Laying the foundations for the digitalization of the energy industry
Thomas Habel, CIO at Alpiq, reveals how the electricity and energy services company has underpinned its digitalization strategy by moving its IT infrastructure to a managed cloud service.
The energy sector may be one of the world’s more conservative but that does not insulate it from the march of digitalization. At Alpiq, one of Europe’s largest electricity and energy services companies, CIO Thomas Habel highlights how the arrival of new digitally inspired business models, underpinned by technologies such as IoT, big data analytics and AI, are set to dramatically reshape the operational activities and competitive landscape of the sector — with IT organizations playing a crucial role in enabling that transformation.
“Digital transformation is a big theme for Alpiq. Across our different business units, we are trying to identify new digital business opportunities,” he says. Depending on the potential, such innovation can then be centralized and applied universally across the business, he says. “And the big driver behind this is IT,” he says.
The pace of change is such that the company has had to establish structures designed to “harmonize the flow of business cases, ideas and innovations around a strategy that will ensure Alpiq can exploit these new digital opportunities, he says. And the stakes are high, he stresses: “We have to get acquainted with these new approaches, as the [classic] industry business models around producing and selling energy are dead.”
At Switzerland’s largest energy company that coordinated strategy is already taking shape. An ambitious IoT program, launched late 2015 with the help of data extraction specialist Digital Route, will ultimately see all aspects of the company’s assets — from the components in power plants to trading floors — chip-enabled and connected in an enterprise-wide network providing real-time insight into the optimization of smart grids, energy exchanges, demand-side management and more.
While it promises to provide unprecedented business insight and efficiency, such innovation still needs to integrate with the existing IT landscape. With that in mind, Habel has adopted hybrid IT. “We created a bimodal approach. Naturally we have legacy IT dealing with the existing applications. Alongside sits another group that is focusing much more on new digital topics, supporting the business coming up with those ideas and making them happen. But that group is still part of the same business organizational structure.”
Setting a digital transformation agenda comes with organizational challenges, too, and Habel says an early priority was to ensure all stakeholders in digital projects were working towards the same goal. As he explains: “Everyone has a different understanding about what digitalization is.” So starting with the executive board, his group ran education and awareness sessions to convey across the company just how important digital initiatives are to Alpiq’s future. His second challenge was a familiar one: finding the funding for such digital projects and the people who had the right balance of technical skills and deep business understanding to execute them.
Era of customer-centricity
The energy industry as a whole is changing, and many of the challenges Habel is seeing are a reflection of wider industry trends. “Going forward, people working in the energy business will have to have a different mindset, different skills and a different business focus because this industry will be very different in the future. Simply selling power to end-customers will not be enough any more. So we need to understand the customer better in order to know what else we can provide them.”
As Habel says, IT hasn’t always trained its focus on the end-customer; but with the rise of technologies such as big data analytics and data lakes, IT teams now have a brief to create great user experiences that drive revenue growth and profitability. “The energy business will change. We have to be much more customer-oriented and customer-centric,” says Habel — and IT plays a big role in delivering that. That demands a two-way conversation between customers and the business, and access to a wealth of data on customer behaviour. “IT has to come up with the solutions for this, so the IT mindset needs to change to become more customer-centric,” he says.
He explains: “In order to support that we need to have processes in place to collect the data from the end-customers, to analyse that and to understand what else can be offered to them to generate future business. So it will be a whole new IT landscape.”
Outsourcing IT infrastructure
One pillar in Alpiq’s re-architecting for the digital age has been a strategic move to outsource its IT infrastructure to global ICT company Fujitsu, with the core aims of increasing business responsiveness, improving systems performance and scalability, simplifying operations, reducing energy consumption and cutting costs.
The outsourcing project — which kicked off two years ago — has seen the consolidation of four of Alpiq’s data centers into two new Fujitsu facilities and the delivery of enhanced services through the tech company’s Infrastructure as a Service and Platform as a Service cloud solutions. Alongside that, the move has also enabled the consolidation of applications and services such as Exchange, Lync and Sharepoint, as well as the optimization of security and network services.
Habel highlights how the transition took only 18 months from contract signing to launch, with the welfare of Alpiq staff a key focus. “With such a transformation project you have to take care of your people. We now need different skillsets — staff now spend more time managing than doing, and it was important our partner was able to take our people into new areas,” he says.
Success measurements are vital in a project of this size, says Habel, pointing to significant savings. “We have reduced costs massively, by a double-digit percentage,” he outlines.
The Fujitsu environment is also providing the Swiss energy company with the ability to scale its IT to meet increased digital demands. The IoT platform is a good example, says Habel. The business constantly needs to add assets and new data sources so the Fujitsu platform must be able to scale quickly. “We needed an infrastructure that was much more flexible and could react to changing volume levels,” he says. “Not only do the new services work very well, but we have also achieved all the targets we set for this outsourcing project.”