Extending the high energy from the early Fall ASUG Best Practices: SAP for Utilities conference, ASUG recently took a look-back and look-forward with Michael O’Donnell, SAP National Vice President, Utilities, and Stefan Wolf, SAP Global Vice President, Go To Market Execution, Industry Business Unit, Utilities. The leaders discussed industry dynamics, customer business and technology challenges, unique industry community characteristics, and their 2023 outlook.

What follows is an edited version of the complete conversation.

Question: What were the highlights and significant achievements in the utilities sector for SAP in 2023?

Michael: There are a number of highlights. This year, there's been great progress, specifically for our utilities’ customers and their journey to the cloud and RISE with SAP. We've had a lot of success through the first three quarters and hope to finish the year strong.

We have started to look at organizations making the cloud decision, to transition, having the platforms in place with SAP, and trusting SAP to help them drive forward through the energy industry transformation.

Look at the change in the energy mix (the distribution of the grid, grid security, etc.), all these factors that utilities are trying to tackle, and how they get to carbon neutrality. It feels good that we're playing an important role. And a big focus for this year is about getting those foundational components set up with RISE to allow them the flexibility and agility they will need.

Stefan: In many countries, there is an acceleration going to the cloud. RISE with SAP is an offering that is very interesting for our customers. We have customers who are implementing it right now.

Globally, we see, especially in the current European market, a big concern about the energy supply chain because of the war in Ukraine, the sanctions against Russia, and so forth. These have plenty of implications regarding the energy mix. The German government is now deciding to keep the three remaining nuclear reactors on the grid, at least as long as the current fuel lasts, to do whatever is possible to reduce the need for natural gas. There is a shortage and a considerable price increase, which hits the end customers. Generally, people in Europe are not just experiencing high inflation like most countries right now, but energy prices, in particular, are scaring them. They're unsure how they can afford to stay warm and keep the lights on during the winter. That is top of mind for utilities there. This also created problems for the retail market because they depend on buying energy. These highly volatile prices do not help in their business planning.

What does it mean for SAP? From our perspective, utilities focus more on reducing costs and avoiding spending money since they already need funds for other more important purposes than IT infrastructure and experiments on the IT side. We are seeing interest in how SAP can help reduce operations costs. It's also part of the move to the cloud to avoid owning the responsibility to maintain the IT assets.

In addition, we see worldwide a continuous interest from the field operations side to support field workers with additional tools to keep them safe and efficient and to reduce the amount of manual labor as much as possible. Examples are using drones and augmented reality.

From a specific SAP solution perspective, we are proud that we rolled out our utilities core solution in the middle of this year. With that, we are taking RISE with SAP to the industry level. We’ve had RISE for two years now as a starting point to simplify and de-risk the transition into the cloud from a cross-industry, generic perspective. Now we are adding this utilities core, for the industrial processes, on top of RISE. In the coming years, we want to continue to build on that.

Question: Is there any unfinished business for SAP utilities customers in 2022?

Michael: I don't think there's ever been a case where there hasn't been unfinished business. But instead of thinking about unfinished business, some of the things Stefan mentioned as focus areas are taking up a lot of bandwidth for the organizations we serve in the utility space. And, we think about that transition, trying to get to carbon neutral, and pair that against energy security, the war in Ukraine, the energy supply, and how it impacts the rest of the planet. All these things have an impact on utilities serving customers in North America. They have to consider all these factors in how they go about addressing each challenge.

The unfinished business immediately is to ensure that utilities make good foundational decisions to enable them to be able to react quickly. You must be more flexible. Utilities experienced little change over the last hundred years; the planning cycles were much longer. In the last decade, the pace of change has accelerated quite a bit. You could go back to the advent of advanced metering and things of that nature and start seeing a shift in customer engagement and expectations. But the reality of climate change and having to address carbon emissions has completely changed the industry's nature.

Utilities works through that detailed plan, all the different steps and pieces involved, to ensure they can make the transition. But they still do it cost-effectively and securely and deliver reliability to their in-state customers, whether they're delivering electricity, gas, water, or the like.

This is not a one-item issue. It's a continuum to work hand in hand with the utilities we serve.

Stefan: Maybe I’ll add a few points. The role of the customer is becoming more critical. Since the smart meter came around, the customer has become more important. This trend is continuing.

If I look, for example, into the energy supply chain security or the introduction of renewables, the customer's role is expanding. The customer has many more possibilities, like power generation through rooftop PV and energy storage through wall batteries or EVs. This allows them to be flexible with their energy consumption and dynamically shift their load and generation. And the utility is incentivized to work with its customers to tap into this flexibility.

But the customer needs to agree to that. A utility needs to understand the customer. In the past, these types of demand responses were done with commercial and maybe industrial customers, almost on a one-to-one basis. Now, as a utility, you need to work with hundreds, thousands, who knows, maybe millions of customers at some point. You need to find the right ones, see how they react, and how to incentivize them. The customer will become a true business partner working with the utility.

To do this, you need to have insights. If you try to do this in silos—your billing system, your demand system, or the distributed energy response system—will not accomplish the task. As a utility, you need this complete overview to help customers understand their possibilities and options. Customers want to avoid sitting down for hours trying to put Excel sheets next to each other to figure out the right thing to do. They want advice. They want best practices. And the utility wants to know what the customer is doing so they feel secure they can really rely on what the customer has to offer and regarding flexibility. The unfinished business here is how to support this best.

As a software vendor, we continue to work with partners to provide the necessary additional capabilities on top of the stable core. That is the epitome of the Industry Cloud. That is the innovation platform where we can bring in the partner community to enable these possibilities. That is unfinished, and probably will be unfinished for quite some time because the world is changing, and technology is changing too.

Question: As leaders, what is the one thing you are most proud of regarding SAP in this utilities marketplace for 2022?

Michael: I am most proud of how our ecosystem and community of customers, partners, and SAPers came together at ‘SAP4U’ in 2022. We had an amazing event with almost 1,100 people attending. Fantastic energy, great networking. It showed the community's vibrancy, the work we're all doing together, and the positivity that everyone exhibited. Everybody recognizes the challenges we have. They're large. They're monumental. They're once-in-a-lifetime challenges.

That event made me proud to be part of the community we serve daily. It was an awesome thing to witness, and it speaks volumes about the commitment of the community to each other and the mission.

Stefan: I'm very proud of our work together and our cooperation with utilities. By working together, we are trying to make things better, to identify where we can improve, how we can use best practices, and how we can learn from each other.

Question: Let’s look ahead to 2023. What are the key points in terms of strategy and enhancements to platforms or technology that will come to SAP utilities customers in 2023?

Michael: We’re making good strides with the SAP Business Technology Platform. Our partner ecosystem is extending our solutions, ensuring we're addressing some of the biggest challenges utilities face and leveraging BTP. People will be able to take advantage of the platform, innovate, and leverage the combination of SAP technology and expertise, along with the industry expertise that our partner community brings forward.

This could be for short-term acute concerns, some of the more innovative things people are looking to do, things around EVs, or anything related to handling and leveraging drones to mitigate the risk of wildfire or addressing post-hurricane work. There are all sorts of interesting things utilities are doing to build up resiliency, leveraging our technology platforms to do that, and having it inherently integrated into the core of SAP. That's the true energy and power of BTP.

Stefan: For next year, we’re looking at things like the distributed energy resources, how we can provide elements in the platform to enable and work with a partner community to make these solutions available, to bring them up at scale for utilities, and for the end customers.

The overall topic of sustainability is top of mind for many. Again, energy supply chain risk in Europe is driving the market there even faster to renewable energy. We see that in many infrastructure projects. We are looking into how we can support this area more and work with our customers to help them support these kinds of projects more efficiently from planning through execution.

Question: If you were talking directly to your customers, to ASUG members, what would be your best pieces of advice for 2023?

Michael: Time is of the essence. We're constantly talking about the move to the cloud, why it's so important, specifically as it relates to SAP, and how we've constituted and structured it in RISE with SAP. The advice I suggest is that you make sure you're getting the right platforms in place now. The idea has been to sweat the asset and not move--for most utilities--until you absolutely need to. We're in a circumstance now where a good portion of utilities recognize that the change they have to take on within the next decade will be massive. You need to have the right platforms in place.

You need to move as quickly as possible because what will happen if you continue to string things out and wait and wait? Unfortunately, you're going to hit an inflection point in the amount of change you need to make in operations and how you serve your customers. That change will be so big all at once that you'll need more time to do everything needed from platforms and systems perspective to address it. And how are you keeping it affordable and resilient at that point?

It's about starting that move now, and we're here to help and do that in a very thoughtful, pragmatic, and cost-effective way, but that journey needs to start immediately.

Stefan: Get the foundation for what you need to do now and ensure you have the platform you can build on for the next 10, 15, or 20 years. Change is only becoming faster. The last three, four, and five had unexpected challenges, disrupting business. We don't know what will come in the next years. You may need to enable new scenarios and business processes and take advantage of new technologies to reduce operating costs.

And if you do all of this simultaneously, you are trying to keep the lights on daily, which is a huge challenge. Our offer: work with our partner community and with us. My advice is to work with us early on to help you optimize the use of solutions and technology.

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