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16/12/2014

The CIO to pave the way to Utility 2.0

Over the past decades the importance of information and the role of IT within organisations has exponentially increased. The "utility" CIO specifically faces challenges from a meter data perspective. In this article, Sia Partners focuses on the role of information management and explains its brand new CIO advisory offering.

 

A historic note

The CIO has been introduced in the mid-80s in the US, when chief executives of major companies increasingly invited IT leaders to sit at the table with other C-suite executives. In those days the role of Electronic Data Processing at large corporates gradually turned into a key component for business strategy.

This increasing sense of urgency to involve the IT-leaders at board level led to the introduction of the role of the CIO. The definition of CIO responsibilities was easily defined in those days: the CIO should be able to translate business strategy and business requirements into IT Strategy and IT related domains.

Since the mid-80s an enormous amount of developments both in business and IT have taken place. This resulted in a change of the role of the CIO. The new role included a stronger alignment with the business and a focus on challenging the business leaders.

In this article we would like to reflect on the role of the CIO, in specific of its role within an energy company. Also we would like to introduce areas of contribution from Sia Partners, since per November 1st we have introduced our CIO Advisory Services offering.

Current challenges of the CIO

Figure 1: Current areas of interest for the CIO

Source: Sia Partners

The CIO does no longer have to explain what his role in the company is. The business represented by the CEO and the COO, being his most important client internally, is well aware of his role. The (IT-related) services he provides to his internal business client should result in an improved performance of the company as a whole. In other words, his ability to understand the business strategy and the management needs, and the ability to translate them into the IT roadmap with a clear delivery strategy is and remains the main performance criterion of the CIO.

The I from CIO is sometimes mistaken for Innovation. Innovation is one of his important areas to cover, and then in specific IT innovations. Past decade CIOs have seen an increasing use of smart devices related to the internet, emergence of the Internet of Things (IoT), cloud computing, etc. The CIO should be able to translate those innovations for his specific business sector into useful IT solutions.

Another important role deals with managing the costs for IT (OPEX/CAPEX). Should we insource or outsource, for hardware, software or even for IT services? New terms related to this cost component of the role of a CIO are Software, Infrastructure and Platform as a Service (SaaS, IaaS, PaaS), Software Asset management, lean-IT and IT factory performance.

With regard to project portfolio management, it is mandatory for the CIO to prioritize and select the projects that contribute most to the business, besides those required for compliancy reasons. Portfolio Management seems to be already introduced in most of the companies. Closely related is the setup of a project management office and supply of the pool of Project- and Program managers that facilitate selected and to be executed Projects or Programs.

The CIO in the Energy sector

The specific challenges for the Utilities are abundant. Where utilities over the past decades have created an enormous amount of legacy applications and hardware platforms, rationalisation is on the agenda now in order to reduce maintenance costs. Virtualisation of datacentres and improved management of software licenses also contribute to reduce IT operating costs. The real challenge and also an opportunity for the utility is found on the customer side. Customers will appreciate new services related to energy efficiency combined with insight in their own energy consumption, especially when compared to peer customers. This is related to smart timing of consumption of power and gas, where devices are activated once the price for energy is advantageous ('demand response'), and services for customers that generate energy themselves.

The Utility 2.0 should become more agile. Ensure to be customer driven is our advice. There is a clear sense of urgency which makes the role of the CIO more important. Meter Data Management as a core competence should be an area to outperform competition. By assessing client data, analysing it and acting in the form of delivering adequate products and services, customer loyalty could be ensured, profit margins retained and possibly an increase in market share could be gained. Since meter data management and all the IT enabling technologies around this topic are primary concerns to the CIO, the sense of urgency is explained.

Technology can enable this agility required and only the smart CIO led teams that are able to make excellent use of technology will benefit from the opportunities. The advent of smart meters in households could become the game-changer in the Retail market. New market-players could benefit from this technology disruption in households in such way that incumbent utilities that cannot make the change to Utility 2.0 will lose ground.

CIO Advisory Services from Sia Partners

Our CIO Advisory services consist of the following elements which are on the agenda of the CIO:

  • IT Project and Program Management
  • Project Portfolio Management
  • IT Innovation & Digital
  • IT costs management (Software Asset Management)
  • Performance & IT security
  • IT HR Management
  • IT strategy & IT application landscape
  • Governance of an IT department

In all of these areas of responsibility for the CIO, Sia Partners has an approach to contribute him/her with highly qualified resources, equipped with supporting tools and methodologies.

Sia Partners has on board several ex CIO's from various industries including Automotive, Banking and Energy. They are able to align with the CIO on specific issues and can help develop a roadmap to come from current state to an improved state (To Be) on abovementioned areas.

Our approach is to have a short assessment together with a CIO to confirm the main areas of attention. As a next step a presentation on contribution areas can be delivered together with a business case.

Closing remarks

Currently, the energy sector has various important challenges to overcome and IT is definitely becoming increasingly important. The most important challenges are found in the areas of governance, IT security, and in the area of smart meter data management.

The objective to bring down costs of hardware and software brings increased focus on Outsourcing of several tasks like maintenance. The Internet of things and other innovations that can change business models for utilities may not be overlooked.

Services in the area of energy savings, in the area of renewable energy generation - increasingly using smart (monitoring) devices to improve performance.

We believe that with a combination of competencies in the area of IT, combined with in-depth knowledge of the developments in the Energy industry, CIOs can make a difference for their company and help turn them to the next wave, Utility 2.0.

Over the past years it has become clear that in particular DSOs have taken the initiatives to drive and pilot for this next step to become Utility 2.0 and focus on IT innovations, whereas energy suppliers suffered from decreasing margins due to price reductions and unutilised power plants. The suppliers lag behind and CIOs definitely have work to do to bring them back on the roadmap for the next generation Utility.

With the large scale roll out of the smart meter around the corner - a significant disruption in the normal daily operations for both energy suppliers as well as DSOs - the data management challenge will increase even more. The next wave Utility will definitely be an information analytics and information sharing company. It will be an important role for the CIO to help the business drive towards this playground where the future battle with competition will take place. CIO to become the new CEO.

Sia Partners

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