Utilities to increase IT spending for customer satisfaction and data management

OVUM VIEW

Summary

A new Ovum survey, Business Trends: Utility Technology Investment Strategies, analyzes the results of in-depth interviews with 200 IT investment influencers or decision-makers from utilities operating in Western Europe, North America, and Asia-Pacific. The survey explored major IT investment strategies, areas of spend, expected budget growth, strategic goals, and industry challenges. Results indicate that utilities’ IT budgets will increase next year relative to 2012. The survey found that increasing customer satisfaction is the most important IT investment strategy and customer focus is the most important strategic goal in 2012. Additionally, data capacity requirements are expected to grow significantly in next five years.

Utilities IT budgets set to increase in 2013

The survey targeted the electricity, water, and gas industries in the utility sector. The sample comprised 27% of respondents from Asia-Pacific countries, 35% from North America, and 38% from Western Europe. In terms of company size, nearly half of the respondents were from utilities with revenues of $500m or more; companies that spend above $5m a year on IT made up about 58% of all respondents.

In response to uncertain global economic conditions, most of the utilities took a conservative approach to IT spending in 2012. Around 43% of the respondents said their IT spending was flat in 2012; nearly 37% said it increased slightly. However, utilities have a more positive IT budget outlook for 2013. Nearly 60% of respondents said they plan to increase their IT budget slightly or significantly in 2013.

This positive outlook for 2013 creates opportunities for IT vendors, which should collaborate with utilities to provide new solutions tailored to their requirements.

Customer satisfaction is the most important factor in IT investment decisions

Increasing customer satisfaction and revenues were the two highest-rated IT investment strategies among utilities. More utilities are embracing a customer-centric business model to retain their customers, remain competitive, and meet regulatory requirements to improve the customer experience.

Utilities are increasingly using electricity consumption data from smart meters to develop customer-centric offerings. Most of the utilities surveyed believe that customer service and retention are the major industry challenges today. This is another area where IT vendors can focus and develop solutions that help utilities develop device offerings to increase customer satisfaction.

Data management requirements set to grow over the next five years

Many utilities are either deploying smart grids or are planning to do so in the future. Smart grids will help them address a number of current challenges including the integration of renewable energy, reduction of the gap between supply and demand, and fault detection. Our survey shows that nearly 90% of electricity utilities are currently involved in or planning a smart grid project. This will increase the volume of data to be managed by utilities. Nearly 39% of all respondents had data capacity requirements above 500TB in 2012, while around 61% expect their data capacity requirements to be above 500TB in 2017.

Two top-rated Big Data challenges that utilities currently face are scaling data center infrastructure and service-oriented architecture. However, cloud vendors should not get too excited: the utilities industry is very conservative and utility companies are unlikely to store this new data anywhere except on-premise. This attitude was reflected in the survey, where cloud and datamart consolidation were the lowest-rated Big Data challenges.

APPENDIX

Author

Surupa Mahto, Analyst, Energy & Sustainability Technology

surupa.mahto@ovum.com

Further reading

Business Trends: Utility Technology Investment Strategies, IT002-000251 (January 2013)

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