• 5. Items For Consideration

• 6. Final Thoughts

16
Historically - Why Replace CIS?
Exceptional Customer Service
Cross Organizational Boundaries
Single Point of Customer Contact
Internal User Information Access
External Customer Information Access
New Products and Services
Quick Time to Market
Customer Choice
Front and Back Office Integration
Cost Avoidance Through Technology
Year 2000 Revenue Impact
Old Technology Revenue Impact
Unbundled Billing
Convergence Billing - A Single Bill
Marketing to Potential Customers
Marketing to Existing Customers
17
Today Why Replace CIS ?
18
Today Why Replace?

• Customer Care - Provide Exceptional Levels of
  Customer Service

• Revenue Stream Older Technology Impacts Revenue
  Stream (Current and Vision)

• System Flexibility Allowing Timely Response to
  Maintenance and Enhancement Requests.

• Consolidation of Multiple Systems.

• Discontent or Significant Problems With Current
  Solution

19
Data From 50 TMG Customers
20
Planning Success
26 (13) of CIS initiatives end during planning
or selection.
74 (37) of CIS initiatives successfully enter
installation.
Data From 50 TMG Customers Billing 20Million
21
Installation Success
13 (5) rated F. Project Canceled
27 (10) rated A. On Time On Budget Exceeds
Expectations
19 (7) rated D. More Time More Money, Does
Not Meet Expectations
22 (8) rated B. More Time More Money Exceeds
Expectations
19 (7) rated C. On Time On Budget Meets Few
Expectations
22
TRENDS AND SOLUTIONS

• 1. Market Activity

• 2. Utility Initiatives

• 3. Trends Solutions

• 4. Procurement Examples

• 5. Items For Consideration

• 6. Final Thoughts

23
Industry Trends
1. Very few new core CIS offerings entering the
market.
2. Many new solutions offer extended CIS
capabilities.
3. No big push from other industry vertical
providers.
4. Industry activity picks up and continues at
brisk pace.
5. Utilities continue to extend current system
capabilities.
6. Consolidation of multiple CIS Utility
Billing Systems.
7. Vendors diversify and target multiple
segments.
8. The core CIS offering remains bundled.
9. Vendors clean-up base code fixes
enhancements.
10. CIS vendors develop CRM-like modules and
capabilities.
24
Industry Trends
11. Install timelines of lt 12 mos give way to 12
to 18 mos.
12. CIS vendors offer out-of-the-box 3rd party
solutions.
13. Configuration versus customization continues
- 0 mods.
14. Offerings continue to evolve from hosted to
total ASP.
15. CIS incorporates Internet Web-Based
Services.
16. Vendors offer effective maintenance and
upgrade paths.
17. New CIS designs accommodate wireless
technologies.
18. Performance resolved with large customer
installs.
19. Products are pre-configured out-of-the-box
solutions.
20. Products reflect best practices and efficient
workflow.
25
Architecture Considerations
26
Operational Platform
In-House 70 or 35
Hosted 16 or 8
Outsourced 4 or 2
Co-sourced 10 or 5
27
Solution Installations
Advanced DST Innovis EDS IBM STS Accenture Orcom
Other 18 or 9
SAP 10 or 5
TBD 24 or 12
Cayenta 12 or 6
SCT 24 or 12
PeopleSoft / SPL 12 or 6
28
CIS Solution Categories
6. ERP Based Product Solutions
1. Utility Based Custom Solutions
7. Telecom Based Product Solutions
2. Utility Based Product Solutions
8. Investor Based Outsourced Solutions
3. Energy Based Product Solutions
4. Complex Billing Product Solutions
9. Vendor Based ASP Solutions
5. Billing Agent Based Solutions
10. Public Based Cosourced Solutions
29
For Example A Few CIS Solution Providers
30
Recent Proposals Submitted By
31
Typically Receive 12 to 18 Proposals For
Example
32
PROCURMENT EXAMPLES

• 1. Market Activity

• 2. Utility Initiatives

• 3. Trends Solutions

• 4. Procurement Examples

• 5. Items For Consideration

• 6. Final Thoughts

33
Example 1 - Proposals Submitted 20
A regulated distribution utility serving 1.5
million electric customers
34
Example 1 Type of Proposals
Integrator Only No Product 3
ASP Proposed With Bundled Product 2
Vendor Proposed (No Integrator) 3
Integrator Proposed Product 12
35
Example 1 Proposals
36
Example 1 - Operational Environment
Integrator Only No Product 3
Both In-House Outsourced 5
In-House Only 9
Outsourced Only 3
37
Example 1 Performance
USE SLAs 2
Actual Client Operational 4 (2 sites)
Nothing Provided 8
Study or Benchmark 6
38
Example 1 Server Proposed
Mainframe OS/390 1
Silicon Graphics 1
IBM AIX 2
IBM RS/6000 1
Any UNIX 2
Nothing 2
39
Example 1 Database Proposed
1 DB2 Only
1 DB2 Moving To Oracle
DB2 Or Oracle 2
None Specified 3
ORACLE 13
40
Example 1 - Timeframe
41
Example 1 In-house Installation Cost
2.67
28.67
25.58
42.00
42
Example 1 Installation Cost - Outsourcing
6.00
11.00
14.94
31.33
43
Example 1 Ongoing Outsourcing Per Click
0.46
0.75
1.00
44
Example 2 Proposals Submitted
45
Example 3
46
ITEMS FOR CONSIDERATION

• 1. Market Activity

• 2. Utility Initiatives

• 3. Trends Solutions

• 4. Procurement Examples

• 5. Items For Consideration

• 6. Final Thoughts

47
How Is Customer Defined ?
48
Application Waves
1960 1970 1980
1990 2000 2010
2020
First Wave (flat custom)
Second Wave (hierarchical custom)
Third Wave (relational custom)
Fourth Wave (relational product)
Fifth Wave (relational component)
Today, utilities are running systems across all
of these application waves.
49
Application Evolution
Relationship
Customer
Account
Premise
Meter
50
Billing Versus Customer System
1960s Technical Efficiency
1970s Cost Reduction
1980s Office Effectiveness
1990s Flexibility
2000s Global Village
51
Why is Customer Focus Important ?
52
Why are Customer Initiatives Important ?
6
Flourish In Global Village
5
Reach the Customer
4
Enhance Executive Decision Making
3
Enhance Products Services
2
Leverage Investments
1
Reduce Costs
1960s
1970s
1980s
1990s
2000s
2010s
2020s
53
Billing Versus Customer System
It is tough to exceed a customer grade of
Satisfactory with a Billing System
54
Utilities Focus On Transaction Not Customer
Utilitys Customer Understanding and Analysis
Utilitys Long-Term Customer Relationship
Utilitys Transactions
Customer Interactions
Customer
55
The Customer Is Our Focus
56
How Customer Focused Is Your Utility ?
Strategy
Structure
Customer
People
Process
Systems
57
Transformation Using Technology
People Employee Satisfaction
Formulate Business Strategy Structure
Business Process Excellence
Refocus staffing and responsibility
Systems Integrity Flexibility
Drive Process and Workflow
The utility must change new systems are
frequently the catalyst !
58
Period of Inefficiency Dont Oversell Technology
Productivity
Implement
Period of Inefficiency 3 months to 2 years

• Fix Program Problems

• Really Learn the System

• Modify Business Practices

Time
59
Transition Period
Fix System
Users Learn
Rework Process
E F F I CI E C Y
0 1 2 3 4 5
6 7 8 9 10
11 12
Time In Months
60
Transition and Operation Timeline
Stabilize CIS
Extended Stabilization
Production Operation
Transition To CIS
Legacy Termination
Maintenance, Support and Help
Third Party Maintenance and Enhancements
61
Transition and Operation Overlap
New CIS Operation
Legacy Operation New CIS Install
Transition Period
Install CIS
Transition CIS
Operate Legacy Billing
Operate New CIS
Legacy Development
CIS Development
Maintain Legacy Billing
Maintain New CIS
High
Moderate High
Moderate
Low
Level of Cost
62
How Long Will The System Last ?

• It may take 2 to 5 years to fully implement CIS
  technology, people and process tools.

• The standard response to how long the system will
  last is 5 to 7 years.

• CIS implementations placed into production as
  recently as 1996 are already being considered for
  replacement.

• The goal with product solutions is to select a
  vendor and a product which will continue to
  evolve both from a technology and a business
  perspective.

• The value and reality of this approach continues
  to be validated.

63
FINAL THOUGHTS

• 1. Market Activity

• 2. Utility Initiatives

• 3. Trends Solutions

• 4. Procurement Examples

• 5. Items For Consideration

• 6. Final Thoughts

64
Projects Are Complex Undertakings
Scope
Cost
Comm.
Plan
Staffing
Organization
Perspective
Risk
Activities
Legacy Database
Data Prep / Clean
Data Conversion
Project Mgmt
Post Install Support
Database
Development
Bill Format
Base Install/Train
Go-Live
IT Environments
Maintenance
Reporting
Batch
Go-Live Prep
Base CIS
Production
Interface
CIS
Acceptance Test
Modification
3rd Party CIS
Facility
Server
System Test
Configuration
IT Infrastructure
Network
3rd Party Install/Train
Analysis Design
On-line
End User Training
Desktop
Workflow / Workarounds
Staff
Business Process
CISTOOLSTM
Rates/Rules
Interaction
Switch
Service
Change Mgmt
Readings
Customers
Offerings
Structure
Strategy
Billings
Payments
Collections
Legend
A Outstanding
B Above Avg
C Satisfactory
D Unsatisfactory
F Failing
Not Evaluated
65
Final Thoughts
1. New Technology Does Not Solve Everything
2. New Technology Is Not Less Costly
3. Short Project Timelines Are Impossible
4. Cost Justification Is Nearly Impossible -
Innovate
5. Dont Expect Everything At Go-live Core
Capabilities Are Good
6. Be Aware of New Technology As A Disabler
7. Get Real About Need For Total Customer Focus
8. CIS Is Not A Commodity At Least Not Yet
9. Can You Pay For System Flexibility To Do
Anything Right Now.
10. Dont Set Expectations So High That Failure
Is Inevitable.
66
CIS
WHY TRAVEL ALONE?
CISWORLD.COM
Provided By TMG Consulting, Inc. A Utility and
Energy Industry Solution Provider