Why you should care
Let’s start with why you should care. The traditional utility business model is being turned upside down.
In countries around the world, electricity demand is flat or falling. The decades-old linkage between economic growth and electricity demand growth is beginning to decouple. Utilities’ margins are being squeezed by energy efficiency improvements , behind the meter generation and the relentless rise of renewable energy. Regulated utilities are facing increased scrutiny on capital expenditure.
Consumers expect more. The Utilities industry ranks 2nd worst for customer experience, has a consumer distrust problem and is listed at the bottom for reputation.
And consumers can have more. As electric vehicles transition from niche to mainstream, consumers will find themselves in possession of a battery capable of powering their homes for days on a single charge. They will be able to share energy with their neighbours and help stabilise the grid through participation in demand response programs or virtual power plants.
New entrants are already taking market share from the established players. The volume-based approach to revenue generation is out of date. Utilities need to offer end-to-end energy products and services bundled according to individual customer’s specific needs. They need to be able to rapidly define and develop new product offerings and bring them to market quickly. And they need to radically improve customer service.
OK, I care now, but what is SAP Cloud for Utilities?
SAP Cloud for Utilities is a next generation SaaS solution enabling the end-to-end lead-to-cash processes for multiservice utilities. It aims to help digital utilities capture new opportunities and develop innovative new business models in the rapidly evolving market for utilities products and services
A key part of the SAP Cloud for Utilities vision is to accelerate the time to market for any kind of product, including new energy products, physical products, complementary services and multiservice bundles.
The idea is to build a universal product innovation engine for the utilities of tomorrow.
The graphic below illustrates the scope of SAP Cloud for Utilities.
Utilities generally have little or no experience of fulfillment processes for non-energy products, so an important part of this scope is the integrated service fulfillment. Future utilities will need to be able to efficiently orchestrate the execution of their offerings, which may include third party offerings the utility sells on the behalf of others, as well as offerings that others sell on behalf of the utility.
SAP Cloud for Utilities has a strategic focus on utilities as agile, customer-centric, multi-service providers of commodity and non-commodity products and services. It aims to help these utilities reduce their cost to serve, bring innovative new products to market quickly and increase revenues and profitability.
Being a public cloud solution, SAP Cloud for Utilities enables fast implementation times, the lowest operational costs and immediate and ongoing access to technical and process innovations. It contains predefined standard business processes based on SAP’s 20+ years’ experience of industry best practices. It also has machine learning built into core business processes, leading to a high degree of automation.
SAP Cloud for Utilities is the largest investment SAP has made in Utilities since the launch of SAP IS-U in 1998.
SAP Cloud for Utilities consists of individual cloud solutions combined into a suite for a seamless end-to-end experience. This modular approach has two main advantages:
- It allows a step-by-step transition for existing SAP IS-U customers who may not be ready to move everything to the public cloud just yet. Standard integration means these customers using a “hybrid architecture” will still benefit from end-to-end processes.
- It means solutions can be consumed independently if a utility is only looking for particular functionality, such as Meter Data Management.
So, while SAP is bringing the cloud solutions together, customers will still be able to buy and run them separately.
Co-innovation with customers
SAP recognises the importance of customer input when it comes to defining the future business needs of utilities. For this reason, SAP Cloud for Utilities is being developed through co-innovation with utility customers.
It is a solution for SAP’s customers, being developed together with them.
The co-innovation group is open to all utilities and currently consists of 19 leading global utilities serving more than 100 million customers. This group works collaboratively to share experiences and help define the scope of the new solution. Participating utilities benefit by being able to influence the direction of the product to match their future ambitions.
SAP has also partnered with Accenture to co-develop the solution, combining the global know-how and execution power of two market-leading solution providers for Utilities.
What is available now?
The idea is that SAP Cloud for Utilities can be consumed end-to-end in the public cloud or in a modular way using the standard integration to SAP S/4HANA for Utilities.
Most parts of SAP Cloud for Utilities are already in place and can be integrated to existing SAP for Utilities systems. For example, a utility could use the cloud solutions for product definition, selling, marketing and customer service, while continuing to use SAP S/4HANA for Utilities (SAP IS-U) for the meter-to-cash process and market interactions. SAP Cloud for Utilities already supports the complete lead-to-cash process for non-commodity services today, which could be used to complement existing SAP for Utilities systems.
By the end of 2020, SAP is planning to complete the integration of the hybrid architecture, offering the whole lead-to-cash process as a service. This architecture would still use SAP S/4HANA Utilities as the backend for the commodity business, supported by seamlessly integrated native cloud components for customer engagement, commerce and market compliance operated by SAP.
That hybrid architecture would look like this, with standard integration between all the components:
Hybrid architecture - end 2020
Cloud only architecture - end 2021
So, what are we working on?
- Integration between individual components to enable full end to end processes between cloud components as well as S/4HANA Utilities on premise.
- Cloud billing, starting with basic subscriptions then progressing to more complex scenarios such as estimation, proration and budget billing.
- Bundling commodity and non-commodity products and services
- Complex orchestration of service and physical goods fulfilment
- Automated marketing campaigns, including price change, bill shock, supply switch and cross/up-sell.
- Innovative self-service, including smart home integration
This is just a selection, for full road map details feel free to get in touch.
Some frequently asked questions
Is this the end of the line for SAP IS-U? No. SAP will continue to invest and extend the functional scope of the on-premise solution (aka SAP S/4HANA for Utilities). SAP’s vision is to allow customers to mix and match components of the cloud and on-premise solutions and so SAP IS-U will continue to have an important role in that future vision. SAP is currently running a Customer Connection project whereby customers can suggest improvements they’d like to see in the SAP S/4HANA for Utilities solution. Finally, SAP recently announced an extension to support for SAP S/4HANA until 2040.
Is SAP Cloud for Utilities a replacement for SAP IS-U? No. The functional scope of SAP IS-U and SAP Cloud for Utilities will differ. SAP IS-U was built for the traditional commodity, consumption-based business model and supports a large variety of options for many processes. SAP Cloud for Utilities is specifically designed for multi-service offerings and, as a SaaS solution, will focus on leaner processes.
I was considering moving my SAP IS-U system to S/4HANA. Should I just move to Cloud for Utilities instead? This depends on your propensity to move to a full SaaS solution. For many utilities that isn’t an option yet, or a hybrid architecture might be more suitable, such as the one mentioned above that is already available today. SAP has produced the following spider diagram as a guide and will work with customers to help them choose the best path forward.
Do I have to buy all the clouds? No. A key idea behind SAP Cloud for utilities is that Customers will be able to mix and match, picking the cloud solutions they would like and integrating to SAP S/4HANA to provide the remaining functionality.
Is SAP Cloud for Utilities available now? Yes, the first hybrid architectures are already available. See the section above on “What is available now?”
What is the difference between SAP Cloud for Utilities and SAP C/4HANA? SAP Cloud for Utilities leverages the SAP C/4HANA solutions to provide the customer experience functionality. SAP C/4HANA is an umbrella term for SAP’s Customer Experience solutions and consists of a number of cloud solutions, such as Commerce Cloud, Sales Cloud, Marketing Cloud and Service Cloud.
Can I join the co-innovation group? Yes. The co-innovation group is open to additional participants. If you are interested, please reach out to Henrik the Co-innovation group lead.
The wrap
As utilities transition into next generation multi-service providers they will need to develop and commercialise innovative new products and services quicker than ever before. SAP Cloud for Utilities is SAP’s next generation SaaS solution supporting fast product innovation and reduced ost-to-serve for the utilities of tomorrow.
If you would like to read more about SAP Cloud for Utilities, check out the SAP Community page. Would you like to get involved? Drop Henrik a line. Anything else? Feel free to reach out to me.
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