The Case for “Configurable COTS” in Complex Energy Markets

Energy and Utility Companies and their Agents play a critical role administering power markets around the world. Power markets tend to be very complex and the organizations responsible for their administration must manage huge volumes of complex transactions and payment streams often representing billions of Dollars. To effectively manage their assets, organizations rely on critical Information Technology (IT) systems. The selection of software vendors and service providers for these IT systems can have a huge impact on the ability of Operators to achieve their strategic goals and objectives while providing cost effective services.

Drivers for Change

Several main drivers cause Energy & Utility Companies to make changes to their IT landscape:

• Technology obsolescence – The technology of the underlying solution has reached the end of its useful life and the system must be replaced for technical reasons as opposed to functional shortcomings.
• Regulatory changes – Changes to market designs, introduction of new market features or changes in market administration may require new solutions or major changes to existing solutions.  As an example, the increased impact of renewables on the grid and desires to improve market efficiency are driving regulators to demand changes to existing markets throughout the world.
• Expansion into new regions or markets – A new organization is taking responsibility for managing an aspect of region such as the California EIM.
• Strategic ICT Initiatives – Enterprise architecture initiatives with the goal of rationalizing applications and creating an integrated ICT plan.  These initiatives include service oriented architecture approaches and a comprehensive integration plan than can only be accomplished by replacing legacy systems with new applications.  Often these initiatives, while expensive to implement, offer considerable savings over the life of the software.
• Increasing operational cost and risk associated with the current solution. The cost to maintain the current system and the risk of failure is such that a system replacement is merited based on total cost of ownership.

Energy & Utility companies face a critical decision when considering major investments in IT systems: should they build their own custom solution, procure a Commercial off-the-Shelf (COTS) software solution or extend the life of unsupported solutions?

These options provide inherent advantages and the unique nature of energy markets makes the decision very difficult.

Proven Capabilities

Energy & Utility Companies often select COTS over custom systems due to the proven capabilities of COTS.  An off- the-shelf system has already been proven to work, and merely requires adaptation to the specific requirements of the customer.  This not only reduces the risk of development – both in cost, duration and user satisfaction, but it also enables the customers to learn from and share best practices with other customers.

While Energy & Utility companies undoubtedly have their own unique requirements, there are many common elements to their needs.  Custom designs require developers to “reinvent the wheel” with each delivery which is costly, risky, and inefficient.  It is beneficial to take advantage of the economies of scale available with by starting with “tried and tested” software and adapt as required.

The best practices incorporated in COTS significantly reduce the time to market for implementation.  The implementation effort focuses on configuration and adapting the unique regulatory and market requirements of the customer rather than business process, administration and integration needs.  These requirements are already reflected in the design and development of COTS and the customer benefits from the collective experience of past deployments.  The benefits of reduced time to market and focus on the specific configuration needs of the customer reduce overall costs of implementation and reduce the risks for the customer.

Ongoing Updates and Product Roadmap

Perhaps the most important benefit of COTS is customers receive regular technical and functional software updates that ensure that the system is operating efficiently and continually evolving to meet the changing needs of the customer.

Software updates fall into several categories:

• Performance Improvements that increase the speed and processing capability of the application. As data volumes increase, systems age and settlement and billing cycles decrease, performance is crucial for Energy & Utility Companies.
• Defect Resolution addresses issues with the core solution. Resolutions for high-priority defects may be delivered on an emergency basis, while resolutions for lower-priority defects may be released as part of the standard release schedule.
• Functional Enhancements add new capabilities to the solution based upon the product roadmap and vision. These enhancements may include new or improved user interfaces, analytical tools or new calculation capabilities.
• Technology Upgrades do not typically change the functionality of the software, but change how that functionality is enabled by moving the under-the-hood components to more modern technologies. This may include updates to database, integration protocols (such as web services) or user interface technologies.

These updates are typically provided under a support and maintenance agreement that the customer enters into with the COTS software provider. The COTS software provider shares the costs of these enhancements over a large customer base, reducing the cost to each individual customer.

Another advantage of COTS solutions is becoming part of a global user community.  In a changing world, where transmission systems are becoming more integrated and the supply mix is becoming more divers, there is much to learn from other Energy & Utility companies, and most COTS providers hold periodic events and can provide access to experts, and support facilities which enable users to interact and discuss resolutions to current and potential future issues and market trends.

With the exception of enhancement requests or reporting defects, there is little or no resource commitment on the part of the customer to request and document individual change requests. Enhancements are driven by a large user base giving customers the ability to receive enhancements that may be useful but that they had not requested.

For COTS solutions, the customer typically pays an initial license price and an ongoing support and maintenance fee.  The support and maintenance fee entitles the customer to future product enhancements and upgrades.  The product updates include updated technical and user documentation and often training that is provided to the installed base of the COTS vendor.  In contrast, this process is often neglected or becomes very costly with one-off deliveries as the process becomes a series of “projects” all requiring approval, budget and extensive oversight from the customer.

COTS software vendors typically ship 1 major release and 1 or 2 minor releases per year. Providing updates on a similar schedule would represent an enormous and costly effort for an organization using custom software deployment.

Configurability and Flexibility

Organizations with complex business processes and regularly changing needs must also consider the level of configurability that they require in a solution.  The level of configurability required is driven by the frequency and complexity of changes to the functionality.

Because custom solutions are built with the goal of meeting a set of requirements that reflect an organization’s needs at a certain point in time, they are typically far less flexible than COTS solutions. They lack the ability to be configured as requirements change, and updates generally require changes to the application code itself. A COTS solution with configurable components allows customers and their service providers to more easily incorporate market or other changes. A solution built specifically for today’s requirements without consideration for configurable components will likely not have the flexibility to accommodate change without major development.

The benefits of a flexible architecture manifest themselves in the continually evolving nature of energy markets.  The deployment of new technology such as smart meters, energy storage and distributed generation all has significant impacts on the requirements for settling and billing energy.  These developments often lead to new applications that augment one-off solutions as they are implemented and the customer’s application landscape becomes more complicated and more costly to maintain.  With the flexibility of COTS, many of the developments can be incorporated in the core product.

Non-Functional Requirements

A robust, usable application in a complex business environment must offer tools and capabilities beyond the core business functionality; it must also offer a robust user interface, reporting, audit, security and compliance with industry standards and protocols. Each of these items on its own is a significant investment of time and resources; if not fully and effectively implemented their absence can present a significant obstacle to a system’s usability.

For commercial off-the-shelf software, vendors are able to leverage these capabilities across multiple customers and applications to significantly reduce the incremental costs to deliver the capabilities. Custom development of non-functional requirements increases the costs associated with implementation, with little or no opportunity to scale or leverage this investment in other areas of the enterprise. Some examples of non-functional capabilities are provided below.

User Interface

Users need the ability to view, evaluate, and edit results, and having that ability means a set of interfaces that supports the business process. These capabilities are frequently overlooked in a custom implementation.

COTS solutions also draw upon expertise in user experience and, typically, a development team that has years of experience building user interfaces.  These interfaces are designed and built with industry and technical standards in mind and reflect the experience of the vendor designing and implementing interfaces that are robust and sufficiently minimize the impact of underlying application or database updates.

COTS vendors invest in creating flexible, intuitive user interfaces.  COTS vendors generally provide a pre-defined set of screens based and proven on previous deployments.  These interfaces are designed to be modified to meet specific customer requirements and workflows.  Often the base set of interfaces meets the majority of customer requirements and the focus of the implementation is augmenting these screens to meet the customer’s unique requirements.  COTS providers typically include user experience architects in the design and development of their interfaces.  These experts have extensive experience designing user interfaces that meet the needs of the various types of users that interact with their software.

Reporting

Once integration and configuration are complete, data must be presented to users, analysts, and executive management. For established COTS a base set of reports are offered.  These reports can be modified to meet specific customer requirements and are often augmented by an enterprise wide reporting tool. COTS vendors invest in industry trends for data and analytics and often leverage new components as part of the overall product roadmap.

Security and Audit

Comprehensive security should include role-based security at functional and data levels to provide secure access to data. It may also include integration with an organization’s LDAP, AD, or other implementations for authorization. Other key security features include hierarchical roles, application and data-level security, and the ability to restrict access by object, module, screen, or action.

Complete auditing should give administrators the ability to see detailed information about who accessed specific data, including the user or system accessing, original and new values, the date and time of access, and the machine from which the data were accessed.  Robust, role-based, application level security and audit can be costly to develop and maintain in a custom developed application.

Cyber security is an ongoing concern in the energy industry and especially relevant to Energy & Utility Companies.  COTS vendors are exposed to and must meet the cumulative cyber security of their customers and can stay on the forefront of developing cyber security challenges more cost effectively than one-off deliveries.

Standards

Complying and maintaining compliance with industry standards is generally prohibitively expensive for custom implementations. For large software organizations with an expansive portfolio of solutions in a specific industry, maintaining standards compliance is part of doing business and providing solutions to the industry.

Maintenance Costs and Supplier Services

The ongoing support and maintenance of production systems is generally the largest component of the Total Cost of Ownership of a complex IT system. Customers must decide if they have the resources or can reasonably contract with service providers to support these systems for multiple years.

A typical COTS vendor has an established process for maintaining code, providing defect fixes, training and maintaining customer support staff often at fixed and reasonable costs.

Post-sales support is generally not provided effectively by custom developers, who generally move onto the next project.  COTS providers are there for the long-haul, and have an established account management process and 24 hour support and product management network which provides two-way communication to clients throughout their license period.  This means that product knowledge is maintained and is not dependent on key individuals within either organization.  A key risk of custom developments is that product knowledge tends to get concentrated within a few key individuals – often consultants – who have little incentive to share that knowledge.  Over time, that knowledge can become increasingly expensive or difficult to retain; especially as key individuals move roles or leave the company.

Many unique and cost-effective support services models can be implemented with COTS.  Often Level 1 and/or Level 2 support are staffed with customer or System Integrator (SI) staff.  System Integrators often have experience with COTS from other deployments and COTS providers invest in training and partnering with multiple SIs to create deep pool of knowledgeable implementation and support staff in the industry.  This provides customers with options to tailor the support model and providers to their specific needs and geographies.

Integration

When a new solution is added to complex system architecture, integration architecture must be an area of focus, regardless of whether the solution is custom or COTS.

A custom solution may initially integrate more easily with legacy systems – older systems may have outdated file formats or interface protocols that are best supported by custom interfaces regardless of the new solution. A COTS solution will often interface more easily with newer systems and will offer support for newer integration methods. This means a custom solution’s integration tools may be the best answer for this particular snapshot in time, but a COTS solution provides better results over the life of the system.

A robust COTS solution should also offer a number of different options for integration, including file-based, HTTP/FTP, web Services, Oracle PL/SQL API, and direct DB links.

 

Versify offers a fully hosted web-based SaaS solution for both Generation and Transmission Outage Management software.  Speak to a Versify Team Member or Request a Quote to find out more about a solution at your company.