Should utility companies be using ERP or BSS or a combination of both?
Utility companies (including telephony, electricity, natural gas, water, and sewage) traditionally don't use existing ERP (Enterprise Resource Planning) solutions for billing, with obvious exceptions to the custom modules available from the largest ERP vendors (SAP, Oracle, etc).
BSS (Business Support System) are the 'business systems' dealing with customers, and support such processes as taking orders, processing bills, and collecting payments. Combined with the 'network systems' of an OSS (Operations Support System), a BSS/OSS solution is generally implemented in utility companies instead of an ERP solution.
The main reason for this, is that most affordable ERP solutions can't handle the real-time processing of millions of customer records and thousands of operations that a BSS can routinely process and act upon.
Why Not Use ERP For Billing?
Taking a step back, it would seem that billing fits naturally as a function of ERP systems. Industrial enterprises utilise this feature of their ERP's Sales and Debtors modules to charge for products and services sold, send bills and monitor debts. Additionally, modern solutions are already equipped to deal with advanced pricing, bonus management, debt restructuring and collection.
Why is it, then, that ERP systems are so little used in the telecom and energy markets?
Why, for example, does SAP, the largest ERP vendor globally, offer the energy suppliers that use SAP for utilities, a specifically designed vertical solution for billing, rather than its sales and debtors modules?
The huge customer and operation data volumes pose the first challenges to ERP as a billing system. No existing ERP system is ready to process the millions of customer records and the thousands of operations that utility systems record each month. ERPs are not traditionally high-availability systems. They are designed mostly for manual entry of transaction data and non-time-critical analytical processing. Business Support Systems operate in a tough environment, where it is necessary to process thousands of automatic requests a second, with some analytical data, such as customer balance, available airtime or traffic, being returned on the fly.
The second problem is functionality. No matter how fast ERP's advanced pricing or debt control evolves, it won't be able to support the volume of charges in the dynamic utility market (especially in telecommunications). In this environment ERP needs constant improvement and complex in-house add-ons, which threatens system integrity and backward compatibility. BSS systems were initially designed for industry-specific service models for functions such as efficient pricing, financial service and debt control.
The third problem is integration. A utility needs seamless collaboration between prepaid systems and network elements, which are fully supported by a BSS but hardly at all by ERP packages.
Customer-Oriented Business Software
The relatively recent evolution of CRM systems have stemmed out of traditional ERP, and they are a vivid example of the demand for customer-oriented business systems, as opposed to the accounting and operation-oriented ERPs. CRM was not a revolutionary product with totally new functions. Instead, it shifted the focus of existing systems to the customer. The customer became the starting point for operations and management. In fact, CRM had the customer as a centre of the whole information environment.
Business Support Systems followed the same track. Information and event models focus on customers and services and growing around the customer's account. However, CRM still uses manual entry as a source of operational data; this delays analytical processing, so in this respect it is closer to ERP than BSS.
Thus, a utility company inevitably has needed a specialised vertical Business Support System. In addition, the BSS traditionally couldn't be fully built in or added to ERP, which is why the BSS has become a key element of the IT application infrastructure in utilities.
BSS - A Comprehensive Solution
Profitability, average revenue per user (ARPU), total revenue and customer base characteristics (size, growth dynamics) have always been the key performance indicators in the utility sector. Consequently, BSS solutions were built around the core utility business management functions: revenue assurance and billing. The functions gained utmost importance in the mid to late 90s. Telcos, desperately struggling for customers, needed new services, flexible tariffs and customer base analysis by value and segment.
With growing subscriber bases, the only way to cut costs was to optimise customer care and reduce expenses per customer. BSS systems indeed play a key role here as any organisational initiative depends on their functionality. It is impossible to expand sales and payment collection networks if the BSS can't support centralised dealer management and settlements.
BSS systems should also be technologically scalable, not only vertically to ensure optimised performance, ergonomics and technological effectiveness for dynamically growing production volumes, but also horizontally for functional scaling and development. CRM systems were the first milestones. Already by the late 90s market leaders started providing full-scale CRM solutions within their BSS systems, supporting marketing functions, online customer interaction and dealer management.
It is noteworthy that all modern universal CRM systems include such an important customer interaction tool as a call centre. OSS/BSS solutions provided call centre functionality even before CRM systems, as such, came to the market. The BSS call centre module became a logical consequence of computer telephony. Today's feature-rich BSS systems offer an exhaustive range of functions for utility companies.
Some of them even automate adjacent processes. For example, some BSS solutions support inventory, task management, personnel administration and payroll accounting.
BSS functions were growing along with their customers - in particular the telecom companies - and only solutions that laid a solid technological and architectural foundation managed to survive. A strong and stable mid-size utility company usually opts for a powerful, full-scale, BSS solution as a single mission critical IT application.
The business logic and architecture choices are dictated by pragmatics: it is simpler, more profitable and reliable to construct a large building on a single strong monolithic foundation, rather than on three or four smaller ones with differing characteristics.
BSS systems have already entered the next level of convergence - convergence of management technologies within the framework of a single, comprehensive industrial solution, encompassing ERP and CRM functions.
Why Some Large Utilities Are Still Choosing ERP
When choosing an IT solution, a large enterprise looks not only at the functionality; it is not enough to know if the system supports all the necessary processes. In spite of all the power of modern BSS solutions, major utility companies opt for ERP systems. It is true and inevitable, and there are two possible explanations for this trend.
First, an ERP solution is a compromise used for financial management in a heterogeneous environment. Companies grow both organically and by mergers and acquisitions. Having acquired a new business, they tend to keep the legacy technologies, continue to use different billing systems and, in some cases, retain the legacy business processes and organisational structure. Depending upon its history, large companies often end up using multiple - largely incompatible - IT applications. In some cases, the lesser evil - compared to replacing acquired technologies - is the creation of a management system, based on a classic ERP, which aggregates data from all the company's applications and then integrates, consolidates and analyses key performance indicators to enable corporate reporting.
Second, large IT investments appeal to public companies and their investors, and might be a deciding factor in the selection of major ERP systems. Very often accounting modules are the first and sometimes the only modules implemented. However, it is just what investors need: financial reporting, reliably controlled, enabled by an ERP system by vendor consultants they trust. Nevertheless, they often pay a high price just for the name when buying a famous brand ERP.
Universal Integration Solutions
Integrating multiple applications is an expensive, time-consuming and poorly reproducible process. For several years now, the major analysts of corporate software have called for a transition from commercial integration projects to the adoption of universal solutions that support easy integration - composite applications.
The rapid penetration of service-oriented architectures, SOA, heralded the emergence of composite applications; today, most major business applications provide web-based access to all of their functions.
The idea of composite applications is not new but it is very significant that business application and technological platform vendors have finally agreed upon a series of widely recognised standards for data representation and interaction. These standards make full-scale composite applications possible today.
An early experience in building composite applications provided a solution that linked BSS financial data to ERP debtors and ledger modules in 2004. The composite environment of the solution met the most critical utility requirements for performance and information security. A composite application should be based upon an ideal reference data model with event processing and interfaces to major systems.
A popular environment for major customers now, is a fully integrated BSS/CRM solution with ERP modules for finance and personnel management that permits any update and modification of its components. The future of the large business segments is with industrial applications; these are natural to the modern system landscape.
Telecommunications have always been at the cutting edge of innovations and will surely be the first to adopt new technologies.
BMS - A Composite Application
With BMS, we have built a specific Billing and Revenue Management (BRM) application (like what SAP and Oracle have done for utility companies). When this BRM is combined with Amazon's infinately scalable infrastructure, we can offer a solution that handles the intensive, real-time processing requirements of a billing solution in utility companies. Then by integrating with third party OSS through a flexible JSON API, utility companies can achieve the BSS/OSS functionality they require.
In building a composite application, we then have the customisation of a modern BSS/CRM solution (CRM, Sales, Billing, Stock & Service), with full integrations into third-party software (like Workday) for traditional ERP finance and personnel management. Utility companies can now implement a cloud-based BSS/OSS/CRM/ERP software package at a fraction of the cost of legacy solutions.