Sorgenia

Business Needs and Program Objectives

The main driving force behind Sorgenia’s IT transformation was its new all-digital growth strategy, set in the wider context of the upcoming end of regulated energy prices in Italy.

During the years leading to 2015, Sorgenia had seen a contraction of its business and a decline of its customer base, which had shrunk to about 100,000, predominantly business customers. In 2015, under new shareholders and new leadership, the company decided to make a comeback in the retail segment, setting itself a challenging long-term target of 1 million customers.

Making the plan even more ambitious was Sorgenia’s customer acquisition strategy, based entirely on digital channels and service excellence. The company’s focus on digital channels is designed to reduce the cost to serve while making the customer experience better and simpler. The goal is to grow a satisfied and loyal customer base by offering time, peace of mind and convenience. While Sorgenia’s plans were only partially linked to regulatory change, the company’s strategy was clearly timed to take full advantage of the upcoming end of regulated energy prices in Italy — initially set for mid-2018, postponed twice and now scheduled for mid-2020. With most consumers

still taking advantage of the current price protection regime, full price liberalization means millions of energy customers will be transferred from incumbent to new entrant suppliers based on geographic auctions. In addition, the end of regulated prices will also generate more price and service awareness and more active supplier switching behaviors among consumers. With its legacy systems clearly unable to deliver on either its growth plan or customer experience ambitions, Sorgenia saw the opportunity to start with a clean slate and begun evaluating a change of its entire IT landscape.

Program Description: Scalability, Flexibility and Process Integration for the Win

Step 1 — Find the Right Strategic Partners

Sorgenia needed a modern IT engine that could power its long-term digital growth strategy while providing enough flexibility along the way. At the same time, the company was looking for a platform offering tight integration of business and enterprise processes that could enable a lean and efficient digital retail organization, fit for a new competitive season in the Italian energy market.

During the second half of 2015, Sorgenia and its consulting and IT outsourcing partner Accenture set off evaluating several enterprise and business IT platforms. Scalability, end-to-end process integration, license cost and usability were set as key end-user requirements. Out of a shortlist of four, the systems that were found to best meet Sorgenia’s requirements were Microsoft Dynamics AX as ERP suite and MECOMS as customer information, metering and billing system. Since MECOMS is built on and fully integrated with Microsoft Dynamics AX, the pair effectively make up a seamless ERP and billing platform, enabling Sorgenia to manage all meter-to-cash processes — from customer onboarding to credit collection — within a single environment. This made for a step change from Sorgenia’s legacy environment, which featured around 20 meter-to-cash and customer service applications, including several custom PL/SQL systems.

A strategic partnership was created between Sorgenia, Accenture and Ferranti Computer Systems (the developers behind MECOMS), where Ferranti would contribute the system and Accenture would customize it for the Italian market, effectively making Sorgenia MECOMS’ maiden customer in Italy.

Step 2 — Deploy a New Engine to Power the Business

In the relatively short span of 12 months, the partners had successfully deployed the combined ERP and meter-to-cash platform. This meant localizing MECOMS, doing the necessary integrations with surviving legacy systems (e.g., energy trading and risk management), configuring and testing the platform, and migrating data from Sorgenia’s legacy systems. In May 2016, Sorgenia went live on the new platform, on time, on budget and with minimal impact on the business, despite opting for a big bang approach.

Between mid-2016 and early 2017, Sorgenia activated several digital channels that would serve as the foundation of its new customer acquisitions strategy, including a new web frontend and mobile application. These channels were later integrated into MECOMS through Dynamics CRM — a component Sorgenia added in early 2018. This integration helped Sorgenia take full control of digital onboarding, which had gradually accelerated from about 1,000-2,000 new digital customers per month after go-live to peaks of around 10,000 in 2018. The program also included the deployment of CallidusCloud as sales incentive management solution, in mid-2017.

Step 3 — Fine Tune Processes to Become Best in Class

After going live on its new platform, Sorgenia used the remaining part of 2016 to stabilize the systems, while embarking on a comprehensive process improvement program in 2017 and part of 2018. This targeted the meter-to-cash processes in general, with specific projects on billing and payment. Customer onboarding was also a big area of work for Sorgenia. The improvement plan was made significantly easier — if at all possible, considering the results achieved by Sorgenia — by the fact that meter-to-cash processes effectively originate and end within the same platform.

The combination of process integration and improvement work enabled Sorgenia to end 2018 with unbilled and unpaid-for energy rates, as well as digital customer additions that place it at the very top end of the Italian market. See the Business Value Section below for more details.

Step 4 — Migrate to the Cloud for Further Scale and Flexibility

With Sorgenia’s data center housing contract due to expire soon, in early 2017, the choice was made to migrate the new IT platform to the cloud. On one hand, the move would help ensure the systems were scalable enough to cope with the customer growth rates that were materializing (i.e., roughly 100,000 net customer additions per year) as well as with any inorganic event like customer auctions. On the other, it was necessary to maintain the flexibility necessary to cope with any contingent factors, including the moving target of full energy price liberalization. Cloud effectively allowed Sorgenia to take infrastructure investment out of its balance sheet — a critical factor at a time of growing business unpredictability, with organic growth and regulatory uncertainty pulling in opposite directions. Infrastructure as a service (IaaS) on Microsoft Azure offered the ideal pay-per-use procurement

model and a relatively open and interoperable platform, besides representing the best fit from a technology ecosystem perspective. Adding weight to the choice of Microsoft’s cloud service was the ability to activate additional platform components as SaaS, a move that Sorgenia did for Microsoft Dynamics CRM and Office 365. The company is also leveraging IaaS to quickly deploy the necessary resources for designing, building, and piloting applications, adding to the company’s agility and shortening the time-to-market of its digital services.

The cloud project was engineered and implemented by Avanade — a joint venture between Microsoft and Accenture. Work started in October 2017, with the migration of development and

testing environments, as well as peripheral systems such as finance and ticketing applications, and ended in July 2018, after the production ERP system was moved to Azure. With this, Sorgenia became the first major Italian utility to be fully cloud-based. In a few cases, Sorgenia and its partners had to work to customize certain applications to enable multithreading, thus making them suitable to the IaaS environment and enabling the platform to manage the expected short-term volumes of 400,000 customers. Thanks to this development work, the platform performs better on the cloud today than it used to on premise.

Business Value

As mentioned, Sorgenia managed to consistently improve its business metrics since going live on Microsoft Dynamics AX and MECOMS platform. The company today boasts a set of meter-to-cash KPIs that put it in a league of its own, in Italy and beyond.

For the past year, Sorgenia managed to consistently keep its unbilled-for energy rate under 0.2% of its points of delivery, vs 2% when the system went live. This was done by establishing and improving pre- and mid-billing controls as well as post-billing quality checks. In addition, the company boasts a very solid 1% unpaid-for energy rate. “With KPIs like these, it is safe to say that when it comes to billing quality and collection, there is no company as good as Sorgenia in the Italian market, right now,” said Alessandro Bertoli, CIO, Sorgenia.

Since MECOMS is fully integrated into Microsoft Dynamics AX, all the functionality and company processes are in one, integrated system with a single, familiar user interface, one database and one set of business logics, providing a single version of the truth. A single platform also means a single business process management (BPM) framework, helping control and manage all workflows in a single environment. This makes it easier to ensure that data remains consistent throughout the meter-to-cash cycle, from prep and validation of billing input data (e.g., meter reads) and parameters (e.g., price list and contract info), down to the printing phase.

Regarding Sorgenia’s digital ambition, in 2018 alone, supported by the new platform and digital channels, the company managed to onboard 100,000 digital clients, Sorgenia’s integrated platform not only helped digitize the contact-to-contract process and streamline the meter-to-cash process cycle. Indirectly it acted acts as an anti-churn mechanism through good billing, flawless payment and better customer service.

Finally, compared to alternative infrastructure options such as in-house or housed data center, or traditional application hosting, IaaS gives Sorgenia’s business users higher systems availability and better data security.

Lessons Learned

Create Critical Mass Around Business Objectives

IT-line of business (LoB) collaboration was critical to Sorgenia’s program success. In 2017, the company created LoB process owners across its 11 business areas, tasking them with engaging the IT function across change requests, process evolution and service level agreement (SLA) compliance. At the same time, the company started to measure the IT function’s performance based on business KPIs. In the billing area, for example, unbilled-for energy was used as a universal metric committing every employee, including in IT, in addition to individual SLAs. Having an integrated platform supporting end-to-end processes helped Sorgenia’s LoB, IT function and Accenture speak the same language and share the same objectives.

Co-invest in a Lasting Strategic Partnership

Sorgenia was going to be the first company in Italy to deploy MECOMS, the first to localize it and move it to the cloud in combination with Dynamics AX. While certainly innovative and potentially very rewarding, Sorgenia’s choice wasn’t without risk. For it to play out, it required that all stakeholders have the right incentives and adequate return. Having Accenture, Ferranti, and Microsoft partner with Sorgenia for the long haul and co-invest in the solution was a winning strategy, and key to beating the program’s complexity. “By being the first utility to deploy MECOMS in Italy, adapting it to the local market and migrating it to the cloud, Sorgenia chose to be at the forefront of innovation in its sector. To be at the forefront, you need a technology ecosystem where every partner has the right incentives and returns to support your strategy,” said Bertoli.

Next Steps — Road to 1 Million

With its long-term growth target realistically achievable within four to five years, Sorgenia has activated a project (aptly called “Road to 1 Million”) to start evaluating alternatives for platform evolution. More specifically, Sorgenia and its partners need to decide whether to:

• Scale the current platform further so it can comfortably manage two to five times the current number of customers, ideally taking Sorgenia to the price liberalizationdeadline of July 2020. During cloud migration, Sorgenia and its partners have already identified specific areas of work in order to further improve the solution’s task parallelism; or
• Quickly migrate to the latest 365 versions of Microsoft Dynamics and MECOMS, trading a more stable solution for a less mature one that’s more feature-rich, capable and cloud-native.

Whatever decision is made, Sorgenia intends to walk the “Road to 1 Million” with the same strategic partnership approach that has characterized its IT transformation program so far. Starting at the end of 2018, Sorgenia also created a decoupling layer replicating MECOMS data in a Cloudera environment, that the mobile app and web frontend communicate with via API gateway. On one hand, this helps boost the online performance of the company’s web and app services. On the other, it helps decoupling development on the digital platform, where Sorgenia works in weekly sprints, and IT system where monthly canvases are the norm.

Sorgenia also has a big data project designed, among others, to help the company push the envelope on customer experience and service personalization. The company has recently built a data lake, organically taking data mainly from MECOMS as well as from external sources like social networks. The appliance is built on components from Microsoft, Informatica, and Cloudera

The company has also activated work streams on voice interfaces (intelligent personal assistants), chatbots and is working on redesigning its award-winning customer self-service app.

ADVICE FOR THE TECHNOLOGY BUYER

Essential Guidance

Given its transformational nature and strategic scope, any utility approaching a similar project should consider the following:

• Don’t just digitize, digitally transform. Digital transformation is not only about digitizing existing processes. It is about leveraging digital technologies to do new things as well as do things differently. Successful digital transformers have a bold approach to their strategies that leverages market and technology discontinuity to bring lasting change to the business.
• Leverage cloud for business-critical systems. Under the right conditions, IaaS, PaaS and SaaS can offer the scalability needed to cope with accelerated growth, along with the necessary contingent flexibility. Nowadays, solution vendors and service providers can offer very lean deployment options even when complex business-critical systems are concerned.
• Build a strong technology ecosystem. The more disruptive a business strategy, the stronger should be the technology ecosystem supporting it. Creating the right incentives around a technology-led business vision, so suppliers can become partners is no easy task. However, the result can be extremely powerful.
• Fully align the business strategy and technology program. Let the future business systems be the backbone of the overall business strategy. Define the expected value from the transformation program and do the technical design and process improvement work around it. LoB and IT functions are often committed to different objectives and use different success metrics. Let business KPIs be a unifying language.
• Solve real problems for real customers. Simplifying customers’ lives translates into attracting, engaging, and retaining customers. Customers seek to eliminate complexity in their day-to-day existence. They seek to establish reciprocity in their interaction with utilities. Utilities should focus on finding needs and problems that can be cleverly solved.