New report provides guidance to utilities, regulators and vendors
evaluating the treatment of IT investments
In a new report, IDC
Energy Insights addresses the utility industry's software capex vs
opex issue head-on with a financial model to highlight the quantitative
as well as the qualitative nuances around this issue. The utility
industry's practice of providing a rate of return on capitalized
investments provides a disincentive for the industry to invest in cloud
solutions. IDC Energy Insights provides a financial model to demonstrate
the capex versus opex effects of typical customer information systems
(CIS) for a utility with one million customers, deployed as a
software-as-a-service versus on premise. The new report, Business
Strategy: Making the Case for SaaS in Utilities (Doc #EI258590),
complements report Perspective:
Cloud and the Capex Conundrum in the Utility Industry (Doc
#EI251305) and explores the issues raised in the previous report in much
deeper detail.
ClicktoTweet:
#IDCEnergyInsights provides guidance to #utilities, #regulators and
vendors evaluating treatment of #IT investments
Among industries adopting the SaaS deployment model, the utility
industry has been among the slowest. IDC Energy Insights warns that
utilities and utility CIOs should not let what should be a technical
decision turn into a capex/opex allocation funding decision. In an
effort to highlight the issues in the utility industry, IDC Energy
Insights takes the example of one of the most difficult system
implementations that a utility can undertake — a customer information
system (CIS) — to compare on-premise deployments with SaaS. As a result,
the total cost of ownership (TCO) reveals some interesting insights for
the capex/opex model in the utility industry.
Major findings from this report include:
-
A financial analysis of the TCO comparing on premise with SaaS for the
second most complex business application at a utility shows that cloud
has a substantial advantage over on premise at the right subscription
price.
-
The hard-to-quantify benefits of SaaS (strategic agility, better use
of resources and user adoption, continuous updates, and quicker time
to value) will sway decision making in favor of the cloud.
According to IDC Energy Insights, IT vendors are putting their best
development efforts and intelligence into cloud-based offerings.
Increasingly, these offerings are coming with pre-integration to other
cloud-based offerings. In the next five years, the utility industry will
be faced with fewer and fewer attractive alternatives in on-premise
offerings.
"Today's technology advancements are being developed in cloud
applications first, and not necessarily in on-premise applications,"
said Jill
Feblowitz, Vice President, IDC Energy Insights. "At a time when
utilities need to evaluate and adopt current and emerging technologies
more aggressively, regulators, shareholders, stakeholders, and
ratepayers need to take a closer look at the true economic impact of the
traditional capex/opex model to determine whether the numbers, in fact,
make sense for all parties."
After careful evaluation, IDC Energy Insights found the decision to
adopt the SaaS deployment model is not as simple as whether the cost gap
between the SaaS solution and the on-premise version is greater than the
rate of return that could be earned on the capitalization of the
on-premise solution. The technical and financial merits of the SaaS
model have been clearly demonstrated across industries. In the utility
industry, however, there are nuances and complexities to the SaaS versus
on-premise discussion. Utilities are waiting for the regulators to
clarify. Regulators are waiting for utilities to make the business case.
IDC recommends all parties need to take a more assertive approach to
accommodating the innovation inherent in the cloud model for long-term
success.
For additional information about this report or to arrange a one-on-one
briefing with Jill Feblowitz, please contact Sarah Murray at
781-378-2674 or sarah@attunecommunications.com.
Reports are available to qualified members of the media. For information
on purchasing reports, contact insights@idc.com;
reporters should email sarah@attunecommunications.com.
About IDC Energy Insights
IDC Energy Insights assists energy businesses and IT leaders, as well as
the suppliers who serve them, in making more effective technology
decisions by providing accurate, timely, and insightful fact-based
research and consulting services. Staffed by senior analysts with
decades of industry experience, our global research analyzes and advises
on business and technology issues facing the utility and oil and gas
industries. International Data Corporation (IDC)
is the premier global provider of market intelligence, advisory
services, and events for the information technology market. IDC is a
subsidiary of IDG,
the world’s leading technology, media, research, and events company. For
more information, please visit www.idc.com/energy,
email info@idc-ei.com, or call
508-935-4400. Visit the IDC Energy Insights Community at http://idc-community.com/energy.
View source version on businesswire.com: http://www.businesswire.com/news/home/20150921005862/en/
Copyright Business Wire 2015
