As the util­i­ties sec­tor wres­tles with the con­ver­gence of key top­ics, such as com­mit­ments to zero-car­bon emis­sions and adop­tion of cloud ERP, indus­try lead­ers’ trans­for­ma­tion strate­gies must be designed to at once release their busi­ness­es from decades of tech­ni­cal debt and enable them to embrace inno­va­tion in the decades ahead.

Enter­prise appli­ca­tions in gen­er­al — and SAP plat­forms in par­tic­u­lar — will play a vital role in enabling an indus­try-wide evo­lu­tion that impacts every aspect of util­i­ty oper­a­tions. To bet­ter under­stand the shift­ing util­i­ties land­scape and gain insights into the oper­a­tional oppor­tu­ni­ties cur­rent­ly avail­able to indus­try lead­ers, ASUG recent­ly inter­viewed Michael Sul­li­van, North Amer­i­ca’s new­ly appoint­ed Nation­al Vice Pres­i­dent – Renew­able Ener­gy & Util­i­ties at SAP.

Ahead of deliv­er­ing the open­ing keynote at this year’s SAP for Util­i­ties, Pre­sent­ed by ASUG con­fer­ence (Oct. 9 – 11 in Chica­go, IL; reg­is­ter here), Sul­li­van dis­cussed three major top­ics that will inform his address: ener­gy tran­si­tion, cloud adop­tion and busi­ness transformation. 

This inter­view has been edit­ed and condensed. 

ASUG: While the util­i­ties sec­tor has tra­di­tion­al­ly been seen as a risk-con­scious indus­try, this sec­tor is now mov­ing for­ward with ambi­tious busi­ness trans­for­ma­tion objec­tives. What part will enter­prise appli­ca­tions play, and what is SAP’s role, in ongo­ing efforts to enable and accel­er­ate trans­for­ma­tion for utilities? 

Sul­li­van: We’re in the mid­dle of an ener­gy tran­si­tion. We’re see­ing one of the largest macro­eco­nom­ic shifts that we’ll prob­a­bly see this cen­tu­ry — cer­tain­ly in our gen­er­a­tion — where pow­er gen­er­a­tion and ener­gy con­sump­tion are mov­ing toward renew­ables and the elec­tri­fi­ca­tion of everything. 

With­in that con­text, SAP’s port­fo­lio is per­fect­ly suit­ed to help dri­ve that trans­for­ma­tion in many areas, start­ing with the utility’s end cus­tomer, who’s not only a con­sumer of ener­gy but now also a par­tic­i­pant in the gen­er­a­tion and man­age­ment of ener­gy. More than ever, we see the crit­i­cal­i­ty of engag­ing with these con­sumers and bring­ing them into the process. SAP works with our util­i­ties cus­tomers to dri­ve trans­for­ma­tion in the way they engage with their cus­tomer base. 

In the past, we may have focused on cre­at­ing a mobile app for online pay­ments and account man­age­ment. Today, we still do that, but cus­tomer expec­ta­tions and behav­ior pat­terns are push­ing us to con­sid­er how to cre­ate much deep­er and more holis­tic expe­ri­ences. For exam­ple, when some­one installs solar on their home and becomes a par­tic­i­pant in pow­er gen­er­a­tion, how is SAP work­ing with the util­i­ty to trans­form and engage that cus­tomer with new pro­grams and ser­vices? What are poten­tial new demand response par­a­digms? How is cus­tomer engage­ment evolv­ing in this con­text? This is a key area of focus. 

On the oth­er end of the equa­tion, we’re see­ing util­i­ties — and even indus­tries out­side of util­i­ties — make mas­sive invest­ments in the devel­op­ment of renew­able ener­gy sources: solar, wind, the mod­ern­iza­tion of hydro, and even micro-nuclear gen­er­a­tion in its ear­ly phas­es. We’re see­ing pri­vate equi­ty firms engage deeply in con­sol­i­dat­ing assets. We’re see­ing ener­gy stor­age com­pa­nies emerge and start to grow at scale in terms of their abil­i­ty to plug into and man­age the inter­mit­tent nature of these gen­er­a­tion assets on the grid. And SAP is being asked how we can help with this.

Con­sid­er a util­i­ty deploy­ing grid-scale solar. There are count­less ques­tions to nav­i­gate, many of which fall square­ly in SAP’s domain. How are these com­pa­nies going to pri­or­i­tize poten­tial invest­ment, iden­ti­fy land, and man­age those leas­es? How are they going to struc­ture and man­age the legal enti­ties that spring up around these new renew­able assets? How are they going to opti­mize con­struc­tion of these assets and man­age mate­r­i­al acqui­si­tion? How are they going to most effi­cient­ly main­tain those assets, and even pro­tect them from dig­i­tal and phys­i­cal secu­ri­ty threats, giv­en geo­graph­ic distribution?

SAP has an extreme­ly rel­e­vant role to play in the trans­for­ma­tion tak­ing place across the entire ener­gy spectrum.

ASUG: This, of course, relates to anoth­er high pri­or­i­ty of util­i­ty indus­try exec­u­tives: zero-car­bon ini­tia­tives. How is SAP help­ing this sec­tor cap­ture and track new vari­ables to man­age and inte­grate oper­a­tions that meet zero-car­bon emis­sion objectives? 

Sul­li­van: You’ve heard about SAP Green Ledger. We’re in a unique posi­tion where we can help our cus­tomers report on and cap­ture that infor­ma­tion from an ESG per­spec­tive, to ensure they can speak to and man­age that side of their oper­a­tions. Because SAP goes beyond report­ing and is cen­tral in man­ag­ing the sup­ply chain, man­ag­ing gen­er­a­tion assets, and even man­ag­ing the way that dis­trib­uted ener­gy resources are engaged on a cus­tomer front, we’re going down to the oper­a­tional lev­el to help util­i­ties achieve car­bon goals and sus­tain­abil­i­ty goals — in addi­tion to help­ing them mea­sure, report, and under­stand their progress on those goals. 

ASUG: What’s the state of cloud migra­tion ini­tia­tives in the util­i­ties sec­tor? What ben­e­fits do util­i­ty com­pa­nies gain by inte­grat­ing cloud into their IT architecture? 

Sul­li­van: Util­i­ties orga­ni­za­tions have broad­ly embraced the fact that today’s tech­nolo­gies need to be deliv­ered in the cloud. The con­ver­sa­tions we’re hav­ing dai­ly with cus­tomers cen­ter around ​“when,” not ​“if.” And for SAP, help­ing our cus­tomers move to Cloud ERP for their core finan­cial, asset and cus­tomer sys­tems is absolute­ly top of mind.

From SAP’s per­spec­tive, the cloud is a fun­da­men­tal enabler of what our cus­tomer are ask­ing us to deliv­er: amaz­ing and always-improv­ing user expe­ri­ences, best-in-class indus­try busi­ness process automa­tion, and opti­mized deci­sion sup­port, all under­pinned by Arti­fi­cial Intel­li­gence. This is what we are asked for. But the com­put­ing resources and data sets nec­es­sary to dri­ve that kind of inno­va­tion in the plat­form man­date that SAP deliv­er these capa­bil­i­ties in the cloud. We have no oth­er option. Our cus­tomers see that. 

We’ve passed the point where peo­ple are ask­ing, ​“Do we need this?” It’s become a ques­tion of how we do this quick­ly and how we do it in a way that inte­grates with and enhances the cur­rent oper­at­ing mod­els that util­i­ties use to deliv­er enter­prise assets.

ASUG: Like oth­er sec­tors, util­i­ty indus­try lead­ers strug­gle to bridge the tal­ent gap. How will emerg­ing tech­nolo­gies — like AI and advanced automa­tion — help com­pa­nies in this sec­tor to do more with less? 

Sul­li­van: First, cus­tomers are mov­ing their SAP envi­ron­ments into the cloud and allow­ing SAP to run and oper­ate them as cloud ser­vices. This is a sig­nif­i­cant shift toward let­ting com­pa­nies free up resources they need to dri­ve inno­va­tion around asset man­age­ment, cus­tomer engage­ment, and oth­er such areas. 

While the shift to cloud unlocks inno­va­tion, it also unlocks peo­ple. SAP is fun­da­men­tal­ly tak­ing on an oper­a­tional respon­si­bil­i­ty with util­i­ties cus­tomers more than ever. We’re becom­ing embed­ded in their core oper­a­tions, allow­ing cus­tomers to deploy lim­it­ed resources more strategically. 

Sec­ond, the evo­lu­tion that SAP has gone through — in terms of our own tran­si­tion to cloud and how we’re deliv­er­ing dig­i­tal cloud ser­vices — has become a force mul­ti­pli­er in terms of increas­ing the abil­i­ty of exist­ing util­i­ties staff to engage their work more effi­cient­ly and effectively.

For exam­ple, SAP flipped the script in terms of how ana­lyt­i­cal data is pre­sent­ed to employ­ees. We no longer want to sep­a­rate ana­lyt­ics from the exe­cu­tion of the busi­ness process. Rather, as cus­tomers exe­cute dai­ly on work order exe­cu­tion or finan­cial deci­sions, the ana­lyt­i­cal infor­ma­tion is embed­ded direct­ly in the trans­ac­tion­al sys­tem. Cus­tomers have a sin­gle view, and we’re merg­ing these two con­cepts so that we are not only mak­ing the process more effi­cient, but we’re also giv­ing them tools to do this more robust­ly and quickly.

Our core busi­ness, his­tor­i­cal­ly, was to deliv­er soft­ware. We would sup­port that soft­ware, but the util­i­ty or its part­ners oper­at­ed that soft­ware. The par­a­digm has shift­ed. Cer­tain­ly, the util­i­ty and its part­ners are right in the mid­dle, but we’ve become embed­ded in that oper­at­ing mod­el as well. When we talk with the util­i­ty about deliv­er­ing a cus­tomer ser­vice plat­form, we don’t just deliv­er that plat­form but also help to oper­ate it. 

Take cli­mate and shifts in weath­er pat­terns. If SAP is at the heart of run­ning a utility’s cus­tomer call cen­ter, we’re no longer just deliv­er­ing soft­ware. We’re run­ning and main­tain­ing that ser­vice for their cus­tomers. We’re involved when that util­i­ty shifts into storm oper­a­tion mode. We must dynam­i­cal­ly accom­mo­date, to ensure that our plat­form is up and avail­able. We’re ensur­ing that we’re ful­ly inter­locked with how they’re going to man­age their storm response, so that we in no way, shape, or form cre­ate disruption. 

ASUG: What key suc­cess fac­tors must the util­i­ty indus­try mas­ter to achieve mis­sion-crit­i­cal objectives? 

Sul­li­van: Util­i­ties are in the midst of under­go­ing such sig­nif­i­cant change that, even in the next five years, it’s hard to pre­dict how the mod­els will shake out. 

We’re hav­ing a lot of con­ver­sa­tions about ener­gy tran­si­tion and our cus­tomers’ abil­i­ty to accom­mo­date the shift to renew­ables, as well as the growth curves around elec­tric vehi­cles. There are dif­fer­ing fore­casts as to how quick­ly wide scale EV adop­tion is going to hap­pen, and these curves are region­al as well. But I believe it’s very clear it’s going to hap­pen; whether it’s five, ten, or 15 years away, most vehi­cles on the road will even­tu­al­ly be elec­tric. For util­i­ties, it’s not just about the charg­er in some­one’s garage. It becomes a ques­tion of whether the dis­tri­b­u­tion net­work in that area can han­dle the increased load on the grid. 

There are social gov­er­nance impli­ca­tions to that shift as well: a shift in ener­gy. Are util­i­ties mak­ing invest­ments in a way that’s dis­trib­uted across all social and eco­nom­ic envi­ron­ments? While the elec­tric vehi­cles growth curve has been dri­ven by a cer­tain ini­tial con­sumer demand, the util­i­ty must make sure that it’s man­ag­ing the grid equitably. 

Ener­gy tran­si­tion is dri­ving a mas­sive rein­vest­ment in the trans­mis­sion and dis­tri­b­u­tion grids, and renew­able gen­er­a­tion assets. We’re hav­ing a lot of con­ver­sa­tions with util­i­ties around how to effec­tive­ly plan invest­ments. How do util­i­ties choose between com­pet­ing invest­ments? And how do util­i­ties exe­cute con­struc­tion projects to set oper­a­tions up for the future?

Over the next five years, giv­en the Infla­tion Reduc­tion Act of 2022 and the invest­ment going into this space, util­i­ties are mak­ing hard deci­sions about how to dis­trib­ute cap­i­tal. This is going to be crit­i­cal to the suc­cess of this sec­tor. Con­cur­rent­ly, util­i­ties are shift­ing sig­nif­i­cant­ly in how to engage cus­tomers as this envi­ron­ment shifts. We’re work­ing with busi­ness lead­ers to ensure that they have the appli­ca­tions they need today, and we’re set­ting them up with a plat­form that’s going to let them dri­ve and piv­ot as a rel­a­tive­ly unpre­dictable mar­ket evo­lu­tion takes place. 

The macro lev­el changes are clear. But as elec­tric vehi­cles scale, how will we effec­tive­ly bill our cus­tomers at a dif­fer­ent rate than what we’re billing to deliv­er pow­er to their house today? Are we going to do flat rate billing? How are we going to get con­sump­tion infor­ma­tion? How are we going to man­age the whole process? 

The abil­i­ty to piv­ot as the envi­ron­ment changes, with EV adop­tion as only one exam­ple, is some­thing we know that util­i­ties need. We’re estab­lish­ing plat­forms to meet that need. This agili­ty, deliv­ered in the cloud and pur­pose-built for util­i­ties, is some­thing SAP is unique­ly posi­tioned to provide.

Hear more from Michael Sul­li­van at the SAP for Util­i­ties, Pre­sent­ed by ASUG con­fer­ence (Oct. 9 – 11 in Chica­go, IL; reg­is­ter here).