Ahead of our forthcoming SAP for Utilities conference in San Diego next month, ASUG sat down with Michael O’Donnell, national vice president of utilities at SAP. In this first part of our conversation, he discusses the lay of the land in the utilities industry and the growing importance of sustainability to utilities companies and their customers.
ASUG: Tell me a little bit about what's going on in the utilities landscape today.
Michael: There's such a confluence of things that are happening right now to the utilities industry. I've been with SAP for over 20 years and in the utilities practice almost that entire time. For many, many years, utilities processes were straightforward. Deliver electricity, gas, water, pick up trash, and collect payment. I can tell you that the expectations consumers have with their utilities have drastically changed.
Let me start with climate change. When you think about the utility, obviously it contributes a large amount of the carbon emissions that go into the total CO2 output around the planet. When you drill down to the specifics of how the utilities industry is thinking about how it drives down carbon emissions to try to get to zero CO2 emissions, there are a lot of different approaches and initiatives. This topic has been a discussion for well over a decade. The change that's happened is that there seems to be a lot more urgency around taking action. Instead of just saying, "We're looking at how we reduce our carbon output and we're trying to do things to become more sustainable as an organization to be cleaner and greener," organizations are actually now being much more target directed. They are saying, "We're working to get to carbon neutral by x-date, and these are some of the steps we are going to take.”
The second thing is how organizations are addressing the concept around diversity, equity, and inclusion. In the utilities industry, organizations have been drivers in a lot of ways around serving underrepresented populations in their employee base, including women, veterans, and minority stakeholders of all different types. But much of the approach has been programmatic in nature. What I mean is they might have a program that states, "We want to hire more women. We seek diversity. We have a program around driving more veterans to our ranks." These programs need to become more of an integrated part of how their organization operates. Organizations in the utilities ecosystem are working hard to figure that out. We've done work with the NUDC [National Utilities Diversity Council] discussing different approaches that are helping bring that to fruition. The reality of running a program is that programs have a beginning and an end. It's not fully part of your organizational DNA and who you are. The next step in the utilities industry is to make diversity and inclusion fully integrated into who they are as an organization.
From an SAP perspective, we are helping these organizations drive their technologies to address a few different things. First, there is the changing nature of the utility, meaning organizations have to figure out how to become more agile to deal with the changes that they're facing much more rapidly. Second, there is a generation perspective. Determining how the generational mix is changing, and how to operationally handle it from a technology perspective. Then there’s security, which is a major issue for utilities. Organizations are working to be able to take a more proactive stance in how they approach that challenge. Finally, there’s customer engagement. What customers expect from the utility has completely changed. The ability to examine how people consume energy and the engagement that can now happen because of that examination completely changes the value that a utility can provide to their customers. Utilities are having to figure out how they can change and how they should engage to make sure that they're meeting demands and staying the center of the universe for the customer that they serve.
ASUG: What are the main hurdles in the utilities industry and how are your customers using SAP solutions to overcome these challenges?
Michael: We have amazing customers that have been with us for a long time. With them being customers for such a long time and having our solutions in place for a long period, the question of how to effectively evolve is a huge challenge that they're facing right now. It's a challenge that we're working through from an SAP perspective. It's not a one-size-fits-all approach. We’re looking at how to get them to digital platforms that give more agility and to do so in a secure way.
Instead of being in a data center where you have your applications, and where you run, manage, and secure them, we're now in a situation where a lot of this work is running in an organization’s cloud infrastructure. It is a different set of considerations. A lot of our focus is on trying to help our customers solve that challenge of how to evolve into these new systems that are going to allow them that needed flexibility. It's a work in progress, but it's exciting because I think this effort also has created an environment with a lot of opportunities for us to help our customers formulate what the next 20 to 30 years look like.
ASUG: With all that in mind, what are some of the opportunities that you see in the utilities sector right now?
Michael: There are lots of different opportunities. I think with change, there always is an opportunity to change how you engage, operate, and run from a utilities perspective. Depending on where the utility resides and how heavily they're regulated, some of that opportunity is somewhat—quite frankly—put within the confines of those regulations. Utilities organizations have to deal with and work through those challenges. But there are so many different opportunities. When utilities start to think about how they're evolving their generational mix to reduce carbon, they’re looking at creating smart networks, the end-to-end process, from generation to end-state consumption by the consumer. The importance of having sensors throughout that entire generation, transmission distribution, and consumption process changes the scope of information they have access to and what they can do with that information.
ASUG: It’s been so refreshing to watch SAP make sustainability a key focus. I know that things like the recent UN Report on the coming impacts of climate change have been distressing to read.
Michael: It's pretty dire, right? The SAP Chief Sustainability Officer Daniel Schmidt has several key initiatives on how we're approaching the challenge of climate change. Because it's not just utilities that are saying, "We need to reduce our carbon output." It's every organization and company that SAP engages with. Every company and organization now has a sustainability strategy. They have a strategy on how to get it to carbon neutral. For us, it is a holistic discussion and approach that goes well beyond just the utilities sector. I think the other interesting thing is how utilities take advantage of and dovetail with what their constituents are trying to do. With the organizations that they engage with from a commercial and an industrial perspective, how will they do that?
We are doing a pilot with one of our utilities around sustainability management and accounting. How do you account, financially, for how you're measuring toward your sustainability goals? That process can only be done by taking all necessary data and gleaning the information that is having an impact on driving down carbon consumption.
ASUG: Beyond the overall focus of sustainability at SAP, it seems like the utilities side of the house is also incredibly focused on this topic as well. Can you talk about why you think this is so vital right now?
Michael: Sustainability is such a passion of mine, even outside of my job at SAP. I do advisory work with companies that are looking at alternative and distributed power technologies. I think there's a lot of different emerging technologies that will play a role in the future of the energy mix. There are so many companies doing great work in this space, like TerraPower using spent nuclear fuel to create a new generation, or ESS focusing on long-term energy storage and how that will play into the future of the energy mix. There’s a lot of energy—no pun intended—being put toward how to solve this problem.
An “all of the above” strategy is going to be the answer in the end. There's not going to be some panacea answer of one solution that's going to solve all of our energy needs. It would be nice, right? All the different sustainability efforts will play a part as we move forward through the upcoming decades, and I do think we probably need to measure progress in decades, not years.
Register for the first in-person ASUG conference in over a year and half. SAP for Utilities will take place in San Diego Oct. 17–19. You can register here.