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A large majority (71 percent) of utilities now use cloud software, up from just 45 percent three years ago according to a new Oracle survey. Improving customer experience was noted as the key driver for increased cloud investment. But while progress has been made, 85 percent of respondents still cite security as a top concern and noted that regulatory acceptance remains a barrier to cloud adoption.
“Just a few years ago, utilities looked at cloud computing with skepticism at best. Today, many realize it’s essential to their survival,” said Brian Bradford, vice president, industry solutions, Oracle.
“Utilities are increasingly seeing cloud as a fundamental asset in meeting ever-evolving expectations, mitigating security concerns, and turning data into an opportunity to modernize and evolve their operations to better serve constituents and customers.”
The report, conducted by research firm Zpryme, surveyed more than 150 global utility leaders to better understand the pace and breadth of cloud computing adoption. Respondents spanned investor-owned, municipal, cooperative and district/federal utilities representing electric, gas, water, and renewables.
Changing Customer Expectations
Customers are increasingly looking for more information regarding their overall utility usage and bill and how to lessen the impact of both. And they expect this with the high level of service and personalization that they are enjoying in other sectors, such as retail and banking. Utilities see cloud technologies as a means to provide the speed and control to meet these customer expectations. So, it was no surprise to see continued investment in customer experience and engagement (31 percent) and customer information (29 percent) cloud systems in the top five investment priorities for utilities in the coming years.
Drowning in Data
Sixty-four percent of utilities noted that cloud computing is critical to my company’s future success. A key driver is the need to better manage an ever-growing pool of data coming from smart meters, IoT sensors, customers’ home energy devices, and more. Utilities realize that it is becoming too great a task and risk to manage this influx without a significant investment in tools that can capture and analyze grid edge, supply chain, and customer data quickly. Utilities hope to use the technological flexibility provided by cloud computing to innovate by using data to solve business problems from grid optimization to managing distributed energy resources (DERs).
“Utilities are seeing the impact that digital transformation is having on their business model,” said Jason Rodriguez, CEO of Zpryme. “The challenge is so much greater than simply capturing millions of disparate data points. Utilities need IT tools to manage and drive better business decisions and cloud computing provides the agility to more effectively integrate data predictively use it.”
Security Concerns Remain
Utilities remain concerned about security (85 percent) and privacy (81 percent) and also rated these as the biggest barriers they face when it comes to using or expanding cloud computing. Concerns, however, were not around the vulnerability of cloud computing technology itself, but rather a growing barrage of increasingly sophisticated cybersecurity threats. Whether it is IoT devices, field area networks, or 5G networks, utilities are operating in a hyper-connected digital ecosystem that can provide new and varied opportunities for nefarious actors to expose their networks. Utilities recognize that they need to stay vigilant and that will require help from both regulators and vendors.
While improving, many regulators globally still don’t allow for utilities to earn a rate of return on their cloud investments, which impedes upgrading legacy IT systems. While utilities recognize the role that regulators play in approving their prudent expenditures, 26 percent cited regulatory acceptance as a continued barrier to cloud adoption. The majority of utility respondents (75 percent), however, also note that regulators can play a strong role in helping protect customer privacy and security.
Many utilities dipped their toe in the cloud waters with enterprise applications, such as enterprise resource management (ERP) or human capital management (HCM) and 74 percent plan to spend more on cloud in the next 3-5 years. While a move to better serve and engage customers is driving this next phase of cloud adoption, operational system investments are not far behind. Forty-three percent of utilities have increased their operational spending by at least 25 percent over 2015 levels.