Best Practices

SAP for Utilities

The State of the Utilities Industry

The State of the Utilities Industry 1

An Update from ASUG

When we first fielded our survey of SAP utilities customers in January 2020, we had no idea how much business would radically change within just a few months.

We still believe there are many useful insights in this report, though we acknowledge that utilities companies will need to make difficult choices about where to focus their plans for the remainder of the year.

A Pulse on SAP Utilities CustomersSince March 20, 2020, we have been running a weekly ASUG Pulse Check to find out how ASUG members are adapting to new work and business practices in the days of COVID-19.

The insights we’ve learned from this survey are qualitative and represent only a small portion of SAP utilities customers, but we wanted to share some of these latest observations from your peers. One respondent captured the spirit of quite a few responses: “We are tightening budgets while reducing operating and maintenance costs where feasible.” Respondents say their companies are re-evaluating current and future technology projects, though they’re not canceling them yet. So far, the majority (73%) are postponing just a few planned technology initiatives, 13% aren’t postponing any, and 7% are postponing most initiatives.

Support for Shifting PrioritiesWe firmly believe that getting the most from your SAP investment is more critical now than ever. And we are here to help you navigate those decisions as you provide essential services to your customers.

We will continue to share useful SAP customer research and connect you with stories from other customers because we believe joining together is the best way to get through unimaginable challenges like the one we’re facing today.

Best,

Ann Marie Gray VP, Content Strategy and Research, ASUG

73%of SAP utilities customers are

postponing a few planned technology initiatives as of

March 27, 2020

27+73

The State of the Utilities Industry 2

Executive Summary

The utilities industry faces increasing pressure to meet expectations for digital interactions and customer service, especially now that customers are able to choose their energy providers. Traditional utility companies are going head-to-head with upstarts, particularly in the renewable energy sector. As a result, they need to deliver a better experience to attract and retain customers.

Help Wanted with New SkillsBut to make these changes, SAP utilities customers know they need to implement new technologies to accomplish more with fewer resources, both human and financial. And these new technologies require employees with up-to-date skill sets. Participants in this year’s research indicated they are concerned about workforce shortages as a result of retirement and skill-set mismatches among their remaining employees.

Key Differences for SAP Utilities CustomersOur research found that SAP utilities customers differ from other customer segments in three ways. First, moving to digital processes is a bigger undertaking because of the steps involved, including modernizing grids and updating infrastructure. Human and financial resource constraints amplify this challenge.

Second, utilities face unique safety risks due to natural or man-made disasters, which threaten their survival. And finally, utilities recognize that maintaining cybersecurity is even more critical that it is for less-essential industries. SAP utilities customers are asking for centralized solutions they can use to keep customer data safe and prevent potential public safety issues.

Trends

Pressures

Applying technology to digitally transform work

The rapid pace of technology changes

Upgrading the customer experience

Change management to adapt to new technology

Moving toward alternative energy sources

A lack of integrated solutions

Figure 1: Where SAP Utilities Customers Need the Most Help

32+20+20+1732%

Optimizing current technology products

17%Exploring new technologies

20%Training and

onboarding employees to use SAP products

20%Integrating current

technologies

Source: ASUG research, January 2020

The State of the Utilities Industry 3

Key Technology Topics

Applying Technology to Digitally Transform WorkThis year, participants highlighted the value of using technology to reinvent their work environments, especially when it comes to sharing knowledge. As one participant wrote, “trying to break down information and work silos using technology” is key to helping distribute information across organizations, especially those with large populations of retiring workers.

Using digital technology is a continued theme from last year’s study, where turning to analytics and reporting to drive business decisions was a top trend. In 2020, technologies of interest have expanded to include automation, cloud-based solutions, artificial intelligence (AI), and the Internet of Things (IoT).

High-risk, externally driven situations are driving SAP utilities customers to focus on making smart technology work for them. They need to mitigate damage from natural or man-made disasters while also dealing with aging infrastructure. “Making the grid smarter and more efficient with smart technology” is what one participant hopes for. According to Deloitte1, when power and utility executives were asked to indicate priorities for their business in the next three to five years, the top priority (56%) was to implement a holistic digital initiative to drive overall productivity/profitability.

“ We are looking to use artificial intelligence (AI) to predict leaks.”

– SAP utilities customer42%cited emerging technology as

the biggest industry trend

58+42

1 Deloitte, April 9, 2020. “Digital transformation and the utility of the future.”

The State of the Utilities Industry 4

Upgrading the Customer Experience Participants emphasized the importance of improving the customer experience. This is a continued theme from last year’s study, in which managing multichannel customer interactions appeared as a top trend. This year, we see that enhancing the customer experience includes giving them a choice of their preferred method of service, as well as offering more self-service tools and digitally transforming various touchpoints. One participant’s company is considering using “robotics to interact with customers as customer service representatives,” referring to conversational user interfaces, also known as chatbots.

As they aim to provide seamless service and limit customer churn, utilities are moving toward a digital-first approach to go beyond satisfying customers with what they expect and delighting them instead. Participants indicated that they were focusing on “digital transformation of customer engagement.” This could mean offering customers more mobile, self-service options or providing real-time information on utility usage for to help them consume resources more strategically. According to Cognizant2, to offer truly customer-centric service, utility providers must first track customer preferences. 34%

of participants rate enhancing the customer experience as extremely

important to their job

66+34“ There is an increased push to give customers more tools to manage their consumption.”

– SAP utilities customer

2 Cognizant, June 2019. “Enhancing the Utility Customer Experience: A Digital Framework.”

The State of the Utilities Industry 5

10%Fewer than

of participants are satisfied with utilities event coverage on how to

manage new energy sources

90+10Moving Toward Alternative Energy Sources Today’s SAP utilities customers are pulled in various directions. They must field consumer demands for cleaner and renewable energy sources and strive for excellent customer service, all while preparing for and executing transitions to digital business. As vehicle electrification, sustainability, and solar energy continue to grow, consumers are demanding that the utilities industry provide clean, alternative energy solutions. “Sustainability, renewables, solar, reducing environmental impact, and carbon neutrality are all on our radar,” according to one respondent.

Some utilities view the shift toward sustainable energy as an opportunity and are developing mission statements related to energy management. According to the Smart Electric Power Alliance (SEPA)3, approximately 50 utilities companies in the U.S. have committed to significant carbon reduction goals. And, according to the Deloitte 2020 Power and Utilities Industry Outlook4, many utilities will continue to invest in charging infrastructure and plans to manage electric vehicle (EV) load in areas of high adoption.

“ We are looking to generate power in a clean, sustainable, and environmentally friendly manner.”

– SAP utilities customer

3 Smart Electric Power Alliance (SEPA), “Utility Carbon Reduction Tracker.”

4 Deloitte, Nov. 2019. “2020 Power and Utilities Industry Outlook.”

The State of the Utilities Industry 6

Major Pressures

The Rapid Pace of Technology ChangesConsistent with last year’s findings, SAP utilities customers are worried about keeping pace with changes in technology and business. Lacking the resources needed to transition to new technology adds to this pressure, just as it did last year. Participants pointed out that even government regulations of the industry can’t keep up with all the changes. This is likely why utilities need the most help with product optimization (32%) and employee training. There are “thousands of tools and technologies to learn,” another observed.

Meanwhile, some customers are rushing to keep pace with common technologies. At 64%, most participants expect data analytics and dashboards to significantly affect their jobs within the next 12 months, followed by IoT at 30%. Newer technologies such as blockchain and digital twins are expected to have little impact on day-to-day work at utilities within the next year, with 76% predicting no impact at all.

Yet there are newer technologies utilities customers are planning to adopt. At 30%, the largest share said road-map planning for a migration to SAP S/4HANA was the most important technology project they will work on during the next two years. In the past six months, 12% of utilities either went live on SAP S/4HANA or have been live for longer than six months. Participants in our research are eager to hear customer stories on SAP S/4HANA and business cases to learn from the companies that have gone before them. “I would like to hear from any regulated utility that has successfully migrated to SAP S/4HANA,” one participant wrote. A move to an advanced ERP system could put SAP utilities customers in a better position to adopt innovations more quickly than before.

“ The public sees technology advertised and thinks that we have the money or magic wand to deploy it or engage in it.”

– SAP utilities customer

79%of participants are planning

to move or are already moving to SAP S/4HANA

21+79

The State of the Utilities Industry 7

Change Management to Adapt to New TechnologyWhen technological advancements combine with training gaps, the result is a bigger hurdle for participants who need to modernize their work environments, customer-facing systems, and operations. SAP utilities customers identified training and onboarding employees as a top concern, at 20%. “Our technology is too complex and not user friendly,” one participant explained.

Utilities also need more guidance on training and onboarding as they upskill their workforce. Many employees are looking to the internet for information, perhaps because they are not finding these resources within their organizations.

Meanwhile, participants note that knowledge is leaving the building along with their aging and retiring workforce. About 20% of participants said that workforce management (including retirement shortages and skill-set challenges) is a critical factor to their job and important to their satisfaction.

A Lack of Integrated SolutionsAs digital transformation projects advance, siloed technology systems force SAP utilities customers to halt their progress. Data from third-party sources adds to this complexity. “We’re trying to get our various technology tools to talk to each other,” one respondent explained.

Integrating mobile technology will be key to keeping systems connected. Although 57% of participants use mobile technology in the field, only 7% of participants consider empowering their workforce with mobile tools a relevant topic to the utilities industry in the next 12 months.

But adding new tools, integrations, and endpoints isn’t necessarily a good solution if it adds vulnerabilities. SAP utilities customers know they need centralized solutions for cybersecurity that will allow them to “secure all the integration points from outside cyberattacks,” as one respondent said.

“ We need to make these technologies easy enough to use that non-tech-savvy users can adopt the solutions.”

– SAP utilities customer 50%of SAP utilities customers are relying on online searches to find industry-specific information to do their jobs

50+50

The State of the Utilities Industry 8

The Secrets Behind Satisfaction

Critical Factors for SatisfactionWe looked at key factors that are important to utilities customers and evaluated how strongly they correlate to satisfaction with available information. The critical factors that respondents told us are both important and drive satisfaction are migrating to SAP S/4HANA and optimizing field operations, which are the same as last year’s findings.

Hidden Motivators Driving SatisfactionRespondents didn’t initially identify these factors as critical, but our results indicate they move the needle on satisfaction. This year, these hidden motivators are workforce management to mitigate retirement shortages and skill-set challenges; environmental regulations; managing new energy sources; and expansion into new products and revenue streams.

Workforce management has evolved from a minimum expectation in last year’s study to a hidden motivator—which could relate to change management arising as a pressure for this year’s participants. Environmental regulations came up as a motivator last year. Managing new energy sources is part of this year’s trends, and it’s also connected to the need to expand into new products/revenue streams while providing customers with more options.

Bare-Minimum Expectations

SAP customers in the utilities industry identified two factors that don’t move the needle on satisfaction but are part of their requirements: access to data/data management and enhanced customer experience. Access to data/data management will be required to integrate systems (identified as a pressure), as well as to drive analytics and dashboards (identified as a trend). Enhancing the customer experience is now a basic requirement for utilities companies to succeed.

Critical Factors

Hidden Motivators

Importance Satisfaction

Importance Satisfaction

Workforce management (retirement shortages and skill-set challenges)

Environmental regulations

Managing new energy sources

Expansion into new products/revenue streams

Migrating to SAP S/4HANA

Optimizing field operations

The State of the Utilities Industry 9

Products of Interest

This year’s study revealed that all SAP utilities customers are aware of SAP S/4HANA, and 62% are considering using it in the future. Last year, 5% of utilities were not aware of SAP S/4HANA.

As for other SAP products, software as a service products SAP Ariba (15%), SAP Fieldglass (9%), and SAP SuccessFactors (5%) all show an uptick in use. It’s worth noting the increase in SAP Fieldglass and strong representation of SAP SuccessFactors (49%) aligns with the retirement and workforce management pressures this year’s participants told us they are facing. Both products help better manage the existing workforce and fill in talent gaps. Additionally, 54% are using SAP Fiori, which underscores the desire for more analytics and reporting among SAP utilities customers.

While upgrading the customer experience is trending among those in the utilities industry, participants are not turning to SAP customer experience products such as Qualtrics or SAP C/4HANA today, as usage remains low (12% and 13%, respectively). SAP Cloud for Utilities use is currently low at 7%, but 51% of aware nonusers are considering it for the future. Predicted usage of SAP S/4HANA as the top product, followed by SAP Cloud for Utilities, is consistent with the offerings participants told us they want to learn more about.

SAP ECC SAP SuccessFactors

71+79+ 44+4920+3571%79%

SAP Ariba

20%35%

44% 49%

SAP S/4HANA

28% 26%

+15%

2019 2020

Source: ASUG research, January 2020

Figure 2: Key Products Used by SAP Customers in the Utilities Industry

#1#2

SAP S/4HANA is the product participants most want to learn about

is SAP Cloud for Utilities

The State of the Utilities Industry 10

Getting the Most from SAP Utilities Solutions

Based on our research, SAP utilities customers are asking for information on modernizing their work environments and customer experience, including help bringing alternative energy sources into their offering. They’re looking to keep up with rapidly advancing technology by incorporating the change management necessary for successful digital transformations. And they’re planning to integrate their technology solutions to provide a single source of truth and a secure operating environment.

At ASUG Best Practices: SAP for Utilities you’ll hear about these topics and more from your industry peers who have solved or are looking to solve similar challenges.

You’ll experience presenters such as Southern California Edison, National Grid, Duke Energy, Puget Sound Energy, American Water, City of Tacoma, and CenterPoint Energy as they discuss how they’re delivering mobile technology to the field, managing demand from electric vehicles, using AI to track water meters, elevating the customer experience with SAP HANA and SAP Fiori, and converting to SAP S/4HANA. We’ll address these industry trends through real-life customer case studies, interactive discussion sessions, demos, and SAP expert presentations. We connect you with the utilities customers who have the answers you’re looking for.

Join Us Oct. 18–20, 2020 San Diego

The trends that surfaced from this study will inform the agenda for ASUG Best Practices: SAP for Utilities, where thought leaders and industry experts will share their insights and experiences to help you get the most out of your SAP investment. Join us Oct. 18–20, 2020, at the Manchester Grand Hyatt in San Diego, California, to connect with your peers and take new ideas back to your organization.

Visit the ASUG Best Practices: SAP for Utilities website to find updates on speakers, keynotes, pre-conference training sessions, and more.

sapforutilitiesconf.com katie.walker@asug.com 914.509.5354

Best PracticesSAP for Utilities

About ASUG Research ASUG research captures a unique view of what SAP customers are thinking, doing, and planning for their road maps. We apply traditional quantitative and qualitative methodologies and research best practices to deliver insights on relevant technology topics. The information in this report came from a quantitative survey of SAP customers in the utilities industry conducted in January 2020.

© 2020. ASUG. All rights reserved. All SAP products are the trademarks or registered trademarks of SAP SE in Germany and in several other countries.

64%Electric

24%Renewables

11%Communications

(telecom, internet, cable, etc.)

24%Waste services

29%Gas

34%Water

Source: ASUG research, January 2020. Numbers exceed 100% because participants represent organizations operating in multiple segments.

Figure 3: Participants Represent These Segments