UK utilities are set to invest over #1.6 billion in IT systems by 2002, up 43 per cent from this year?s expenditure, as they respond to mounting competitive pressures.
According to a new report from market researchers Datamonitor, utilities must place greater emphasis on the use of IT to support their business as they face complete deregulation of their markets, in what Neville Barnes of energy supplier Centrica described as ? the most significant and fundamental period of change that the utilities have ever faced?.
The task ahead is formidable, with utilities forced to create IT systems to support a market of multiple companies, in which domestic customers can change supplier every six months. This is an ?enormous challenge, the equivalent of creating a bank cheque clearing system from scratch,? said Kay Hand of the Electricity Association.
The electricity sector, which currently accounts for 43 per cent of the utilities? total IT spend, is likely to remain the biggest investor as it prepares for fully open competition next April. Hand stressed the need for flexibility as well as capacity in new systems, to cope with customer ?churn?.
The gas market, which has been operating competitively since April 1996, faces fresh challenges now as other energy companies, including the regional electricity operators, look to incorporate gas supply into their services.
Some operators are more advanced with their systems than others. Barnes claims that most of Centrica?s systems work has been completed, following a large scale programme that cost #150 million in 1996. It aims to compete in both the gas and electricity markets.
?Obviously there will be some ongoing work but the majority of thes systems are there, enabling us to move to our objective of becoming the UK?s number one energy supplier,? he added.
The report also highlighted the growing importance that utilities attach to customer care, estimating that over half of the combined IT spend in 1997 will be on systems control functions such as call centres and usage monitoring. Centrica, for one, has made ?significant investment? in call centres, with eight nationwide, and most electricity companies now have such centres, as the acquisition and retention of customers becomes a prime objective for the first time.
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