The digital future for energy and utilities.

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1 Digital transformation has changed the way you do business. The digital future for energy and utilities. Digital is reshaping the landscape in every industry, and the energy and utilities sectors are no exception. Whether you re serving customers at a gas station, drilling for oil or managing an electricity grid, digital technologies are changing the way you operate. Oil prices have fallen significantly as global supply outstrips demand. That means energy companies need to work harder and find cost efficiencies to maintain margins. And, at the same time, they re under growing pressure from government and regulators to secure critical infrastructure. Utilities companies are facing similar pressures to modernize legacy infrastructure, to comply with tighter regulations and compete in a market where customer expectations about service and delivery are growing. Energy and utilities sector companies invest in digital products to improve safety and reliability, reduce costs, boost customer satisfaction and drive revenue growth. Organizations across the energy and utilities sectors are embracing digital to improve safety and reliability, deliver cost efficiencies, improve customer satisfaction and drive revenue growth. And the leaders are already enjoying the benefits by automating processes and introducing new services, enabled by digital. But digital transformation isn t a short journey. Research we commissioned from Forrester Consulting shows energy and utilities companies still have some way to go, although they re keeping pace with the pack. 28 of business leaders in the sector say they have fully implemented digital strategies, which compares favorably to the figure of 25 across all sectors. Only 8 of energy and utilities businesses say the maturity of their digital strategy is excellent, which is on par with 9 across all sectors 1. In this document, we ll explore how digital solutions, like cloud, mobile and the internet of things (IoT), fit into the major strategic priorities of energy and utilities companies. From there, we ll look at why it s critical that these initiatives are supported by robust and agile networks, and what steps you can take to stay ahead and thrive in the digital age. 1

2 How can you improve safety and reliability, mitigate risk, enhance customer experience, cut costs and increase revenue? Digital can help. Why digital matters to your business. Improve safety and reliability Driven by increased customer demand and the declining price of oil, energy companies are looking toward technology to deliver safer, more reliable, efficient and cost-effective processes and services. Similarly, utility companies are focusing their IT efforts on replacing legacy systems and rolling out new solutions to build more reliable, safer and cost-efficient infrastructure. As the costs of automation and IoT devices have fallen, companies from both sectors have been quick to embrace the possibilities of digital transformation. Modernization programs are improving the reliability and resiliency of transmission and distribution networks. The latest digital solutions have made greater automation of remote facilities possible, by providing near real-time information to your operations centers. IoT-enabled grid and pipeline monitoring systems help you spot and fix issues such as leaks, outages, fraud and faults more quickly. You can also generate and analyze more data to inform on-site improvements and increase performance. And, for utilities companies, digital is extending the visibility into the grid and providing greater flexibility to integrate new distributed generation solutions to meet regulatory requirements. The biggest challenge in utilities is aging infrastructure. Almost half (47) of U.S. utility executives put it in their top three most pressing challenges 2. But however far you go with automation, people remain important and digital can help them work more efficiently too. Field engineers can use virtual reality to train up on how to maintain complex systems. And the latest mobile tools can improve collaboration in the field, and help maintain contact with central control functions. IoT and mobile solutions are reducing friction and delay in every business process. Providing the central control, storage and compute needed to deliver on the promise of digital will involve data center consolidation and a shift to cloud architectures, even for core systems. Companies in your sector are already acting. 46 of business leaders say they ve already implemented cloud, and a further 38 are planning to implement it 1. 2

3 Manage risk The focus on digital transformation is also being driven by the introduction of tighter regulations in the energy and utilities sectors. Governments at a regional, national and international level are increasingly concerned about the cyber threat to critical infrastructure and the potential for disruption to energy and utility services. In the U.S., for example, electricity companies dealing with the bulk energy systems must comply with the North American Electric Reliability Corporation (NERC) Critical Infrastructure Protection (CIP) security standards. Such is the level of concern that an Executive Order Improving Critical Infrastructure Cybersecurity, February 2013 was issued to address one of the most serious national security challenges. 53 of utility executives report their utility s grid network is not adequately protected from physical and cyber attacks 2. The latest self-healing networks include traffic awareness, which means they can prioritize mission-critical data in the event of an outage. They can also recognize and divert denial of service attacks, which could otherwise take your systems offline for days. The latest cloud-based disasterrecovery solutions provide redundancy and quick failover to remote data centers in the event your primary center is hit by a natural disaster. And cloud solutions can help with compliance by providing transparent audit trails accessible at a moment s notice. It s not just your critical infrastructure that s at risk. Energy and utilities companies are also attractive targets for criminals looking to steal personally identifiable information (PII) and credit card data, owing to the large amount of such data they handle. Again, the latest digital solutions can better protect against intrusions, with defenses built into your network instead of just on site. For example, tokenization and mobile location tracking are helping to combat payment fraud at the gas pump. Exceed customer expectations Customer expectations are higher than ever and digital solutions help you meet them. Digital is providing customers with the fast, easy, personalized selfservice options they want. If you operate gas stations, digital is revolutionizing the way you interact with customers. Infotainment displays on gas pumps allow you to intersperse helpful news and traffic updates with advertising messages. You can accept mobile payments at the pump. Your point of sale (POS) applications allow you to partner with best-in-class loyalty programs. And customer analytics help you make more informed decisions about the products you should stock and how you should display them, to improve store traffic and sales. 79 of energy and utility companies say improving the customer experience is a critical or high priority for Digital is helping utilities companies improve the customer experience too. Innovations, such as smart meters, mean that customers can have confidence in billing. They re no longer disturbed by the meter reader or have to dial in their own meter reading. And smart meters have also opened the door to new potential revenue streams. You can extend your offering to provide a range of connected services, such as predictive boiler maintenance. IoT and big data are enabling the retail experience you offer to be on par with the most cutting-edge consumer goods businesses. They re helping the leaders in your sectors embrace omnichannel and be more responsive to regulators demands to give customers more choice and improved, and more reliable and cost-effective services. When you re developing a strategy to manage cyber risk, you shouldn t just focus on the new technology you re introducing. Legacy applications often prove to be the most vulnerable to attack. 28 of energy and utilities companies have already implemented IoT solutions; 56 are planning to implement them 1. 3

4 Digital transformation requires a reliable and agile network. The unsung hero of digital: the network. Digital needs the network Every one of the digital initiatives that s making a difference in your sector relies on the network. The technology that s helping you modernize your infrastructure also relies on the network. The monitoring systems that enable you to spot issues with your pipelines, grid and critical infrastructure need a robust, secure connection. And the network is key to your ability to generate and analyze data to inform process improvements in a timely manner. It s also essential for the tools that enable better collaboration between fieldworkers. The technology that s helping you improve the customer experience depends on the network too. The smart meters that have reduced the burden on your contact centers and delivered new possibilities for connected services depend on a reliable network. The infotainment screens at your gas pumps will be left blank without a network that can handle rich media. And you need a reliable, secure network to handle payments at the pump and online. You need an agile network Most energy and utilities companies know that, while the network is critical to the success of their digital transformations, their existing infrastructure isn t up to the challenge. 59 of leaders in these sectors say that their legacy infrastructure is a bottleneck. And they re already acting to address this. Over two-fifths (44) say they re expanding their network capacity to support digital; another 49 are planning to do so soon 1. But just adding more bandwidth isn t a sustainable option. In the digital age, networks need to be flexible enough to handle peaks and troughs in demand. They need the agility to block malicious traffic and keep business-critical systems running to maintain service levels. And they need to be intelligent enough to operate without the need for already overstretched IT teams to be constantly reconfiguring them manually. The good news is that there are technologies emerging, such as software-defined networks (SDN) and network function virtualization (NFV), which can do just that. Energy and utility leaders are aware of the benefits of these technologies 71 say SDN offers significant benefits 1. 4

5 Close business and IT alignment is key. Leaders in the energy and utilities sectors recognize the importance of the network in supporting their business goals. 72 say the network forms part of their competitive advantage Culture change is a must Digital transformation requires more than putting in place new cloud, analytics and networking solutions. It means pushing through cultural change. To support the business, IT needs to understand the business. 74 of leaders in energy and utilities agree that the enterprise network should go beyond connectivity and align infrastructure with the needs of lines of business 1. But IT faces challenges in supporting the business. 47 say it s a problem that key staff are focused on other activities. And the same proportion say they have difficulty attracting staff with the necessary skills 1. So what s the answer? Business leaders already know what needs to be done: 73 say IT staff should spend time working in the business, and 86 say IT projects need clear business-focused KPIs. 77 say that CIOs should chair a council on digital innovation, with representatives from IT and the business 1. say poor network quality translates into poor user experience say the network is critical to any big data strategy say the network is integral to delivery on the promise of cloud 1. 5

6 Accelerate your digital journey. Make a difference today Some of the latest digital and networking solutions are still in their infancy. But there are things you can do today that will make a difference. For example, we helped a large international power company update its critical network infrastructure using a Verizon Private IP MPLS network. This provides a reliable, secure and flexible conduit for its near real-time SCADA system, which lets the company poll all their devices and act quickly if an issue is discovered. Without near real-time oversight of its grid, the company couldn t react as quickly to circuit faults that could cause a rural substation transformer to blow up, potentially costing the business severe service degradation as well as hundreds of thousands of dollars to repair. We help energy and utility companies transform their networks and become digital businesses. Find out more Our full report explores the big picture of digital transformation and the future of the network. Find out more We helped another major utility company maintain positive customer relations by moving it to a full-featured contact center, using an updated premise-based PBX. The new infrastructure reduced time to answer and call-handling time, and enhanced reporting capabilities. And the contact center is now more responsive to changing call volumes. We worked with a large energy company to introduce remote monitoring for its natural gas business. The company wanted a way to remotely monitor the pipeline bonds and cathodic rectifiers designed to prevent corrosion of its pipelines. Its new monitoring solution can report on status and deliver alarms and notifications over , SMS or telephone. And the information it provides allows the company to more easily manage compliance with the Pipeline and Hazardous Materials Safety Administration regulations. References 1 A commissioned study conducted by Forrester Consulting on behalf of Verizon, February Utility Dive, 2015 State of the Electric Utility Survey Results, January verizonenterprise.com 2015 Verizon. All Rights Reserved. The Verizon name and logo and all other names, logos, and slogans identifying Verizon s products and services are trademarks and service marks or registered trademarks and service marks of Verizon Trademark Services LLC or its affiliates in the United States and/or other countries. All other trademarks and service marks are the property of their respective owners. WP /15

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