| Pouring on Value |
| Cover Story | |
| Written by Jill Rose | |
| Sunday, 30 November 2008 | |
 Utilities are seeing a flood of benefits from SAP implementations done right.  Of course, there are always lessons to be learned from these types of projects, and the executives we spoke with shared theirs to give our readers a leg up as they work to replace their legacy systems. Both Tacoma Public Utilities and Aquarion Company used Axon as the system integrator on their projects. Axon is a dedicated SAP services partner with offices in the US, UK, Canada, Malaysia, Singapore, China, India, and Australia. Todd Crandall, executive vice president of strategic verticals (aerospace, defense, utilities, logistics, and public sector), says the key to a successful implementation is looking at it as a way to improve business performance. “A lot of these projects are viewed as replacing the previous system. That’s what we don’t do. That’s setting up a project that’s destined for failure.” Crandall said it’s critical to talk about these projects as business transformations. “It’s probably the best opportunity you will have for decades to transform the way your business operates.” Complete overhaul That’s certainly true for the city of Tacoma, which used its utilities department’s failing system to overhaul much of how the city’s public works are run, according to Sue Daulton, the management analyst who oversaw the SAP installation on the utility side. In 2002, Tacoma Public Utilities (power, water, and rail) was using a green-screen system that had been in place, with various updates, since the 1970s. Because the language used to write the code was old, and most of the people who had worked on its development had retired, the utility board feared that if the system went down, it could be weeks before billing was restarted. “We decided it was too much of a risk to continue with that system,” said Daulton, who was involved with the project from the evaluation of vendors to managing the post-support group. Twenty-four vendors responded to the RFP, including outsourcers, ERP implementers, and best-of-breed vendors. Daulton said by the time the evaluation was complete, it was clear to all involved that SAP was the right choice, able to meet the city’s current needs and offering potential to support expanded functions. “Best-of-breed solutions didn’t have that potential,” she said. Axon was selected as the implementer because it offered a partnership in the form of a fixed-rate contract. “We had lots of good resources, lots of planning, good communication—all the things that make a project successful happened right from the beginning,” Daulton noted. “With the fixed-price contract, if milestones weren’t met, payments were not made, and we did come in on time and on budget.” The new system went live at the end of 2003, and utilities can now implement rate changes in a few days, a task that took six weeks to complete in the energy crisis of the late ’90s. New-customer work orders are created with a few key strokes at headquarters and sent to the in-vehicle tablet of a field worker; the resulting data is automatically updated to the customer’s account. “Before, people had to print out a paper form, hand it to a field person, and manually enter the data when the paperwork came back at the end of the day. There was lot of room for errors and lost paperwork. All that is gone,” said Daulton. Credit collections are also automated, leading to a reduction in office staff. About 10% of Tacoma residences have two-way meters (called AMI) that allow remote connects and disconnects, reducing field calls. “The ability to move in this direction happened because of SAP on the back end,” Daulton said. The SAP installation created many other opportunities: 1. Because more than 100 city systems were involved in the transition, including finance and HR/payroll, the city was able to locate functions where they made the most sense. For example, because dunning activities, past notices/late fees, and follow-up are all built into the utility billing system, animal licensing and all cash payments for the city are handled by that department. 2. Tacoma citizens’ information is contained in a single database accessed by all departments. Regardless of which department a customer calls to update his/her contact information, that change is made system-wide. This connectivity enables easy notation across departments if a customer writes a bad check; after two bad checks, that citizen cannot write checks to any city department for a certain period. 3. On the main utility Web site, customers can look at their bill online, opt to receive that bill electronically, pay the bill online, get a monthly quote for a budget bill, enroll in the budget program, ask for their garbage-can size to be changed, ask for a recycling bin to be dropped off, and request various move-in/move-out services. 4. A dedicated site for property managers is being tested, allowing these businesses to quickly manage move-ins/move-outs and their accountants to confirm that final bills are correct. “They’re self managing, and that’s reduced the phone calls to utilities for both changes of service and billing issues,” said Daulton. 5. Another site was built in conjunction with the association for escrow and title companies in the area. Instead of two full-time workers responsible for getting utility-bill closing estimates within the required three-day window, these companies get the information online at their convenience, and a single person works part time to help smaller companies with exceptions. 6. A pilot group of 300 pre-pay customers have an in-home display showing usage data and money left in their account. The group consists of both credit-risk individuals and those looking to reduce their consumption. These customers also have access to a Web site displaying their usage data in graphical form. Take it to the woodshed When Chuck Firlotte returned to the US after four years as a lead executive on an SAP implementation in the UK, he knew he would be heading up another such project, and he was armed with critical knowledge. “If that experience taught me anything, it was that (1) this is not an IT-driven project—it has to be driven by the business, and (2) you need to put your best and brightest on the project,” Firlotte said. He noted that the second point is not as simple as it sounds. “You’re taking key people from your business—you’re taking the people you can least afford to lose.” In 1999, Firlotte was working for Aquarion when it was acquired by British utility Kelda Group (water services for the Yorkshire area). He was tapped to help implement Kelda’s information system, and, once the project was complete, he returned as CEO to Connecticut-based Aquarion, a regulated water utility serving primarily Northeast states. “When I came back, I knew one of the major challenges was the information system,” he said. “What we had was, essentially, obsolete and held together with Band-Aids and twine. I knew I had to take it to the woodshed and shoot it.” Like the city of Tacoma, Firlotte and his team seized the opportunity to gain efficiencies. “We needed a new billing system and a new financial system. I could have bought two systems, installed them, and started pumping water, but I wanted an integrated approach that would involve financial, procurement, engineering, and customer service,” he explained. “I wanted to sustain the efficiencies I had already taken out [he cut staffing by 22% through an early retirement program]. I also wanted better customer service.” And that’s exactly what he got on completion of the one-year project: • Call center times to answer inquires improved by 50% • Time to resolve customer billing issues was reduced by 25% • Time to complete final customer bills was cut by 80% • Finance staff productivity rose 20% As in Tacoma, Aquarion’s field workforce uses a mobile application to communicate with the main office, creating many opportunities for efficiency (for example, performing a maintenance task in the area after completing a service call). Perhaps most importantly, the new system will allow the company to grow. “Prior to the implementation of this program, if we had acquired another company, we would not have been able to put it on the existing system,” said Firlotte, adding that the company is now owned by Macquarie Utilities and hoping to make a purchase in the New England area. Crandall said these types of results are always the goal for Axon. “It’s one thing for a utility CEO to say, ‘I’m going to get a 10% improvement in customer satisfaction, and that will give me 5% better retention in my customer base.’ That’s interesting, and those percentages may have helped you come up with a business case, but you need to know exactly how you’re going to accomplish that.” When Axon executives talk to teams looking to set out on projects like this, they ask how many have participated in a large IT implementation (usually all), how many of the projects were successful (not as many), and how they know. “They say it was successful because it was on time and on budget,” explained Crandall. “That’s a very constrained view of project success. We like to say our projects are on time, on budget, on value.” Indeed, Crandall says his goal is to be able to go back to the executive in charge of the engagement five years after the project and ask if it was successful. “And you want him to be able to say, ‘Absolutely. We got X% improvement on this, Y% improvement on that. Here are the benefits we look at on a daily basis that were the result of that project and our ability to improve those metrics on an ongoing basis.’” |
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