ANALYST INSIGHT

EDP Commercial and Industrial

Customer Billing: a Case Study
Despite its existing relationship with SAP, EDP selects Oracle
for its commercial billing
Reference Code: BFTC2595
Publication Date: July 2010
Author: Stuart Ravens

SUMMARY
Catalyst
Due to an historical lack of credible competition in the European marketplace, SAP has gained a
sizeable chunk of the utility billing space in the region. Its penetration of the sector is so high that
any significant win by a competitor becomes a talking point, particularly if the rival makes a deal
with a utility that is already running SAP. One such win was Oracles contract with Energias de
Portugal (EDP), under which the Portuguese utility now uses Oracles Customer Care and Billing
(CC&B) product to bill its commercial and industrial (C&I) customers. As the utility reaches the end
of its project to migrate five companies onto CC&B, it is timely to look at why EDP selected Oracle
and whether this heralds a new dynamic in the European utility billing market.

Ovum view
Oracles victory in Portugal was due to the CC&B modules technical superiority over SAP in two
specific areas: contract design and account management. Ovum believes that, due to the inherent
complexity and the increasing competition and product innovation in the C&I billing market, this
area will be where other vendors will compete against SAP in Europe. While opportunities exist,
however, SAP is not unaware of the threat posed by other vendors or the perceived technical
superiority of Oracles CC&B for C&I billing. Oracles recent wins are certainly not the beginning of
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the end for SAP, or even the end of the beginning, but there is now credible competition in the C&I
billing market for major European utilities. Ovum believes that this competition will spur further
product innovation to bridge the current technology gap, which can only be good news for utilities.

Key messages

Due to a number of factorsparticularly utilities conservatism and an historical lack of

credible competitionSAP has traditionally dominated the European utility billing
market.

Through acquisitions, Oracle has developed an end-to-end portfolio of utility-specific

business applications that it claims now eclipses SAPs. Oracles scale in Europe
brings a credible competitor to the market, which was absent before 2007.

Oracle has seen some successes on the continent, particularly in the area of C&I
billing and in Central and Eastern Europe (CEE).

Portuguese utility EDP is coming to the end of its migration from five legacy systems
supporting C&I billing to Oracle CC&B.

Oracle won the contract due to a perceived technological advantage in the creation of
contracts and the bringing together of back-office and front-office processes for use by
a single account manager.

Oracle feels that its rating engine and focus on the user interface will remain a
competitive advantage into the future.

Ovum believes that no billing engine supports all of the new business processes
introduced by smart meter and smart grid investments, and that this area will be
where vendors will achieve competitive differentiation in the future.

Ovum recommends that utilities:

o

Look beyond SAP as the default billing provider.

Make sure that any compliance issues are included in the original blueprint.

Work with client advisory panels to ensure that the vendor can accommodate
the firm's future business models.

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THE EUROPEAN UTILITY BILLING SPACE IS DOMINATED BY

SAP IS-U
SAP IS-U has an enviable collection of tier one utility clients across
Western Europe and North America
SAP claims that its Industry Solution for Utilities (IS-U) is the best selling billing system in any
industry across the world. At its 2010 conference for utilities in Europe, the Middle East and Africa,
the company claimed 65% of the utilities billing system market share, although Figure 1 shows that
Ovums survey data, from 2009, gives the company 35%.

Figure 1: Billing software providers in Europe, 2009

40 %
35 %
30 %
25 %
20 %
15 %
10 %
5%
0%
SAP

Oracle

CUSI
Primary vendo r

North Star

In Ho us e

O ther

Se condary vendor
OVUM

Source: Ovum

Figure 2 looks at each vendors penetration of Western Europe by size of utility. While there is a
propensity for smaller utilities to use a large number of different suppliers, SAP has the lions share
of the largest Western European utilities. Among its client roster for IS-U are EDF, RWE, E.On,
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Centrica, Essent, Electrabel, Enel and Vattenfall. Oracle's reference clients for billing in Europe
include Bord Gais, EDF and Veolia.

Figure 2: Distribution of primary vendors by revenue band - Western Europe,

2009
Other

In Ho use

CUS I

North Star

O racle

SA P

100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
< $1 0m

$1 0m -$ 50 m

$ 50m -$25 0m

> $25 0m

Revenue band of utilities

OVUM

Source: Ovum

SAP benefits from utilities conservatism and an historical lack of

credible competition
Utilities are laggards in terms of technology investment. While other industries invest at the cutting
edge of technology, utilities are typically late adopters. A number of factors combine to create this
conservatism.
One of the fundamental objectives for any utility IT department is to ensure the continuous service
of its billing system. Essentially, billing systems are usually built in duplicate to ensure that, for
instance, if there is a hardware failure, a back up system is in place to operate during system
downtime. The sheer cost of replacing a billing system means that utilities are very reluctant to
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make the decision to migrate. There is a tendency to sweat existing billing technology, which leads
utilities to hold on to their applications much longer than organizations in other industries.
When the billing system is no longer fit for purpose, utilities are also very conservative in selecting
a replacement system. The trend in the marketplace is to seek out a robust, scalable product:
essentially software that has a proven track record for billing in a utility environment. While smaller
utilities have a choice of a number of specialist vendors, larger utilities have a much smaller pool of
vendors from which to choose.
In the US this historically has largely meant a choice between SPL WorldGroup, SAP or a custombuilt solution. Given SPL WorldGroups focus was largely on the US market (the company had a
small sales presence in Europe) up until its acquisition by Oracle in 2006, SAP was given more or
less a free run at the European utilities market, as there were no vendors with both a credible
product and a significant European presence. The EU-led unbundling of vertically integrated
utilities, increasing competition and the planned introduction of smart metering across the
continent have been the catalysts for many utilities replacing their billing systems. Although a
minority of utilities has an innate predisposition against SAP, most of the larger utilities opted for
SAP as the billing solution provider of choice.

Through acquisitions, Oracle has developed a portfolio of utility-specific

business applications that now rivals SAPs
Although comparatively late to the market, Oracle has, through the acquisition of SPL WorldGroup
and Lodestar in 2007 (which brought Oracle a market-leading complex rating engine), built a suite
of utilities-specific billing, network management, mobile workforce management, meter data
management and load profiling applications. However, while Oracle acquired a proven billing
system with deployments at large US utilities, it had to start from a very low base in Europe to
break SAPs dominance of the marketplace.
Playing catch-up in an industry as conservative as the utilities business is not an easy task. For its
recent wins, innovation, flexibility and competitive differentiation are cited as the reasons why
utilities chose Oracle over SAP. However, being as good as SAP is insufficient, as that company is
now the default billing provider for European utilities. Oracle must go beyond what SAP currently
offers to gain further clients in Europe.
As we have seen in Figure 1, Oracle has a number of clients in Europe. The company's CC&B
product, with its complex billing module, has now been deployed by Frances EDF and Portugals
EDP for C&I customer billing. EDP is the more recent addition to Oracles portfolio, and the deal
brings into focus a possible competitive advantage that Oracle CC&B currently holds over IS-U.
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WITH SIGNIFICANT WINS IN MULTIPLE UTILITIES IN EUROPE,

ORACLE IS BECOMING A VIABLE ALTERNATIVE TO SAP IN
EUROPE
EDPs C&I billing was previously done over multiple, disparate legacy
systems
In 2007, EDP made the decision to migrate its existing C&I customers over to a new billing system.
The firm wanted to streamline its C&I billing operations onto a single platform, across Iberia, that
could manage the billing process for both electricity and gas.
While EDP has used SAPs IS-U to bill its residential customers for several years, EDPs C&I
customerswhich are located in both Portugal and Spainwere billed through five disparate,
custom-developed legacy billing systems. EDP used separate billing systems for its Spanish and
Portuguese customers and for electricity and gas in each country. During the migration to Oracle,
EDP acquired a commercial gas business in Spain, adding the fifth billing engine to its list of
legacy applications.
The principal reasons that EDP chose Oracle CC&B for its C&I customers were:

The system architectures of its existing legacy systems had become outdated and
maintenance costs had become unsustainably high.

While the majority of EDPs customers were located exclusively in either Portugal or
Spain, there was a significant number with facilities in both countries, and the
company predicted that this number was set to rise. None of the legacy systems could
provide a single bill for pan-Iberian enterprises.

The creation of a single Iberian Electricity Market (MIBEL) in 2006 means that EDP
now competes with the Spanish utilities Iberdrola and Endesa, putting customer
service higher on EDPs agenda.

EDPs selection criteria focused on the operational requirements of its

new pan-Iberian C&I business
Rather than issue a formal RFP, EDP first worked on a project plan, along with consultants from
Accenture, to transform its C&I business from separate gas and electric businesses in Portugal
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and Spain into a single Iberian organization. The new organizations operational design was
agreed upon and, following a needs assessment, a list of requirements was built for the billing
system.
As none of the four existing, country-based legacy systems supported the requirements of a panIberian billing system, EDP initially considered developing a billing system itself. However, EDP
soon ruled out this option and decided to buy an existing billing software system from either SAP
which has been EDPs residential billing provider for many yearsor Oracle.

Oracles flexibility in contract design and account management won EDP

over
While EDPs relationship with SAP as a residential billing provider has been long and happy, EDP
was conscious of the differences in customer management between residential and C&I. High on
the list of selection criteria that EDP built with Accenture was the requirement to deal with the
specific needs of each individual C&I customer.
In conversation with Ovum, EDP cited two reasons why the chose Oracle above SAP. The first
was that Oracle gave the organization greater flexibility in designing contracts for new clients,
allowing the utility's sales force to create very specific offers within CC&B. EDP was concerned
that IS-U would require more input from IT to develop individual client offers; with CC&B, this is left
in the hands of the business.
EDP also cited the integration of the front and back offices within CC&B, in particular sales,
customer care, billing and debt control. While in residential this is not an issue as different
departments will deal with each of these, EDPs C&I customers will have a dedicated account
manager who will deal with all four of these functions. CC&B brought these functions together in a
way that fitted in with EDPs single-platform requirement.

Accenture was chosen as the systems integrator over EDPs longstanding partner Logica
In another break from its historical relationships, EDP selected Accenture to integrate CC&B into
its businesses. While Accenture had helped EDP to design the operational structure of the panIberian business and the requirements of the new billing system, EDP still went through a selection
process for its integrator.
Accenture was chosen ahead of long-term partner Logica, as well as Capgemini. EDP decided
Logica lacked experience installing CC&B, and while Capgemini had strong credentials it was not
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chosen due to Accentures previous work with EDP: the utility recognized that the project risks lay
not just on the IT side, but also on the business. Given that Accenture had worked with all of the
EDP subsidiaries affected by the new billing system, it was felt that it had a slight advantage in
understanding EDPs business.
Throughout the selection process for the systems integrator role, EDP stressed the importance of
working closely with Oracle. The firm believed that Oracle was not as developed as SAP in terms
of processing customer switching, as the regulators in Spain and Portugal have slightly different
compliance requirements. While not envisaged as a problem, EDP made sure that Accenture
which did some of the developmentworked closely with Oracle, which gave EDP direct access to
its developers in San Francisco.
Utilities in countries where a billing vendor does not have a current deployment will also probably
face a certain amount of localization issues. In the case of EDP, Oracle took a position on each of
a list of requirements generated towards the end of the deployment, defining those that are
compliance requirements (which Oracle funded) and those that are business requirements (which
EDP had to fund).

ORACLE MUST MAINTAIN PRODUCT INNOVATION TO STOP

THE SAP JUGGERNAUT
This is the second major utility in Europe running IS-U to select Oracle
CC&B for C&I
It looks as though Oracle's investment in acquiring best-in-class utilities business applications is
starting to pay off. The EDF and EDP wins demonstrate that Oracles C&I billing module can
compete with SAP's. Oracle cites the advanced configurability of the rating engine that supports
CC&B and the navigability of its user interface as its two main technological advantages over SAP
IS-U, particularly for C&I billing and customer management. Oracle has also been successful in
CEE and cites its large consulting resource in Poland, which competes well with SAP on cost and
language skills for the CEE region.
But should SAP care? In the grand scheme of things, losing bids for two clients seeking a C&I
vendor is not the end of the world: SAP continues to win significant, large contracts within the
utilities space. However, what will be interesting is if this trend continues and utilities turn to Oracle
for their C&I billing or, more worryingly for SAP, if Oracle can build on the footholds it has at EDF
and EDP by selling other components of its Applications for Utilities suite.

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C&I billing is likely to be the battleground billing vendors choose when

fighting SAPs dominance in Europe
Ovum believes that C&I billing is an area that will see more competition between vendors to offer
advanced functionality to utility clients. There are several reasons for this.
The C&I market is more competitiveFigure 3 shows how more European countries have a
liberalized market for commercial than for residential pricingthan the residential market across
Europe, and is inherently more complex. Utilities work on relatively tight margins within the C&I
business, so any efficienciesparticularly in terms of speed to marketthat can be gained can
lead to significant differentiation in the marketplace.

Figure 3: Price regulation in the EU, 2010

OVUM

Source: Ovum

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The sales process typically leads innovation in the utilities marketplace, and technology takes time
to catch up. As has been seen, Oracle gained some competitive edge over SAP through its more
flexible approach to contracts andfor EDP at leastoffered a more intuitive front end for C&I
account managers. A common complaint among larger utilities is that their C&I billing systems are
not sufficiently flexible to support the contract innovation currently taking place in the industry.

The future energy market will require substantial innovation in

residential billing
While C&I billing is an area in which Ovum expects billing vendors can compete, there will be a
number of requirements for further innovation in residential billing in the future. Residential smart
metering opens the door to a number of new business strategies: the potential for time-of-use
billing, critical peak pricing, real-time pricing alerts, demand response programs, electric vehicle
recharging, and feed in tariffs (which could mean some customers become creditors rather than
debtors). However, these new business models require functionality not found within current billing
systems. Both Oracle and SAP are well aware of these requirements and are evolving their current
billing systems to support these new business processes.

RECOMMENDATIONS
There are now credible options to SAP IS-U in Europe
Before the Oracle acquisition, SPL WorldGroup was very much a US-based organization with a
sales office in Europe. Now that it has been acquired by Oracle and is being integrated with the
Lodestar portfolio as well as other Oracle productssuch as Siebel CRMthe billing software
now sits within a suite of utility-specific applications that benefit from Oracles European presence.
Given that now two major European utilities that used SAP for residential billing purposes have
opted for CC&B for C&I billing, Ovum believes that there is now a credible contender to SAP
operating in Europe. Utilities with specific requirements for their commercial billing should look
beyond their existing provider and see if there are other products in the market that better align to
their business needs.

Make sure that any compliance issues are included in the original
blueprint
In the EDP deployment, CC&B had to be configured at a fairly late stage to comply with local
regulatory requirements, what Oracle call localization. Utilities should ensure that, if they
purchase billing software from a vendor with no previous experience of working in their particular
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home country, the specific regulatory requirements are fully scoped out in the initial blueprint, and
that the vendor makes any compliance-enforced modifications on its own account and does not
force modifications on to the system integrator.

Ensure that the vendor can accommodate future business models

While many utilities are just exploring which elements of smart meter and smart grid technologies
they will adopt in the future, it is worthwhile that firms keep a very close eye on what their current
and potential future billing software providers are doing in the space. A number of examples of
new business processes were listed earlier in this report. At present there is no utility-specific
billing engine that supports all of these processes, although all of the major vendors are investing
in development. Ovum recommends that utilities engage with their existing providers customer
advisory boards to ensure that the vendors support the future requirements of the business.

APPENDIX
Further reading
Customer Satisfaction, Smart Meters and the Utility Billing Process, DMTC2357

Methodology
This report was published as part of Datamonitors Collaborative Intelligence research process and
draws on expertise from Ovum and Datamonitor Energy & Sustainability.

Author
Stuart Ravens, principal analyst, energy and sustainability technology
stuart.ravens@ovum.com

Ovum Consulting
We hope that the analysis in this brief will help you make informed and imaginative business
decisions. If you have further requirements, Ovums consulting team may be able to help you. For
more information about Ovums consulting capabilities, please contact us directly at
consulting@ovum.com.

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Disclaimer
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incorrect.

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