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Blog November 2022

Cloud vs. On-Premise Software Considerations for Utilities

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Nicole Kelly Director of Marketing North America (Utilities)

The utilities climate

Since the dawn of the digital age, many utility companies have resisted implementing new technologies. The big players do it, of course, which is why they’re able to work with agility, gain significant efficiencies, lower their operating costs, and improve customer satisfaction. The rich get richer, as the saying goes.

A mistake made by many small- and medium-sized companies and municipalities is thinking technologies are out of their reach in terms of costs. So, they make do with labor-intensive manual processes.

Working this way strains margins in the best of times, but containing operating costs is now more urgent than ever. With the onset of inflation, the ability of both utility companies and municipalities to cost-effectively serve their customers is seriously hindered.

A common misperception about going digital

Digital solutions are the obvious answer. It’s understandable if the mere thought feels overwhelming. This is a sector unlike any other. Supply and delivery of utilities, be it water, electricity, or gas, must be stable, reliable and secure. Any interruptions implementing new systems can inconvenience customers at best.

And technologies are always improving, so will a sizable expenditure today be wasted when the same technology is out of date in a year? That’s a valid concern but in reality, technologies don’t advance that quickly.

More than 80% of technologies improve at less than 25% each year. 1 The fastest improvements occur in the software domain, but that’s only problematic with on-premise software, meaning software installed directly onto your computers.

When software operates on the cloud, it automatically updates those technological advances for you, without any interruptions to business, while scaling with you and providing a high level of security to your data.

Starting your digital journey

The best place to start is in a simple way. At the core of any digital transformation is the ability to optimize your operations. By this, we mean streamlining workflows to gain meaningful efficiencies and cost savings. This will provide your operations with a stable backbone.

The first step to modernizing is through cloud-based software designed specifically for the utilities industry. Start in one area of your business. We suggest billing, given the inefficiencies and costs of using paper or manual processes. Utility rate structures vary, of course, making traditional processes time consuming due to the complexity involved.

Automating these areas through e-billing can simplify and streamline the entire process while saving costs for labor, paper, ink, and postage. Errors are minimized and your adherence to regulations is assured. You can also provide customers with an online portal to self-serve if they choose.

Before you take any step, however, you need to make an informed decision about what’s best for your operations.

What exactly is the cloud?

It’s a group of servers, which are essentially powerful computers, located on your cloud provider’s site, secure data centers or server farms. This is considered third-party hosting. A cloud-based application operates online, versus physical software installed on your computer.

You’re probably already on the cloud without realizing it. Think of the apps you might use online. When you log onto Twitter, Facebook, or PayPal, for example, you’re using the cloud. The rule of thumb for determining if you’re on the cloud is whether or not you can access your account from any device. If you can, you’re using a cloud-based application.

To use on-premise software, you typically have to be on site, where the physical software is installed. Cloud-based software is available wherever you are, on whatever device you’re using, as long as you have internet access.

Many organizations use both cloud and on-premise, so this isn’t necessarily an either/or decision. The point is, a digital transformation requires cloud computing due to its flexibility. To understand what the cloud actually is, we can compare it to on-premise.

Pros and cons of on-premise software

Although on-premise software is the older, traditional computer model, it’s by no means outdated. For starters, it’s reliable and offers data privacy, providing you have the necessary layers of security in place. With no third-party involvement, however, it requires a great deal of attention and resources, such as dedicated staff.

You have complete ownership, which comes with responsibilities. This includes cybersecurity, maintenance, updates and training, along with the associated costs. You’ll need additional servers in a climate-controlled room (which triggers more costs), operating systems, network and data security measures and database software.

If you have the budget, it can be an effective solution, as long as you don’t mind the lack of flexibility.

Availability: cloud systems vs on-premise software

Some on-premise systems can be accessed remotely, but you’ll need third-party support and a mobile device to do this. If you prefer on-premise software for the control it gives you, understand that using a third party introduces a level of security risk. It’s not insurmountable. You’ll need strict security measures in place, across all devices.

Nor will you have the 24/7 availability that the cloud affords, which is critical in utilities. Weather events that affect the delivery of utilities can also prevent your team from reaching the office, where they can only access the software needed to do their jobs. With the cloud, as long as you have online access, your team can work wherever they are, enabling access to systems from any device. All that’s required is an internet connection.

Customers want 24/7 availability too

By providing a customer portal, which only a cloud system can provide, your customers can manage their account and pay invoices online. Everything they want to know is right there, such as usage patterns, which reduces traffic to your call center. They can view their account information at their own convenience. Faster payments improve your cash flow. Customer portals, no matter what the industry, decrease late payments. This is especially true in utilities.

Security: cloud systems vs on-premise software

Protecting data, such as financial accounts and customer and employee information, requires strict attention. With on-premise systems, you store your data in-house. As long as dedicated IT professionals are on top of this responsibility, carrying out continuous backups, installing patches on each device, setting user access policies and mitigating cyberthreats, your data should stay safe. If not done correctly however, your data and your networks are at risk. We cannot stress this enough: if you opt for an on-premise system, don’t skimp on hiring an IT employee (or two or a team) to handle your security.

When the cloud first appeared, it was considered inferior to on-premise security but times have changed. The largest cloud providers have multiple disaster and redundancy protocols in place to protect your data. Their robust security measures are multi-layered. Security teams worldwide track threats and implement tight procedures. If you’re choosing a cloud-based solution, talk to the provider about their security and the steps taken to protect data.

Don’t overlook scalability

A drawback to on-premise software is that it can’t scale with you. As your customer base grows, so do your computing needs. To accommodate this, on-premise systems require heavy investment to overhaul your IT infrastructure. If at any point your needs decrease, you’re left with excess capacity. The cloud, on the other hand, scales with your needs, whether you need more or less capacity.

The cost factor

Cost is another factor, which is why the cloud is typically preferred by small- to medium-sized utilities and municipalities. No upfront investment is required, whereas on-premise software usually demands an upfront perpetual licence or service fee (or both). Cloud-based services mostly operate under an annual or multi-annual subscription, covering everything and freeing you from the responsibilities of ownership.

Details: how a cloud solution looks for your billing function

By automating your billing and invoice creation, no matter the customer type or how complex the rate plan, you eliminate a significant amount of manual labor. It also ensures accuracy while reducing manual entry errors and decreasing the load on your call center.

Let’s look at the AMCS Utility Billing solution, designed specifically for the sector. Because it’s industry-specific, it understands and addresses the nuances of complex rate structures and the invoicing demands that only utility companies and municipalities experience. Instead of trying to retrofit a “one size fits all industries” invoicing system, the AMCS Utility Billing solution delivers out-of-the-box capabilities to ingest automated meter reads and prepopulate the billing engine with electric, water, or gas billing formats.

But are customers ready for e-billing? With the adoption of online purchasing, which significantly increased during the pandemic, the majority certainly are. These same customers are comfortable with customer portals, where they can view their account information and pay online. This is only possible with a cloud-based system.

Customers who still want a paper bill aren’t overlooked. Automated paper bills enable them to pay through the mail or in person. AMCS can work with you to offload the onerous process of generating invoices to print and mail, using vetted and trusted third-parties.

How AMCS Utilities Billing works:

Automated meter reads

Accurate billing

Invoices generated electronically

Email notifications sent

24/7 availability

Easier customer communication

Paper bills made easier

Full visibility

We’ve not yet talked about the transparency you’re given across all customer data. This is a critical advantage to moving to AMCS Utilities Billing on the cloud. When you connect all of your billing and payment processes on a single cloud-based platform, you’re gaining a clear and accurate view of your customers. Customer interactions through the portal show up in the system in real-time, so you know what’s going on and when.

Analysis of this information removes guesswork, helping you to make informed decisions going forward.

Talk to us today about what cloud-based AMCS Utilities Billing would mean for you or download the brochure below to learn more.

1Massachusetts Institute of Technology, MIT News, A comprehensive study of technological change, August 2, 2021

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