Energy: The commodity that is physically and metaphorically invisible, until we all got hit with the enormous price hikes, and now it’s what we see and hear about all the time.
And that’s how it feels for many. What’s worse, is that, as consumers, we don’t really have many options. Almost everyone will be impacted, many as a significantly high proportion of their income. There’s no apparent timeline either. Maybe it will last for the next year, maybe even as many as three years.
Pressure for energy providers is on the increase – reputationally and operationally, with the media really scrutinising the topic. The FT recently focused in on the lessons that the energy sector can learn from the banking crisis as they experience ‘similar demands for penance’. Price surges have caused some suppliers to go bust, leaving other suppliers with a heavy workload to pick up their customers. The workload increases further with the increasing number of people going into arrears on their bills. As of the end of April, USwitch reported that six million homes were in the red. Emotional and worrying times for consumers – challenging times for energy suppliers handling more inbound communications than ever and a mounting number of debt management cases.
However, through a business lens, for all intents and purposes, this presents a real opportunity. Consumers will unfortunately just have to live with it in the immediate term. But in the short-to-medium term (like with any such crisis), there will be some market disruption. In recent times, this has largely been led by technological change and the energy sector will be the same. Consumers will demand change and they’ll want to be in control of their own destiny. That is where we’ll see some real innovation in the energy industry.
But what challenges does that pose for the incumbents in the sector?
The simple answer is this: Monolithic organisations really struggle with transformation. On a technology footing, they’ll need to move from archaic, under-invested infrastructure to a more data-driven, real-time business model. On top of that, there will be new entrants and localised energy providers. These market disrupters will often be entrepreneurial tech start-ups that just happen to be providing energy solutions. Additionally, and probably more pressing for our younger and future generations, there will be a real focus on sustainability and the environment.
Cloud adoption for gas and electricity providers
With a market so exposed to change, there is a myriad of areas that can be discussed, as the topic is huge. So, for the purpose of this article, we wanted to focus on cloud adoption in the energy sector. The challenge of navigating the industry’s highly regulated legislative environment is also supported in an article by Accenture, where they comment that ‘with the perpetual volatility and disruption, energy companies must act now; thus making it a strategic imperative, but it comes with danger.
From other industries, we know cloud / SaaS adoption has been tricky. To realise its full potential, organisations will need to really focus on the wider landscape of the energy sector. The consumer is one stakeholder, but with many elements of the end-to-end service being equally monolithic, there will be some real operational challenges. These will be in the form of integration of business processes and systems, as well as the pace at which all parties can move.
The move to the cloud is run rate change for most organisations now, but at ROQ we often see similar failures across many industries. The lack of preparedness is often the biggest one. The lack of a defined data migration strategy and therefore a sensible validation of success is often seen and never ceases to amaze. The reliance and trust placed on the system integrator to be responsible for the successful migration of all the business ‘gold’ seem misplaced. Stephen Johnson, Director at ROQ comments “It’s like asking a stranger to take your child to its first day at school. Statistically, your child will likely make it, but you’ll be constantly worried until pick up time. Additionally, nearly everyone will judge you negatively, and you’ll instantly regret it.”
Despite this risky approach, you can’t underestimate that the migration of data is pivotal to the success of any cloud / SaaS adoption. It’s an area that often isn’t prioritised and sponsored at the right level within the programme. It is the treasure that will open the markets and the consumer engagement, so it’s an area that organisations should really have more focus on – fast. If you get it wrong, the loss of market penetration as well as creating a poor consumer experience instantly increases.
Security as a cloud adoption concern
There will also be a real focus on the security aspects of cloud adoption. This is due to the nature of the data sensitivity and the potential to enter the backbone of national infrastructure. In a recent report by Mondor Intelligence, the cloud security market was quoted as being set to grow by 11.2% CAGR over the next 4 years. This in many ways will be caused by the significant increase in the Internet of Things (IoT) and the interconnectivity across the cloud being the major exposures for so many organisations. As the adage goes, you are only as “secure” as your weakest link. In the same report, Cisco is quoted, from a research piece they carried out, that 73% of security professionals in the energy and utility sectors had experienced security breaches – significantly higher than any other industry (55%). With the current geopolitical environment in Russia, we must also consider the fact that there may be more to come.
Whilst at ROQ, we don’t get heavily involved in traditional security/penetration testing, we will often be consulted and actively encourage our clients to engage a ‘security-first’ mindset as early in the development lifecycle as possible. It needs to be architected in and integrated into solutions from the outset of the project. The risk is otherwise too great.
The right people for the challenge during a digital skills shortage
One of the other challenges that many organisations face, but one that is more applicable in an industry that is further behind technology-wise, is the availability of talent with skills in cloud technologies exacerbated when combined with seeking someone with the domain knowledge of the energy sector. In a survey by PWC on cloud adoption, 77% of CEOs were worried about the availability of key skills. And like many industries, the changes in IR35 rules, wage inflation (ironically caused by the cost of living -including fuel, utilities and energy consumables) and general lack of skills in the technology market will all compound to make an impact. At ROQ, we often support organisations in supporting the peaks of resource requirements, but they could also look for more sustainable approaches to employee development to provide more longevity in the solution, as we discuss in our recent article, Mind the UK’s Digital Skills Gap.
For the benefit of this article, we have purposefully kept it to one area of technology adoption – we genuinely believe it is a huge opportunity for the energy sector. The industry is increasingly being put under pressure to reduce costs, meet sustainability goals and become more consumer-centric, and the solutions are out there. The challenge will be to get there first, like any race, but we know getting it right the first time is generally the right way. It’s going to be tough, but it’s achievable if some of the fundamentals are adopted early.
If your business has started or is about to embark on its cloud adoption journey and is experiencing the talent gap to meet the requirement, we’d like to invite you to join our webinar on 30th June at 11 am. We’ll be discussing why, if digital transformation has created an unprecedented demand for technical skills, is there still a growing digital skills gap? Register here as we debate ways in which the digital skills gap challenge can be resolved by industry bodies, education establishments, the Government, and the technology industry at large.