Published on the 31/01/2017 | Written by Donovan Jackson

The big boys of the electricity industry aren’t taking this digital transformation malarkey lying down…

With upstart startups like Electric Kiwi and Flick Electric punting the advantages of all-cloud operations and data-driven retail, the companies that own most of the customers in New Zealand but which are seeing en masse churn are being pressed to ‘do something’ to shore up the losses. For Contact Energy, New Zealand’s second largest power producer and retailer, that has meant putting all its business in the cloud with Revera and Amazon Web Services.

And losses there are. It may have been nearly a year ago, but Contact Energy, as reported in Stuff, lost 10,000 customers and over a hundred million dollars ‘as competition from small rivals stepped up, adding pressure to margins’. In late 2015, the churn rate of 20.2 percent, as reported by the Electricity Authority, was the highest in the world.

In an interview with iStart last year, Flick Electric founder Steve O’Connor said consumers were ‘pissed off’ with high prices and opacity from their retailers. He also said the industry was ripe for innovation, with a particular focus on customer experience; meanwhile, Electric Kiwi was the fastest growing electricity retailer by the end of last year, although its 5,300 customers confirm that growth comes off a low base.

Fast forward from February last year to now, and Contact Energy has joined those tech-driven startups, having shunted its entire business into the cloud following a 9-month migration. The initiative was, said Spark in a statement, developed with Contact’s applications management suppliers (Deloitte, Wipro and DTL) and included billing, call centre interfaces and customer queries to back-end systems.

There’s no mention of heightened competition as a driver for the project in Spark’s press release. Instead, it said the move to cloud was prompted by Contact’s majority shareholding shifting from Australia to New Zealand. ‘Contact leadership sought out the opportunity to re-asses its IT set-up and how they can better serve their half-million customers, in digital ways,’ said the telecoms company.

Earlier this year, the Otago Daily Times put its finger on Contact’s necessity to focus on operational costs. Contact CE Dennis Barnes told the paper that, “Consumers are seeing clear evidence the current market is working with high levels of competition leading to lower prices. In the past six months alone we have seen customers continue to take up a range of discounted products in the market with overall savings of up to 22% on their electricity bill,” and added that the company had committed to not increasing the energy component of its customers bills.

Contact Energy GM ICT Michael Dreyer said it is looking for agility and flexibility. “Under a services model that takes complexity away and allows us to focus on our business needs at the application level.”

Perhaps even more so than domestic water supply (which the residents of Havelock North will confirm can have varying quality levels), electricity is the ultimate commodity. There is little to differentiate the quality of the product delivered other than price, and Dreyer confirmed that the cloud may improve this aspect of Contact’s competitiveness: “We now have real transparency around hosting and data storage consumption. This allows us to rapidly adjust and fine-tune our environments even further and the significant operational savings opportunities will help to drive down our cost to serve each customer,” he said.

While the gestation time of 9 months may seem long to ‘cloud first’ companies which don’t face the challenge of dealing with legacy infrastructure, systems and people, Dreyer was pleased with timeframe. “To go from selecting Spark as our new vendor, to having migrated all our systems to cloud, including changing operating systems, databases, and numerous application upgrades within nine months is an incredible effort for all the team,” he said.

Operating from the cloud, he added, means Contact Energy is able ‘to deliver real value and innovation from technology for both our customer [retail] and energy generation businesses’.