When it comes to cloud, energy providers are big spenders. Some estimates predict utilities will invest more than $4 billion in public cloud solutions by 2019.1
What’s behind this momentum?
A big factor is that, at a macro level, utilities face a number of critical threats to their business:
Aging infrastructures make it difficult to meet customer needs
Regulatory bodies are requiring utilities to be more flexible, agile, and efficient
There’s a mandate to decarbonize quickly
Customer demand and expectations are evolving, based on experiences in other sectors
Furthermore, according to International Data Corporation (IDC), by 2020, non-utility companies and digital disrupters will seize 20 percent of the energy retail market, tripling the profitability gap between the companies that thrive and those that merely survive. IDC also predicts that by 2020, 2.5 gigawatts of electricity will be generated by 20 percent of Fortune 500 companies wholesaling their excess distributed energy resources power through utility-independent subsidiaries.2
Cloud has the potential to help utilities combat these challenges in several ways.
First and foremost, cloud can help them get lean. Utilities, on average, spend $624 million on IT infrastructure. In Accenture's experience, moving to cloud could potentially help shave between $70 million and $168 million off that spend.
Lower costs are always very attractive. But other factors are also enticing utilities to cloud.
Cloud has the potential to help utilities improve their performance in several significant ways beyond pure cost reduction:
Shift from Capital Expenditures (CAPEX) to Operating Expenses (OPEX): Cloud reshapes IT finance by allowing IT to take advantage of the as-a-Service and on-demand features of the cloud business model.
Flexibility and agility with reduced sunk investment: With cloud, utilities can experiment, test, and refine solutions without major outlays of cash.
Unlimited compute and advanced analytics capabilities: Cloud provides responsive operational performance in minutes rather than days, as well as access to the latest technology and innovations such as hyperscale compute, in-memory compute, and big data analytics.
Transparency and real-time reporting: This feature provides valuable support to contracting, joint venture, and alliance arrangements.
Ability to deliver new products and services quickly and efficiently: Cloud makes possible far faster deployment of infrastructure and IT services and shorter application development cycles, while enabling utilities to bring innovative products and services to market.
In Accenture's experience, moving to #cloud could shave between $70 million and $168 million off a utility’s IT infrastructure spend.
In fact, utilities we see making a bold pivot to cloud are embracing new working models, sophisticated insight tools, and innovative logistics solutions.
One global energy provider improved insights into its business customers’ energy usage through cloud-based personalized emailed reports and an integrated Web portal, while a major Australian power company is using cloud to digitize 22,000 field workers, improving productivity by an average 72 percent.
In Europe, an energy supplier is using cloud-based technology to centralize the real-time operation and control of 7,000 megawatts of power from 220 wind farms, 70 mini-hydropower plants, and more than 6,000 wind turbines across nine countries.
Cloud has introduced extraordinary opportunities for utilities to transform how they grow and monetize assets, serve customers with novel offerings, and scale their business. When used to its fullest advantage, cloud and all its attendant benefits have the potential to redefine what it means to be a utility—and how a utility competes in the coming years.
For more insights on how cloud can power the utility of today and tomorrow, key principles that can guide utilities’ journey to cloud, and strategic options for using cloud, read our point of view, “What’s Driving Utilities to Cloud?”