Utility companies are going headfirst into a whirlwind of challenges from increasing electricity demands and new sustainability initiatives, to meeting evolving customer expectations. Power demand in the U.S. is on a sharp upward trajectory, with the U.S. Energy Information Administration (EIA) having forecast a new peak of 4.099 trillion kWh in 2024, climbing further to 4.128 trillion kWh in 2025. Utility companies have responded with three straight years of rate hikes, spurred by inflationary pressures and rising capital expenditures, particularly for grid modernization and energy infrastructure. For consumers, this has meant shouldering the weight of escalating energy costs.
COMMENTARY
The rate increases raise red flags about the financial challenges faced by utility companies as they adapt to changing energy demands, environmental regulations, the economic landscape and customer expectations. They also face significant headwinds in information technology (IT), including vendor-required upgrades resulting in unnecessary diverting of their attention and resources from their true business goals and important strategic initiatives.
The question remains: Can companies navigate these pressures, maintain service quality and continue critical investments to support operational needs and digital transformation?
I’m here to tell you—there are options.
Not Knowing the Difference Between Mission-Critical vs. Strategic Can Cost You Big—in Both Money and Time
Utility companies are increasingly recognizing the need to strategically assess their IT investments to ensure they are allocating resources where they will deliver the most value. This assessment begins with a deep analysis of IT systems to determine mission-critical vs strategic. The distinction is pivotal for shaping effective software roadmaps and ensuring resources are directed toward systems that yield value and maximize return on investment (ROI).
Mission-critical applications like human resources (HR), finance and payroll are essential for running core business operations but don’t provide a competitive edge. In contrast, strategic systems drive differentiation and innovation.
“Mandatory” upgrades to maintain full support and big migrations imposed by vendors could lead utilities to waste resources on expensive activities that deliver little to no competitive advantage. This shift in funding detracts from crucial investments in sustainability, grid modernization, cybersecurity and enhancements in customer service, further straining budgets.
Financial pressures are currently at an all-time high, meaning utility CIOs and CFOs now must consider whether reinvestment in mission-critical enterprise software provides the strategic value necessary to justify budget reallocation.
Believing that mission-critical systems are the core of your strategy, as vendors would like to have you believe, can lead to delay in innovation while draining your pockets and time.
Break Free of Vendor Roadmaps if You Want to Achieve Efficiency, Profitability and Growth
Software vendors like SAP, VMware and Oracle often impose arbitrary deadlines that can force companies to make tough decisions without a clear ROI, such as paying for extended support or migrating systems. For example, SAP’s planned end of mainstream maintenance for ECC6 software, EHP 6-8 in 2027 (or 2025 for EHP 0-5) and specific versions of ECC and S/4HANA in 2025, 2026 and 2027 imposes unwanted pressures such as going through the long, potentially disruptive exercise of reimplementing these systems or paying SAP an additional fee for extended or customer-specific support that may not fit with a company’s budget or compliance objectives.
One example of an alternative option is, instead of automatically moving to vendor-imposed timelines, utility companies could consider third-party support as a method of maintaining existing enterprise software. Third-party providers can not only help extend the lifespan of assets, allowing companies to avoid expensive system reimplementation, but can also improve profit margins through more efficient utilization of current investments. The financial savings realized from leveraging third-party software support can be strategically reinvested to accelerate innovation and growth or improve profitability.
Staff members who were previously occupied with maintenance and support can be reassigned to more value-added projects. Redeploying these team members to initiatives that better leverage their expertise, companies can create a more effective team that drives greater efficiency and ability to focus on strategic initiatives across the organization.
And if upgrading is eventually desired, it would be based on the company’s timing and ROI assessment—not the vendor’s. This approach help minimize operational expenses and elongates the life of existing systems. Companies avoid costly disruptions while re-deploying the savings to fund innovative projects that more effectively optimize their asset utilization, improve process efficiencies, and develop a distinct competitive advantage.
Utility companies also no longer need to be held back by the vendor, missing out on the newest AI-powered tools that best fit their business needs. By gaining flexibility, they can “innovate around the edges” of their mission-critical applications with composable ERP. This can allow utilities to accelerate the timeline to bring AI and other exciting capabilities and features to the organization instead of being limited to whatever the software vendors have to offer. Such an approach serves up a much more business-driven IT roadmap and avoids the trap of vendor-imposed upgrades that tie companies to unjustified constraints on resources and budget.
Say Goodbye to Mandates, Say Hello to More Innovation
It is possible for utility companies to set themselves free from vendors’ draining enterprise software constraints and avoid unnecessary spending, while investing more in value-driven investments. Third-party support can help lower operational costs with better SLAs, more comprehensive services and additional savings for investment in sustainability initiatives or improvements in customer experiences.
With so much at stake each day, isn’t it time you break free of mandates and set on a path to innovation on your own terms and timeline?
—Coy Wright is an accomplished global information technology executive with more than 30 years of leadership success in energy-related businesses. He currently serves as VP, Energy, Utilities & Resources Industry Solutions at Rimini Street.
