by David Rae

Utilities CIO keeps to regulatory five year plan

Nov 14, 20117 mins
IT LeadershipIT StrategyMobile Apps

Five years is a long time in technology – entire industries spring to life, fortunes are made and lost.

But for CIOs working in the water industry, five years isn’t simply a long time – it’s a period for which they have to plan meticulously; and all under the watchful glare of the regulator.

Every half decade, each of the UK’s 25 water companies must submit a detailed five-year plan to regulator Ofwat in order that future bill limits, capital expenditure commitments and operating expenditure, among other strategic goals, be laid out for public scrutiny.

Of course, strategic plans are by no means unique to the water industry. But strategic plans driven by external regulators and which are scrutinised in minute detail by customers and shareholders alike, probably are. It’s an unusual situation, but then the water industry – and the wider utilities sector in general – is unusual by definition.

Despite the heavy weight of regulation, speaking to Myron Hrycyk, CIO of Severn Trent, the UK’s third-largest water company with 2010 revenues of £1.7bn, however, provides a refreshing insight into this world of pseudo-competition and rolling five-year plans – and, specifically, how technology leaders can help the wider organisation to meet the sector’s pressing demands.

Severn Trent Water CIO’s strategy update

“We can see that the industry falls short of the kind of service that our customers demand these days,” he says, matter-of-factly. “They like to be able to access services online, have self-service changes of address, billing and those type of things. They want to be able to contact us very easily and have an easy process to go through when they move house and have a water meter changed over.”

Perhaps even more importantly, however, consumers want cheaper bills and in order to deliver both of these things, senior executives in the utilities sector must use a combination of creativity and control –two historically uncomfortable bedfellows.

This double challenge is a huge issue for water companies, which, between them, operate an ageing national infrastructure that Ofwat claims could demand as much as £100bn in required capital investments over the next 20 years. Balancing the need for billions of pounds worth of investment against demands for lower bills and better service, is the challenge faced by Hrycyk and his fellow leaders. And it’s a challenge of immense proportions.

“There is a phenomenal amount of activity going on,” he says. “The water companies and regulators are working very hard to change the way the service is delivered and to try to deliver better customer service at a lower cost.

“The way we have to do that is to look at operational efficiencies. How much better can we run the business on a day-to-day basis, at a lower cost, while improving our services? How can we deliver the infrastructure renewals and new investment in capital plants at a more efficient rate so we get better-quality for less investment.”

Both are questions at the top of the list of priorities for senior executives in the utilities sector. But they aren’t the challenges typically discussed by a CIO – these are business issues, operational requirements. And there isn’t a server or SAP service-level agreement in sight.

“We don’t do technology for technology’s sake, we do technology because it really enables the business,” he says. “As CIOs we need to clearly understand the business direction and then align what we deliver from a technology perspective to support reaching those goals. Sometimes, technology is an enabler, sometimes it does open up strategic opportunity – either way, it has to be aligned.”

So, what are those IT strategies being pursued by CIOs in the utilities sector? Recent research by IBM paints an interesting picture. “Energy and utilities CIOs as a whole have a greater focus on three types of visionary plans in the next three to five years,” the research found. “Mobility solutions (82 per cent versus 74 per cent), virtualisation (74 per cent versus 68 per cent)and self-service portals (69 per cent versus 57 per cent).”

And it’s a picture fully backed up by talking to Hrycyk. “We implemented employee self-service for 5,500 employees and manager self service for our management,” he explains. “And that really starts to empower employees to maintain their own records.

Severn Trent uses virtualisation to enable flexible workforce

“We then moved on to a second release of our ERP solution, focused on transforming our mobile workforce. We have in the order of 1,800 [mobile staff] so we completed the implementation of a workforce management platform, with laptop devices and mobile connectivity though 3G.

And, finally, virtualisation is another of Hrycyk’s strategic goals. “We were in a place where we were on a thin client, with dedicated hard drives – and that wouldn’t work. Today, we’ve deployed a virtualised desktop for over 3,000 of our employees, which supports the ability to go to any desk and log into their machine.”

The similarities between the IBM research and what Hrycyk describes as being his priorities are uncanny, but it’s no coincidence – these are just the types of initiative that can make a significant impact on operational efficiencies, freeing up cash for capital projects and customer service. The mobility and virtualisation drives are great examples – as a result, Severn Trent’s offices now operate at 120 per cent capacity.

It’s difficult to overestimate the broader business challenges that the water and power utilities industries face. With government pledges that include sourcing 15 per cent of the UK’s total energy from renewable sources by 2020 and the reduction of carbon emissions by 80 per cent from their 1990 levels by 2050, energy companies are well and truly in the firing line. Water companies, meanwhile, are still coming to terms with the prospect of increased, government-controlled, competition in the retail markets and the huge capital-expenditure requirements mentioned above.

In a recent video interview, Mark Powell, advisory partner for KPMG’s utilities practice, sums up the situation well. “I think if we could actually look ahead 10 years, we would see an industry that we wouldn’t even vaguely recognise today – I think that is where we’re going,” he says.

In such circumstances, the entire business must pull together if they are to successfully cope with the challenges that lie ahead. For Severn Trent Water, this culminated in its Safer, Better, Faster programme, a lean management methodology designed to upskill its entire employee base – and something which Hrycyk is entirely on board with.

“We had a new set of technologies to support changes in and simplification of our business processes to drive efficiency; systems that would help improve our customer service,” he says. “I formulated this technical strategy and went down a number of streams – one was a sizeable SAP implementation, and that was all about standardising, simplifying and creating better controls in our finance, procurement and HR processes.”

Happily, Hyrcyk has the full support of his CEO Tony Wray, who, he claims, views technology as an investment rather than as a necessary cost. Looking at the company’s 2011 annual report backs this up. “Our new systems and technology are fundamentally changing the way we work and so we have invested heavily in training our people to equip them with the right skills to exploit the new technology and systems,” it says, going on to explain the advantages of the developments Hrycyk mentions.

Myron Hrycyk explains his total operational reorganisation” href=””>Severn Trent Water CIO Myron Hrycyk explains his total operational reorganisation

For CIOs, then, perhaps this is the biggest challenge – getting the attention of the CEO and ensuring he or she sees the value that strategic technology investments can bring to the organisation. “To stay in the role I think you have to be both a business man and an executive team player,” says Hrycyk. “I go to the executive table, leading my function, just like the finance director does or the water production director does. But once you’re round the table, you need to share the challenges from a business perspective.

“If you can achieve that, you understand the touchpoints, the KPIs and the areas you need to improve with technology – I believe that keeps you on the straight and narrow.”