Cloud adoption in utility industry 2016

1 JUNE 2016 UTILITY WEEK
associatedwith
cloudcomputing
outof10:
TOPRISKS
7.6
92%
Thedifferencebetweenpublicandprivatecloudcomputing
ismostimportanttoenergynetworkoperators
AN EXCLUSIVE RESEARCH REPORT
In association with

CLOUDADOPTIONANDUKUTILITIESContents 1 22 3 4 5 6
1 Executive summary
2 Introduction
3 Cloud adoption
4 Drivers and benefits
5 Implementation and challenges
6 Debate backs research findings
Concluding thoughts7
7

CLOUDADOPTIONANDUKUTILITIESExecutivesummary 1 2 3 4 5 6 7
Opportunity ahead
What to make of all this? One obvious
conclusion: there is an opportunity for
the utility sector to benefit from gaining
a better understanding of best practice
in managing cloud technology’s
complexity and challenges.
Simply put, the utility sector needs
help to first of all understand how best to
approach and plan the migration to cloud
technology. Then it must undertake the
implementation and ongoing management
of cloud platforms.
As this report highlights, there is little
doubt among utility companies about
the potential value that cloud technology
could deliver to their businesses. The
challenge lies in overcoming some of the
barriers that stand in the way of achieving
that value.
The prize on offer is a significant one.
And given the importance of utilities to the
economy, the environment and society at
large, it is a prize that utilities and their
trusted advisers should endeavour to attain.
C
loud technology is
disruptive. Out go vast
‘on-premise’ data centres, in
come applications served from the
cloud – often under innovative
pay-as-you-go ‘software as a
service’ licences.
Put another way, out go the large
chunks of capital expenditure associated
with physical data centres, together with
software licences bought in utility-sized
volumes. In their place: month-by-month
rental costs, paid for out of operating
expense. Nor is cloud technology
delivering just any old applications.
Increasingly, software vendors are
adopting ‘cloud first’ or even ‘cloud only’
deployment models.
And to the surprise of some observers,
the utility sector is genuinely embracing
the cloud, placing mission-critical
applications and core business processes
in data centres run by third parties.
But – critically – utility companies
are not embracing the cloud in the same
way, or even for the same reasons, and to
the same extent. Look closely, and there
are significant differences in the ways
companies perceive, approach, and adopt
cloud technology.
Why? A partnership between Utility
Week and Tata Consultancy Services
sought to find out by probing utilities’
take-up of cloud technology, and their
perceptions of the challenges and
opportunities that it provides.
“ There is little
doubt among
utility companies
about the
potential value
that cloud
technology could
deliver to their
businesses.
The challenge
lies in overcoming
some of the
barriers that
stand in the way
of achieving that
value. The prize
on offer is a
significant one”

CLOUDADOPTIONANDUKUTILITIESIntroduction 1 2 3 4 5 6 7
But one by one, these objections have
been swept away. Today, analysts regularly
affirm what was once unthinkable:
compared with on-premise computing, the
cloud has higher uptime, better security,
and offers more control, not less.
And yet the revolution is not complete.
Yes, as this research highlights, the utility
sector is embracing cloud computing.
But not universally, not at the same pace,
not for the same set of imperatives – and
not with the same shared sense of cloud
technology’s risks, rewards, and ROI.
Why? This research, carried out in
March and April 2016, sought to find
out by probing utilities’ take-up of cloud
technology, and their perceptions of the
challenges and opportunities.
Key decision-makers in the utility
sector were targeted, first in an online
survey, and then with a follow-up
telephone contact. In all, some 31
85%
And the parallel is apt, because just
as a handful of industries – among
them financial services and the utility
sector – clung to the mainframe long
after the rest of the corporate sector
had switched to client-server, cloud
computing too promises to herald a
period of equally polarised attitudes.
And yet, as this exclusive research
from Utility Week and Tata Consultancy
Services highlights, history is not
repeating itself. To the surprise of some
observers, the utility sector is embracing
the cloud, and placing mission-critical
applications and core business processes
in data centres run by third parties.
As little as five years ago, that would
have seemed remarkable. Mention
the cloud, and a predictable litany of
objections would have been raised – loss
of business continuity, security, loss of
control, and so on.
individuals from across the sector
shared their insights. Sixteen per cent
were directors or board-level directors.
Half were functional chiefs or heads of
department, 65 per cent worked in their
organisation’s IT division, and 85 per cent
were manager grade or more senior.
They represent 19 of the largest and
most significant players in the sector,
drawn from across the gas, water and
electricity industries. In the roll call of
leading brands and businesses surveyed
were names such as British Gas, Severn
Trent, SSE, National Grid, Welsh Water,
Centrica, EDF, First Utility and Western
Power Distribution.
Together, respondents contributed
a unique insight into the state of cloud
technology adoption in their organisations
– an insight that began with an evaluation
of the present state of cloud technology
in utilities.
F
rom a corporate perspective,
few IT developments have
been as transformative
as cloud computing. Indeed, it’s
probably necessary to go back
to the adoption of client-server
technology in the early 1990s to
find technology quite as disruptive
to the status quo.
Profiling the
contributors:
The research incorporates contributions from
19 organisations from across the sector
Managers or more senior
65%
50%
16%
Chief/head of
department
Work in the IT division
Director/board director
Source: Utility
Week Cloud
Technology
April 2016

CLOUDADOPTIONANDUKUTILITIESCloudadoption 1 2 3 4 5 6 7
Present state and future prospects
H
ow extensive is the utility sector’s adoption of cloud computing?
Respondents were asked to characterise their use of cloud
technology at home and at work as ‘none’, ‘partial’ or ‘complete’.
Respondents were slightly more likely
to use cloud applications at home, with 97
per cent reporting partial or complete use
of cloud technology at home, compared with
83 per cent at work.
Overall, across the sector, respondents
from most organisations – 76 per cent, or
just over three-quarters – of respondents
reported ‘partial’ adoption of cloud
technology. A further 7 per cent went
further, describing their adoption as
‘complete’, making 83 per cent in total.
KEY FINDINGS
83 per cent of utilities report at least some use of
cloud technology – but 17 per cent, almost one in
five, report no use at all.
38 per cent of utilities report that their cloud
migration is either already complete, or will be
complete over the next two years. But 26 per cent see
a complete cloud migration being at least five years
away, while 28 per cent report that cloud migration
‘will never be complete’ in their organisations.
According to respondents, this slow pace of adoption
is often the result of the sheer complexity of the move,
because of the sector’s legacy systems and the need for
appropriate due diligence, especially in the context of
the systems’ impact on critical national infrastructure.
This seems a fairly ringing endorsement
for cloud technology – and yet 17 per cent
of organisations – just under one in six –
report no use of cloud technology at all.
Clearly, across the sector, there is
some polarisation of perspectives on
cloud technology: a significant majority
is happy to exploit it, and a small but
by no means insignificant minority – of
almost one in five respondents – is either
reluctant to exploit cloud computing or
still looking for ways to do so.
“From what we see in
the energy sector, the IT
departments of big utilities
have a lot of power and
influence – which can
make it challenging for
the commercial business
to move ahead quickly
working with, say, third
party cloud technology
vendors,” observed
Andy Bradley, director of
business development
at Delta Energy &
Environment. “Yes, there
are a lot of legacy systems,
but there is often a ‘not
invented here’ culture too.”
The environment appears to affect
the adoption of cloud technology
Q: Which of the following best describes your current use of cloud technology?
Figure 1
Complete Partial None
Home Work Water Energy company Energy network
3%
17% 15%
23%
10%
87% 76%
75%
77%
77%
7% 8%
25%
Source: Utility Week Cloud Technology April 2016

Taken together, said respondents,
the inevitable result is that complete
migration to the cloud will take a long
time. Consider, for instance, the views
of those respondents anticipating a
timescale of five years or so.
“It takes a long time for due diligence
to be carried out and decisions to be
made,” reported one respondent. “There’s
the complexity of the estate to consider,
regulatory requirements to take into
account, and existing third-party contracts
in place,” added another. “There’s a
huge legacy environment to transition,
a regulatory model that favours capital
investment rather than service-based
offerings, and security considerations in
At the other extreme, some 56 per
cent of respondents – over half, in other
words – see cloud migration as a more
distant prospect. Twenty-six per cent
think a complete cloud migration is at
least five years away, and 30 per cent
report that cloud migration ‘will never
be complete’ in their organisations.
Why such a slow pace of adoption?
The prime reason cited by respondents
is the sheer complexity of the move,
not least because of the sector’s legacy
systems and the need for appropriate
due diligence, especially in the context of
cloud-based systems’ impact on critical
national infrastructure.
PACE OF CHANGE
That said, respondents’ collective views
of complete migration again highlight the
polarisation in the sector. Utilities are
either close to completing their cloud
migrations (or have already completed
them), or they believe completion is only
attainable in the long-term future.
Taken together, a third of respondents
report that cloud migration is either
already complete, or will be complete
over the next two years, with the
majority – 22 per cent – expecting
migration to be completed in the latter
half of that period.
WATER COMPANIES LEADING THE WAY
Drilling down industry-by-industry into this overall response to
cloud technology, the reasons for this apparent polarisation become a
little clearer.
The water industry, in short, is leading the way into the cloud, with no
water industry respondents reporting ‘no’ use of cloud technology, and
about a quarter of respondents reporting that their adoption of cloud
technology is complete.
Energy networks – both gas and electricity – take almost exactly
the opposite standpoint, with almost a quarter (23 per cent) of energy
network respondents reporting ‘no’ adoption of cloud technology, while
some 77 per cent of respondents reported ‘partial’ adoption.
In between lay energy companies (generators, retailers and vertically
integrated companies). Here, a smaller number of respondents – 15 per
cent – reported ‘no’ use of cloud technology, while almost one in ten
organisations (8 per cent) reported a ‘complete’ migration to the cloud.
The immediate opportunity: 44% expect to
fully migrate within the next four years
Q: When did your organisation complete its full migration into a cloud environment?
Q: Do you ever anticipate your complete organisation being migrated into a cloud-based environment?
Figure 2
Within next 12 months Next 1-2 years Next 3-4 years At least 5 years away Migration will never be
complete
100% Offullymigratedorganisations,completedwithinthepasttwoyears
11%
22%
11%
26%
30%

respect of critical national infrastructure
services,” added another.
Perhaps more troubling are the views
of those respondents who considered
that their cloud migration would never
be complete. Here, the view seemed
to be that cloud technology was simply
inappropriate for the task in hand.
“Specific data types will always either
be constrained by security risks, or
the need to be accessible on-premise,
making them unsuitable for a complete
migration to a cloud platform,” explained
one respondent. “It’s critical national
infrastructure, and likely to always remain
in-house,” added another. “Security”,
observed another, simply. And “these are
bespoke and mission-critical services that
cloud technology is just not appropriate for
at the moment”, emphasised another.
But clearly these are judgements,
rather than absolute facts. Some utilities
are taking the slow road to the cloud, but
many others – as we have seen – have
come to a different conclusion.
To see why, we turn next to utilities’
views on the business case for cloud
technology. What imperatives are urging
utilities towards the cloud – and what
benefits do they expect to get from
the move?
TCS VIEWPOINT...
While utilities have historically approached the cloud and other
digital technologies in moderation, TCS believes this is going to
change. A fundamental shift in focus from capex-based spending to
opex-based will help shift the industry towards adoption of cloud-
based technologies in particular. These will help spur the rapid
innovation cycles that are mandatory for the utility industry to tackle
the multitude of challenges facing them. Elasticity in computing
power gives CIOs a more effective way to handle seasonal spikes in IT
infrastructure demand, or additional capacity to deal with crises. And
indeed, business functions in utilities see adoption of point cloud-
based solutions as a mechanism to ‘bypass’ IT to get that functionality
they want quickly. However, without an overarching strategy to
integrate these point solutions into a seamless end-to-end process,
many times business are disappointed when their ‘cloud based
investment’ does not yield the efficiencies they set out to achieve. The
cloud also has a huge potential for processes, where the volumes are
changing significantly and future volumes are uncertain. For example
IVR and exchanges are becoming digital and volumes are moving
to digital channels. The area is rapidly moving to the cloud, freeing
utilities from the threat of stranded infrastructure.
On the other hand, for some processes cloud adoption is constrained by
an inability to handle volume-intensive processes such as large nightly
batches for billing. More mature solutions around this space will help
accelerate adoption in this area.
TCS's experience working with this industry shows the adoption has
started. Security and complexity concerns would still be barriers to the
cloudification of operational systems, but increasingly non-operational
technologies are getting roadmaps that enable some sort of movement to
the cloud using IaaS, SaaS or PaaS models.
“ There’s the complexity of the estate
to consider, regulatory requirements
to take into account and existing third-
party contracts in place”

CLOUDADOPTIONANDUKUTILITIESDriversandbenefits 1 2 3 4 5 6 7
T
here was near unanimity in
respondents’ views on the key
drivers for cloud adoption in
their respective businesses.
Respondents were offered ten
potential drivers and asked to nominate
the most important three. Overall, across
the sector as a whole, the three that
emerged scored far more highly than
all but one of the remainder, and by a
considerable margin.
The key drivers in question? First, cost
pressure; second, the drive to improve a
company’s quality of service; and third, a goal
of reducing the company’s infrastructure
footprint through platform consolidation.
Put another way, in two out of the three
industry groupings in the sector – water
companies, energy generating and retailing
companies, and energy network companies
– these key drivers featured, differing only
in respective rank. In the third industry
grouping – specifically, energy networks
– the driver of technology adoption
displaced improved quality of service as
an imperative.
Moreover, industry by industry, the
relative rankings of the top three drivers
say a lot about the pressures that the
sector is under.
In two of the three industry groupings
– water companies and energy companies
– cost pressure comes second to the
drive to improve quality of service,
reflecting the drive for customer
satisfaction under way in both sectors.
Only among energy network companies is
cost pressure the top driver, with quality
of service featuring not at all.
What’s more, in all three industry
groupings (as in the sector overall) the
third-placed driver is an operations-led
objective rather than an overall strategic
priority of the businesses – namely, the
drive to reduce IT infrastructure footprint
through platform consolidation.
To those who would argue that the
UK’s traditionally conservative utility
sector has simply failed to appreciate the
opportunity offered by the cloud, this is a
compelling rebuttal.
Whatever else cloud technology offers,
the opportunity to take disparate systems
running on disparate servers and
mainframes, and condense them onto
one scalable, low-cost and efficient cloud
platform is undeniable.
And individual respondents certainly
weren’t blind to this in their comments.
Cloud technology, said one, “offered
flexibility and scalability”. Another said
the technology had benefits when used
intelligently alongside on-premise
capability: “A blended cloud model
delivers the right mix of agility, efficiency
and reliability.”
KEY FINDINGS
The key drivers for cloud adoption are: cost pressure,
the drive to improve a company’s quality of service,
and to reduce the company’s infrastructure footprint
The key benefits of cloud technology are customer
relationship management, billing, supplier
relationship management and people management.
Respondents were generally clear about how cloud
technology could benefit IT-specific and operational
aspects of their businesses. There was less
consensus on strategic and organisational issues.
The sector largely agrees
on the key drivers
Q: What are the key drivers for cloud adoption in your business?
Figure 3
Overall
Top 3
Water
Co
Energy
Co
Energy
Net
1. Costpressure
2. Improvingacompany’squalityofservice
3. Reducingcompany’sinfrastructurefootprint/platformconsolidation
2. Costpressure
2. Costpressure
1. Costpressure
2. Technologyadoption

Finally, among water companies,
human resources, customer relationship
management, finance and accounting, and
field deployment were jointly seen as the
most likely areas to benefit, jointly voted
so by three-quarters of respondents.
Underpinning this, though, is a more
subtle point, and one that has less to do
with parts of the businesses themselves,
but with the opportunity presented by
cloud technology to deploy cutting-edge
software quickly and at different scales.
Simply put, not only are some of the
world’s most popular, powerful and market-
finance and accounting (38 per cent), and
human resources (25 per cent).
Among energy generation businesses,
though, a very different set of areas of
respondents’ businesses were expected
to benefit: scheduling and billing, and
supplier relationship management came
joint top, with 67 per cent of respondents
expressing this view, followed by areas
such as human resources at 33 per cent.
At energy networks, field deployment
was the area most likely to benefit (36
per cent), with areas such as human
resources (27 per cent) and contact
centres (27 per cent) following behind.
Drivers by sector
If these are the drivers, which
aspects of utilities’ businesses
will they affect? Here, perhaps
predictably, differences reflected
respondents’ industries’ differing
needs and priorities.
Among energy retailers, for instance,
customer relationship management was
seen as the area most likely to benefit
from adopting cloud technology, with 88
per cent of energy retailer respondents
expressing this view. Next was billing
(63 per cent), followed by areas such as
workforce management (50 per cent),
leading software systems more quickly
implemented and upgraded when deployed
on the cloud, but some such systems are
only available in cloud-based versions.
“Water companies have large
workforces, and cloud technology helps
provide a connection to that workforce,”
observed Jacob Tompkins, managing
director of water industry body Waterwise,
commenting on the research. “Especially
in a field maintenance context, the cloud is
an enabler for the smart connectivity that
water companies know they ought to be
striving for.”
There is a strong bias towards people management
in network and water businesses
Q: Which areas of your business would you expect to benefit most from the adoption of cloud technology?
Benefits are wide ranging but focused on
CRM, billing and people management
Q: Which areas of your business would you expect to benefit most from adoption of cloud technology?
Figure 5
Figure 4
HR
CRM
Finance/accounting
Field deployment
Billing
Business development
Other ‘planned maintenance’
Field deployment
HR
Finance/accounting
Contact centre
Asset management
CRM
Capital planning
Supplier relationship management
Other*
CRM
Billing
Energy mgt
Workforce mgt
Finance/accounting
HR
Field deployment
Pricing
Energy settlement
Demand-side mgt
Asset mgt
Energy procurement
Other
Scheduling and billing
Supplier relationship mgt
HR
Billing
Finance/Accounting
Field deployment
Commercial contract mgt
Billing and settlement
Asset and work mgt
Plant control system
Central data
Meter data
Energynetworks Waternetworks
*Other: “Back office and desktop services”, “Integration of data from new sourcing technologies”, “All areas would collectively benefit”
*Other: “Customer engagement”, “Analysis and optimisation”
Energyretailers Energygenerators
67%
67%
33%
36% 75%
75%
75%
75%
50%
25%
25%
27%
27%
27%
27%
18%
18%
36%
9%
9%
88%
63%
50%
50%
38%
25%
25%
25%
25%
13%
13%
13%
13%
25%
33%
33%
33%
33%
33%
33%
33%
33%
33%

statement shrinks to 15 per cent. The
proportion actively disagreeing is 12 per
cent, while 19 per cent – almost one in five
– could neither agree nor disagree.
Can cloud technology facilitate mergers
and acquisitions? Again, the proportion
that agreed drops sharply, to less than half
(46 per cent). Those unable to agree or
disagree rises steeply (to 35 per cent), and
active disagreement reaches 18 per cent.
Does cloud technology create
opportunities for flexible scaling, to cope
with infrequent periods of unusually high
demand, for instance? Ninety-two per
cent of respondents agreed (69 per cent
strongly so), with just 8 per cent able to
neither agree or disagree. Furthermore,
no respondents at all disagreed.
Similarly, 85 per cent of respondents
agreed that cloud technology enhanced
business agility and flexibility, although
just 35 per cent felt strongly that it did so.
And although 3 per cent disagreed with
that statement, most of those who did
not positively agree fell into the middle
ground, and said they were able to neither
agree nor disagree.
Likewise, a broad majority of
respondents – 77 per cent – were able
to agree with the statement that the
on-demand, self-serve, and rapid elasticity
capabilities of most cloud providers
creates an opportunity for businesses to
have greater operational control. That
said, the proportion of respondents that
actively disagreed with the statement was
19 per cent, or virtually one in five.
Move the focus even more towards
strategic and organisational issues,
however, and the consensus erodes quite
sharply. Although respondents can see
the value of cloud technology from an
IT-specific and operational point of view,
they are far less convinced when it comes
to issues closer to the boardroom.
Does cloud technology help facilitate
changes to the business model, for
instance? While 69 per cent – just over
two-thirds – of respondents agreed, the
proportion that strongly agreed with the
Benefits of cloud technology
Finally, to build a picture of the utility sector’s viewpoint of a
number of potential benefits commonly associated with cloud
technology, respondents were asked to indicate how much
they agreed – or disagreed – with a number of statements
about cloud technology. By design, the statements embraced
cloud technology’s potential impact on a selection of
the strategic, organisational, operational and IT-specific
challenges facing utilities.
Generally speaking, the picture this provides is one in which
respondents are clear about whether or not cloud technology will benefit
IT-specific and operational aspects of their businesses – with most, in fact,
agreeing that the impact was beneficial.
Put another way, when it came to IT-specific and operational issues,
respondents had an opinion, with the number of respondents neither
agreeing nor disagreeing with a particular statement being relatively few.
Significantagreementacrossthemajority
ofpotentialbenefitsofcloudtechnology
Q: To what extent do you agree or disagree with each of the following statements?
Figure 6
Finally, respondents were even
less convinced that changing business
processes with cloud computing would
remove barriers between business and
IT resources. Just over a third (35 per
cent) agreed with the statement, while
almost as many – 31 per cent – disagreed.
Once again, those who neither disagreed
nor agreed amounted to just over a third
(35 per cent).
TCS VIEWPOINT...
Getting rid of infrastructure for commodity applications like HR, email, etc,
and moving to the cloud seems a no-brainer for the industry. But utilities are
still trying to figure out how best to use the cloud to differentiate themselves
from the competition. While cost is the easiest win for cloud adoption, other
benefits of transferring applications to the cloud should not be overlooked.
Indeed, in our experience, at times the cloud is not the cheaper option. Hence
it is important in any cloud adoption strategy to also look at other reasons for
moving to the cloud, such as increased agility and dynamic scalability, which
ultimately improve the time-to-market for innovation.
There is a global trend in the utilities sector to phase out traditional
on-premise ERP-CRM or works management applications in favour of
cloud-based options. As a result, the largest solution providers are either
completely cloud based – Salesforce.com – or fast adopting the cloud as a
deliberate strategic direction – SAP AG.
On the other hand, dependency on in-house IT is diminishing as employees,
customers and business partners look towards self-serve capabilities free
from the shackles of the IT function. The ability of these point solutions
to give the user increased control over operations is a key driver of cloud
adoption. However, the need to integrate the point solutions into the core
ERP for a seamless process has been an issue. It is our view that eventually
the benefits will be increasingly coming from cloud-based self-service
intelligence and operations applications rather than cloud-based personnel
and commodity services.
Changing business processes with cloud computing will
remove the barrier between business and IT resources
Cloudtechnologyhelpsfacilitatemergersandacquisitions
Cloud technology helps facilitate changes to the
business model
The on-demand, self-service and rapid elasticity
capabilities of most cloud providers create an opportunity
for business to have better operational control
Cloud technology enhances business agility and flexibility
Cloud technology creates the opportunity for
flexible scaling to help cope with infrequent periods
of unusual high demand
Strongly disagree Disagree Neither agree/disagree Agree Strongly agree
%agree
34%
47%
69%
77%
85%
92%
15% 15%
31% 35% 19% 15%
15%12% 19% 54%
12%35%35%
31%15% 46%
35%50%12%
69%23%8%
4%
Source: Utility Week Cloud
Technology April 2016

CLOUDADOPTIONANDUKUTILITIESImplementationandchallenges 1 2 3 4 5 6 7
PUBLIC OR PRIVATE CLOUD?
Take, for instance, one of the most fundamental
decisions facing any cloud computing initiative:
public cloud or private cloud? Overall, it appears
that the utility sector does indeed draw a distinction
between the two, with most respondents – 56 per
cent – reporting that their businesses did differentiate
between the two.
That said, fewer than one in five respondents –
19 per cent – said they did not differentiate between
public and private cloud operators. Instead, a
significant proportion of respondents – 25 per cent
– reported that they simply did not know if their
organisations differentiated or not.
These perspectives on private versus public were not
shared across the sector. Water and energy networks
had broadly the same perspective: half of respondents
reported that their organisations did differentiate
between public and private, with the other half more or
less evenly split between ‘no’ and ‘don’t know’.
Only in energy companies – retail and generating
– was there a more distinct polarisation. Almost two-
thirds of respondents – 62 per cent – reported that their
organisations differentiated between public and private
cloud operators, while just 7 per cent of respondents
reported that their organisations did not differentiate.
Even so, almost a third of respondents – 31 per cent –
acknowledged that they did not know their organisation’s
stance in this respect.
KEY FINDINGS
The biggest risks associated with cloud technology
were those related to the migration of safety-
critical and mission-critical applications, and
data security.
With more than three-quarters of respondents who
use cloud technology already managing two or more
cloud providers, the difficulty of managing multiple
suppliers was rated as ‘moderate to high’.
Respondents were concerned about the risks
associated with cloud technology, especially in areas
such as data security and business continuity. But
these concerns were highest in utilities with the
least exposure to cloud technology.
Respondents rated the ease of building a clear ROI
and business case for cloud technology at just 5.5
out of 10.
Four out of five respondents felt that the regulatory
regime had an impact on the adoption of cloud
technology. By a small margin, the majority felt
that the regulatory regime was an inhibitor to the
adoption of cloud technology.
H
ow are utility companies implementing
cloud technology? What barriers and risks
have they encountered? Where do the
challenges of implementation lie? The concluding
part of the research probed respondents’ views on
these issues.
Energycompaniesarethemostlikely
todifferentiatebetweencloudoperators
Q: Does your business differentiate between private cloud and public cloud operators?
Figure 7
Yes No Don’t know
Overall Water Energycompany Energynetwork
56% 50% 62% 50%
25% 25% 31%
20%
30%
25%19%
7%

skills, capabilities and functions,”
said one. “There will be a lot more
lawyers,” suggested another. “Roles
will change, and there will be efficiency
improvements,” added yet another.
More subtly, said a final respondent,
the different nature of the work in the
IT function will bring about changes to
organisation structure to reflect changed
work practices. As businesses transition
towards buying cloud computing as a
service, the need to resource internal IT
capital delivery teams will also diminish.
That said, it was clear that
respondents were far from sanguine
about the prospect of managing their
cloud providers. Seventy-eight per cent
of respondents using cloud technology –
over three-quarters – already managed
two or more cloud providers, with more
than half (52 per cent) managing three
or more. Moreover, when asked to rate
the difficulty of managing multiple cloud
providers using a scale from one to ten,
the average rating was 6.7, indicating
a challenge perceived as ‘moderate
to high’.
But again, the pan-sector view
disguises differences between different
types of utility. Water companies, for
instance, were broadly unequivocal
about the need for organisation changes,
with three-quarters expecting to make
such changes, 25 per cent were unsure,
and not a single respondent answered in
the negative.
Among energy companies and energy
network operators, though, a very
different viewpoint emerged. Among
energy companies, for instance, almost
two-thirds of respondents – 62 per cent
– responded in the negative, and half
of respondents did so among energy
networks. The proportion of respondents
that reported in the affirmative was
commensurately lower, as was the
proportion of respondents who said they
were unsure.
What sorts of changes were
respondents anticipating, though? And
why were organisational changes likely to
be needed in the first place? In their own
words, respondents talked through
their rationales.
Moving to cloud technology would
mean not only a smaller IT department,
said many respondents, but also meant
that a different skills profile would
be necessary. “Managing commodity
cloud services requires different
ORGANISATIONAL CHANGES
Will the adoption of cloud technology mean changes
to utilities' organisational structure? Across the sector
generally, opinion was broadly split – 48 per cent
of respondents did not expect cloud technology to
necessitate any change to their organisation's structure,
45 per cent expected that cloud technology would require
such changes, and just 7 per cent were unsure.
Watercompaniesmostlikely
tobelookingtoimplement
structuralchanges
Q: Do you believe the adoption of cloud technology necessitates
changes to your organisation’s structure?
Workingwithmultiple
cloudprovidersiscreating
challengesforthesector
Q: Does your organisation have one or
multiple cloud providers?
Figure 8
Figure 9
“ Managing commodity cloud
services requires different skills,
capabilities and functions”
2.3
6.7
Averagenumberofproviders
Averagechallengeratingofworking
withmultipleproviders
Overall
Water
EnergynetworkEnergycompany
75%
25%
7%
45%
48%
38%
62%
50%
10%
40%
Three+
52%
One
22%
Two
26%
Yes No I don't know Source: Utility Week Cloud Technology April 2016Source: Utility Week Cloud Technology April 2016
Q: On a scale from 1 to 10, how challenging do
you find it to manage multiple cloud providers?

BUSINESS CASE AND ROI
Finally, how easy is it to build a clear ROI and business case
for cloud adoption – and is the regulatory regime a driver
or an inhibitor when it comes to making that journey? Once
again, respondents had firm views. And views, moreover,
that were not necessarily of comfort to cloud providers.
When building a business case, for instance,
respondents placed the ease of building that ROI and
business case more or less in the middle of a scale of
one to ten.
business continuity, quality
risk factors, and changes
required to update
management processes.
“There are clear
advantages to cloud
technology, but also
clear risks – and opinion
among CIOs varies, with
the jury still out,” said
Susan Furnell, founder
at strategy consultants
Furnell Consult. “They
know they won’t lose their
job through doing more of
what they’re already doing
– but that they might lose
it they migrate everything
to Cloud and end up with
a disaster.”
PERCEPTIONS OF RISK
Nor were respondents sanguine about
the risks related to cloud technology and
cloud technology adoption projects. Asked
to rate a number of such risks on a scale
from one to ten, where one represents
zero risk and ten represents an extremely
high risk, respondents across the utility
sector had relatively few concerns about
the quality of cloud provision (rated 3.9 on
average), or of a loss of transparency (rated
4.0 on average).
On the other hand, data security was a
major concern (rated 6.5 on average), with
the risks associated with the migration
of safety-critical and mission-critical
applications being rated even higher, at
7.6 on average. In the middle ground,
rated 4.5-4.7, were risks such as a loss of
Migrationanddatasecurityare
thegreatestperceivedrisks
Q: On a scale from 1 to 10, what is your perception of the following challenges arising
from cloud technology?
Acombinationofcomplexbusiness
casesandregulationwillpotentially
delaymigrationplans
Q: On a scale from 1 to 10, how easy is it to build a clear ROI and
business case for the adoption of cloud technology?
Q: Is regulation a driver or inhibitor for the cloud journey?
15% believed it was neither/neutral
“I’m neutral really on this question. I think regulation could drive or inhibit and can’t
really see any impact at the moment.”
Figure 10
Figure 11
Risks associated with migration of safety-
critical and mission-critical applications
Data security
Changes required to your organisation’s change
management processes
Quality risk factors (functionality, performance,
manageability, security and user satisfaction)
Business continuity
Losing transparency
Quality of cloud provision
“ It is noticeable that in every
instance, energy networks
rated risks higher than their
peers in other utility industries”
That said, as we see below, these perceptions of
risk are bolstered by the more cautious energy network
industry, where respondents have typically rated risks
more than two points higher on the scale of one to ten –
in effect, perceiving a risk rated at three by other utilities
at just over five. It is noticeable, for instance, that in
every instance, energy networks rated risks higher than
their peers in other utility industries.
But is this perception justified? Referring back to utility
industries’ actual use of cloud computing, there are signs
that indicate an inverse correlation may be at work.
Energy networks use cloud computing the least,
with no respondents in that group reporting ‘complete’
adoption of cloud technology, 23 per cent reporting no
use, and 77 per cent reporting only partial use. Yet this
is the industry group that perceives the highest risk. On
the other hand, respondents from water companies and
energy companies – retail and generating, where a body
of real-life experience with cloud technology exists –
generally perceived risks as being much lower.
The inference is clear: there has to be at least a
suspicion that with limited first-hand knowledge of cloud
technology, respondents tend to overstate the perceived
risks of such technology compared with those that have
first-hand experience.
Average riskrating
1= no risk at all, 10 = extremely high risk
Driver Inhibitor
Overall Water
company
Energy
network
Energy
company
Overall Water
company
Energy
network
Energy
company
7.6
6.5
4.7
4.7
4.5
4.0
3.9
54% 50% 62%
44%
46% 50% 38%
56%
5.5 5.9
4.8 5.3

respondents seeing the
regulatory regime as an
inhibitor. In fact, only in
one industry group in the
sector – energy networks
– was the most commonly
held perception that the
regulatory regime was not
an inhibitor.
That said, a complex
variety of reasons
underpinned each
sentiment, with little
overall consensus. Among
those who considered
the regulatory regime
an inhibitor, for example,
respondents most
commonly cited data
protection regulations and
a pricing environment that
pushed utilities towards
capital expenditure
rather than operational
expenditure. In the case
of those who thought the
regulatory regime was a
driver, respondents spoke
of a growing shift towards
pricing environments
based on totex, and a
continued downward
regulatory pressure
on costs.
A similar message
is seen in respondents’
perceptions of the impact
of the regulatory regime
on cloud adoption. A
minority of respondents
– 15 per cent – believed
the regulatory regime had
no impact either way on
utilities’ cloud journeys.
But the remainder – 85
per cent, or more than
four out of five – did
perceive an impact, with
the prevailing sentiment
pointing to the regulatory
regime as an inhibitor.
In fact, some 54 per
cent of respondents with
an opinion expressed
this view, as opposed
to 46 per cent who took
the opposite stance,
and believed that the
regulatory regime acted
as a positive driver of
cloud adoption.
And in the case of
energy companies –
retail and generating
businesses, in other
words – this view was
strongly held, with no
fewer than 62 per cent of
Given the prominence of cost
pressures and improvements to quality
of service among the factors cited
by respondents as drivers for cloud
adoption, an overall score of 5.5 for
building a business case and ROI seems
surprising – and to cloud proponents,
hardly encouraging.
Granted, some industries – energy
companies, for example – found it slightly
easier, but the fact that each individual
industry response was more or less
within 10 per cent of the overall sector
average highlights what appears to be a
fairly widespread perception.
“Look in detail at cloud technology’s
benefits, and it isn’t always easy
to quantify the ROI,” observed Eric
Woods, research director at utility and
energy specialists Navigant Research,
commenting on the research. “The
operational reasons for moving to the
cloud are one thing; the financial ones
quite another.”
Christine Easterfield, principal
consultant at analyst firm Cambashi,
said: “The calculation of where ROI cost
savings are coming from can be complex
in a utility context. While savings on
infrastructure are a given, areas such
as on-demand licences and access are
more problematic. There are savings –
but there can be comparable savings in a
non-cloud context too.”
“ A minority of respondents – 15 per cent – believed
the regulatory regime had no impact either way on
utilities’ cloud journeys”
TCS VIEWPOINT...
For utilities, the ROI of the cloud needs to be looked at from
an overall totex perspective, as opposed to an opex vs capex
perspective. Utilities need to be prepared to move to a world
of not just one cloud, but multiple clouds – and a world where
these multiple clouds need to interact among themselves and
with on-premise applications to deliver seamless end-to-end
business processes.
The lack of orchestration between clouds was a huge oversight
by the early adopters of SaaS and PaaS solutions. This led to IT
functions having to clear up behind the business using multiple
point-to-point interfaces to manage varying data integrity, security
and business rules issues between edge applications.
Utilities were only moderate adopters, so they have a significant
advantage in being able to apply best practice learnt elsewhere
to evolve architectural changes around the fabric of data, security
and integration management. TCS’s view is that utility CIOs need
to lay the foundation to an outside-in architecture. This would
allow the business to tap into sustainable innovation, leveraging
a broader ecosystem – which underpins the API economy we are
entering. This will allow them to mobilise external third parties
as a natural extension of their on-premise applications to explore
opportunities through new operating and business models.
This will mean that cloud management IT functions have to
introduce new capabilities around this space. One of the
key capabilities is cloud orchestration and cloud brokerage
functions , which can be critical in setting up the
outside-in architectures.

CLOUDADOPTIONANDUKUTILITIESDebatebacksresearchfindings 1 2 3 4 5 6 7
“
The
benefits
of the
cloud are around
its processing
power – it is not
just about
data storage.”
I
n late May, Utility Week and TCS
hosted a roundtable debate with
operational and information
technology professional and smart
strategists. Attendees represented
a wide range of utility sectors,
including water companies, DNOs
and energy suppliers.
The views they expressed during this
debate largely corroborated the findings
of this research report. In particular, they
emphasised that energy networks are far
more reluctant to place key systems and
data in the cloud. As network participants at
the debate clarified, where cloud offerings
can deliver cost-effectiveness in commodity
IT services, they are viewed as useful. But all
core operational information is considered
far too sensitive to be placed in the cloud.
A breach of security for an energy network
could, after all, lead to catastrophic failures
in critical national infrastructure.
More broadly, cloud computing was seen
as essential in the transition to smarter
utility services. Their ability to provide
flexible processing power for the influx of
enormous deluges of data was seen as
highly valuable. Cloud computing was also
seen as an essential part of the strategy for
future customer and workforce engagement,
since the next generation of consumers and
workers will have ingrained expectations
about their ability to freely access data and
to receive responsive, real-time services.
As with respondents to this research,
the biggest risk associated with using cloud
“
Utilities have approached
the first round of cloud
adoption in moderation,
and this gives them an opportunity
to leverage the learnings from
other industries for the next round.
They could lay the foundation for
the API economy by setting up an
outside-in architecture to enable
sustainable innovation in a
broader ecosystem.”
“
When cloud
providers
have outages
they tend to be big
and they would have a
significant impact on
a utility.”
“
It would be very
brave of a utility to
use the cloud for
critical infrastructure and
services. The transformation
deployment and selection of
various cloud models, in
conjunction with existing
on-premise technologies,
will help the industry to
move forward.”
“ The
cloud
has got its
place for
commodity
IT services…
but for niche
or bespoke
requirements
in our
business
we’re some
way off.”
“
Fundamentally we just
couldn’t move our
electricity network
control systems into the cloud at
this stage. They are our
lifeblood for our business and
our customers.”
computing more widely was seen to be
security, and participants talked at length
about their strategies for selecting carefully
the data that could be made available
in the cloud. The merit of ‘hybrid-cloud’
solutions or ‘private cloud’ solutions in
helping mitigate security concerns while
still allowing the benefits of flexibility,
accessibility and cost were also discussed.
Of all attendees present, the only
individuals who confidently stated that their
businesses had moved completely to the
cloud were new entrant energy retailers,
which saw themselves as “technology
companies first” – not energy companies.
Here’s a selection of quotes from the
roundtable discussion:
“
The rise of smart
metering and smart
networks will drive a
requirement for greater
processing power that we will
struggletomeeton-premise.”
Rishabh Arora,
director, GTM
Solutions,TCS Utilities
Business Unit
Aninda
Mukherjee,
enterprise
architect – utilities
transformation,
TCS Utilities
Business Unit
Jeremy Heath,
innovation manager, Sutton
and East Surrey Water
Ian Ballantyne,
infrastructure and telecoms tower
manager, UK Power Networks
Chris Welby,
head of regulation,
Bristol Energy
Paul Geddes,
head of IT and
telecoms, Electricity
North West

CLOUDADOPTIONANDUKUTILITIESConcludingthoughts 1 2 3 4 5 76
TCS CONCLUSION
For utilities, the reality
is that they will continue
to operate in a hybrid
world made up of on-premise and cloud-
based applications. Hence the evaluation and
finalisation of cloud adoption strategies has
to be carefully designed in conjunction with
business and technology innovations occurring
in the entire ecosystem. It is equally important
to understand the transformation deployment
and selection of cloud environment models
(IaaS/PaaS/SaaS) in conjunction with
existing on-premise technology. Hence it
is good practice to build the components to
orchestrate the cloud today, so you can better
adopt more compelling services as the market
develops. One way of doing this is to consider a
cloud-based integration platform-as-a-service
application to complement traditional EAI.
Moving forward the cloud ecosystem will
help the industry design new service models
and devise usage-based chargeback models.
However, just the adoption of the cloud by
itself will not ensure that new market entrants,
enriched with digital technology, can be
countered. Developing sustainable competitive
advantage requires disruptive thought
leadership. Cloud bursting or predictive real-
time analytics are some of the groundbreaking
disruptions that the front runners in the
utilities sector around the world are leveraging
in order to develop new operational and
business models.
W
hat then to make of all
this? Several points
stand out.
Broadly speaking, the sector agrees on
the benefits of cloud technology, and the
drivers underpinning its adoption.
What are those key drivers? First,
cost pressure; second, the drive
to improve a company’s quality of
service; and third, a goal of reducing
the company’s infrastructure footprint
And – especially on an industry-by-
industry basis – the relative rankings of
the top three drivers say a lot about the
pressures that the sector is under, in
particular the pressure to improve quality
of service versus the regulator-driven
push for cost savings.
In two of the three industry
groups – water companies and
energy companies – cost pressure
comes second to the drive to improve
quality of service, with cost pressure
perceived as the top driver only
among respondents from energy
network companies.
Although conviction about the drivers for
cloud adoption was clear and unequivocal,
respondents still had to be convinced of
the merits of the cloud when it came to some of the more
strategic claims made for cloud technology. Put another
way, respondents can see the value of cloud technology
from an IT-specific and operational point of view, but they
are far less convinced when it comes to issues closer to
the boardroom.
The third point to make is that despite the importance
of these imperatives, the sector is holding back from a
rapid and extensive adoption of cloud technology. Partial
migration is the norm – and for many, full migration
remains years away.
Why such a slow pace of adoption? The prime reason
cited by respondents was the sheer complexity of the move,
not least because of the sector’s legacy systems and the
need to undertake appropriate due diligence, especially
in the context of cloud-based systems’ impact on critical
national infrastructure.
Fourth – and finally – an examination
of the challenges and risks of cloud
technology adoption makes it clear that
there is an opportunity for utilities to gain
a better understanding of best practice in
managing the complexity and challenges.
Simply put, the utility sector needs help
to understand how best to approach and
plan the migration to cloud technology, and
then undertake the implementation and
ongoing management of cloud platforms.
These broad areas can be broken down
into a need for support and assistance
when it comes to:
Overcoming the complexities of
cloud migration.
Tackling the challenges posed by
utilities’ legacy environments.
Addressing the – very real – security
concerns raised by cloud technology,
especially in a data protection and
regulatory context.
Building better and more compelling
business cases and prospective ROIs.
Dealing with the challenges posed
by managing multiple cloud
technology suppliers.
As this report has highlighted, there is
little doubt among utility companies about
the potential value that cloud technology
could deliver to their businesses. The
challenge lies in overcoming some of the
barriers that stand in the way of achieving
that value.
The prize on offer is a significant one.
And given the importance of utilities
to the economy, the environment, and
society at large, it is a prize that utilities
and their trusted advisers should
endeavour to attain.
“ Simply put, the utility
sector needs help to
understand how best to plan
the migration to cloud
technology, and undertake
the implementation and
ongoing management of
cloud platforms”

Cloud adoption in utility industry 2016

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