Are utility providers finally modernizing? Driven by increasing competition in the energy sector due to deregulation, evolving customer expectations, and a desire for reduced operational costs, energy providers are beginning to chase digital transformation by shifting away from the inefficient and prohibitively expensive on-premise technology they’ve traditionally relied on, in favor of full cloud or hybrid cloud solutions.
So why the change, and why now?
Traditionally, utility companies and energy providers have been restrictively risk-averse, and have been slow to adopt new technologies over concern about control, security, and privacy. So as other industries have made the transition to the cloud and reaped the benefits of a full cloud or hybrid cloud infrastructure, utility companies have remained tethered to on-premise solutions—though it appears that their confidence in on-premise may have been misguided. According to a report from Tata Consulting Sevices: “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.” While data remaining on-premise gives utility companies the illusion of security, statistically, data is safer in a public cloud infrastructure—particularly considering that 73% of companies do not feel prepared for a cyberattack.
Coupled with confidence in security, advancements in technology are also driving a shift to the cloud for utility companies; the Internet of Things (IoT) alone is expected to double each year in the utility industry between now and 2024, to a total expenditure of $15b. These expenditures are primarily being driven by investments in smart grid and smart metering.
Utility companies have an enormous opportunity to collect and optimize energy delivery based on collected data, saving money both for end customers and for the organization. As more non-traditional utility providers enter the market and former monopolies or single-provider markets fall by the wayside, delivering innovation, competing on cost and improving customer experience will become more imperative for existing utility companies—and when was the last time you heard about an on-premise solution driving any of those?
Utility early adopters have been reaping the benefits for a number of years now and have been able to deliver on grander-scale projects and modernize their infrastructure at a faster rate—it’s now on the laggards in the industry to catch up. So while the shift to a cloud-based infrastructure will be critical for utility companies moving forward, options still remain. Should your utility go full cloud or hybrid? Public cloud, or private? What are the benefits and drawbacks of each? And which solution will better poise your utility company to scale into the next year and beyond?
When considering shifting to the cloud, there are three main deployment models:
- Private cloud: Private cloud deployments are designed to be managed by one client or a third-party administrator on-site or off-site.
- Public cloud: Public cloud deployments are available for use by the general public and owned by a cloud service provider (think Microsoft, Amazon Web Services, etc.)
- Hybrid cloud: Hybrid cloud uses a mix of on-premises, private cloud and third-party, public cloud services with orchestration between the two platforms.
Smaller utilities and municipalities, who traditionally own little of their own infrastructure (which, coincidentally, is the exact same model as cloud computing), are solid candidates for a public cloud deployment due to fewer bureaucratic or regulatory hurdles to clear, reduced implementation cost, and speedier time to deploy. Larger utilities, however, particularly in monopolistic markets, with greater government oversight and stricter compliance requirements, will probably feel more comfortable with a private cloud deployment, allowing for greater security.
How utilities are deploying the cloud also determines the ideal configuration. For utilities that are predominantly deploying the cloud in a retail environment, public cloud implementation of SaaS solutions focused on delivering seamless customer experience, and better customer data collection makes sense; for other utilities relying solely on infrastructures such as smart grids and smart metering, a private cloud likely makes sense. And fully integrated utility companies looking to deploy cloud across the entirety of their operations, both from a retail and infrastructure viewpoint, should explore the potential for a hybrid cloud deployment.
A hybrid cloud environment that will mesh both the private cloud infrastructure and IoT network, as well as public cloud instances of business software to manage, collect, analyze, and act on data across the entire scope of their operations, will offer the greatest flexibility and potential.
For utility companies looking to upgrade to the cloud, it may seem late in the game, but it’s never too late to start realizing the benefits currently being enjoyed by enterprise businesses and upstart competitors, including greater efficiency, a better understanding of customers, and lower cost to manage.
At OnActuate, we’ve worked with utility companies, government agencies and those in the public sector to find solutions that work for the business and the regulations. If you’re considering your next step toward cloud deployment, we can help you assess the options and determine the best path forward for your business type, and goals. Contact us to learn how you can begin migrating in part or in full to the cloud today.