Define Your Cloud Vision for the Utilities Industry

Define your cloud vision before it defines you.

Analyst Perspective

Use the cloud’s strengths. Mitigate its weaknesses.

Moving to the cloud can be a daunting and risky decision and may not always be cheaper, better, or even available for every use case. It requires effort to properly assess your cloud services and make consistent, well-informed decisions. This is where our blueprint comes in.

To develop your cloud vision, you must first answer some key questions in a broader, contextual strategy discussion. These questions include: Which parts of our organization should be moved to the cloud? What type of cloud solution makes the most sense for our needs? Should we use public, private, or hybrid cloud deployment? What is the best approach for migration? What risks and roadblocks must be considered during the migration process? What ongoing activities will be required after we move to the cloud?

Answering these questions can be challenging, but our framework makes it easier. By defining a clear cloud vision, you can ensure that your approach to cloud services aligns with your overall organizational goals and objectives. This vision will serve as a guide for decision-making and ensure that your migration to the cloud is well-planned and executed with minimal disruption to your operations.

Jeremy Roberts Research Director, Infrastructure and Operations Info-Tech Research Group

Executive Summary

Your Challenge

• As a utilities company, you face external pressure from vendors to move to the cloud and internal pressure to drive digital transformation initiatives.
• You need to determine the value proposition of the cloud for your organization beyond cost savings or outsourcing opportunities.
• Your industry is now embracing the use of cloud services, but you have yet to establish a basic cloud vision.

Common Obstacles

• Many organizations in the utilities industry move to the cloud without first defining their cloud vision or having a clear plan for achieving the cloud's benefits.
• Cloud adoption decisions are often made in an ad hoc manner rather than a systematic approach.
• There is a lack of consistent framework to assess the suitability of workloads for the cloud.

Info-Tech’s Approach

• Evaluate workload suitability for the cloud, selecting the optimal migration or non-migration path based on the value of cloud characteristics.
• Identify risks associated with workloads' cloud suitability and plan mitigations.
• Develop a roadmap of initiatives for workload actions and risk mitigation.
• Define a cloud vision to share with stakeholders, outlining the benefits and risks associated with cloud adoption.

Info-Tech Insight: 1) Base migration decisions on cloud characteristics. If your justification for the migration is simply getting your workload out of the data center, think again. 2) Address the risks up-front in your migration plan. 3) The cloud changes roles and calls for different skill sets, but Ops is here to stay.

Unique challenges in cloud adoption for the utilities industry

• CapEx vs. OpEx: Utilities tend to use capital for infrastructure investments, whereas the adoption of cloud computing is mainly driven by operational expenses. This may make it difficult for utility companies to justify switching to cloud-based solutions.
• Regulatory requirements: Before the adoption of new technologies or infrastructure, utilities are regulated to a very high degree and compliance must be ensured. This may lead to slower adoption of cloud solutions in the sector.
• Legacy infrastructure: Many utilities have a large amount of legacy infrastructure, which may not be easily integrated into cloud solutions. It can make switching to the cloud much more difficult and time-intensive.
• Operational complexity: With multiple stakeholders, different assets, and complex procedures, the utility sector is highly complex. Consequently, developing and implementing cloud solutions that meet the needs of this sector may be difficult.
• Critical infrastructure: The infrastructure managed by utilities is often critical to public safety and national security, which means that any disruption can have significant consequences. This requires robust disaster recovery and business continuity planning, which may require specialized cloud solutions.
• Data sensitivity: Utilities manage sensitive customer data such as personal information and billing data. As a result, they must comply with rigorous data protection standards which may affect their decision to adopt cloud computing.

Overcoming challenges: Solutions for cloud adoption in utilities

• Legacy systems: A gradual migration of legacy systems to the cloud using a phased approach, starting with less critical systems and progressing to more complex ones, is one solution. This way of thinking can help mitigate disruption and enable the development of expertise in cloud technologies.
• Regulatory requirements: Utility firms may cooperate with cloud service providers that specialize in compliance and security to meet the needs of regulators. Providers may offer solutions specifically designed to comply with regulatory requirements, such as HIPAA or PCI.
• Critical infrastructure: Cloud providers may provide specific solutions for disaster recovery and business continuity, such as backup or replication services, which can help to assure the availability of vital infrastructure when there is a disruption.
• Efficiency complexity: To address efficiency complexity, utilities can cooperate with cloud service providers that offer specialized solutions suited to the sectors in which they operate and have experience. In addition, to make cloud deployment and management easier for businesses, they may focus on simplifying processes and reducing complexity where possible.

Info-Tech Insight: A hybrid cloud strategy, combining both traditional infrastructures on premises and cloud services, could be a solution for utilities companies. This approach, while maintaining control over essential assets and fulfilling regulatory requirements, can make it possible for utilities to exploit the benefits of cloud computing. This will enable utilities to keep vital data on premises, while taking advantage of the scale and cost efficiencies of public cloud services in lesser critical workload applications. Hybrid cloud solutions also provide the flexibility to move workloads between environments as needed, ensuring optimal performance and cost efficiency.

Finding a solution for CapEx vs. OpEx

One of the biggest factors for a slow adoption of cloud in the utilities has been the preference for CapEx over OpEx. As the benefits of using cloud is becoming increasingly clear and almost a requirement for companies to innovate, the utilities sector needs to find a way to make cloud adoption more palatable.

The following points can provide a starting point for cloud adoption:

• Understand regulatory requirements: Start with understanding the regulatory requirements and constraints governing the industry on what can be considered CapEx vs. OpEx.
• Strategic financial planning: Identify the costs associated with cloud adoption, including the upfront costs associated with CapEx and ongoing costs that add to the OpEx.
• Negotiate with vendors: Most cloud vendors offer payment plans which can be paid upfront even three years ahead of time. These deals can be structured in a way where most costs can be associated with CapEx. This is not only useful in meeting the financial needs of the industry but is also considered a best practice for cloud adoption and can help drive down costs.
• Implement cloud cost management: While OpEx may not be completely unavoidable on cloud (especially in SaaS), cost management practices such as monitoring, metrics, and usage optimizations can be implemented with the help of a cloud center of excellence that can ultimately help drive down the OpEx costs.

Info-Tech Insight: An effective way for cloud adoption while being CapEx-heavy is to make PaaS and IaaS look like CapEx, while SaaS can be positioned as OpEx. This will help the sector align with traditional financial models while still leveraging the benefits of cloud.

Cloud adoption

Advanced metering infrastructure (AMI)

AMI is a digital metering system that enables utilities companies to remotely monitor and manage customer energy usage. This technology can contribute to optimizing energy supply, reducing costs, and enhancing customer service for utilities. Flexibility, real-time access to data, cost savings, security, and ease of integration with other systems may be good reasons to host AMI on the cloud.

Case study – Commonwealth Edison

INDUSTRY: Utilities | SOURCE: Itron

Background

With 4 million customers in Illinois, Commonwealth Edison (ComEd) is one of the largest energy suppliers in the Midwest. To improve the level of customer service and achieve organizational efficiencies, ComEd recognized that their metering system needed to be modernized and replaced with newer infrastructure.

Complication

ComEd’s legacy metering system was outdated and could not meet the needs of modern utilities. Accuracy of billing, manual meter reading, and high operating costs were among the challenges faced by the utility. ComEd also needed to meet regulatory requirements to provide customers with hourly interval usage data.

Results

ComEd worked on implementing a smart metering solution that included cloud-hosted software and analytics. ComEd was able to perform automated readings of meters, enhance billing security, and supply customers with detailed usage data thanks to Advanced Metering Infrastructure’s AMI system. The cloud enabled real-time outage analytics and proactive maintenance, reducing the length of interruptions and improving reliability. The new system also resulted in significant cost savings and improved customer satisfaction.

Cloud adoption

Billing systems

Utility companies can make the billing process more efficient, reduce costs, and increase customer service through cloud-based payment systems. Using cloud billing enables customers to access information about their bills and make payments online, providing them with a more convenient experience and reducing customer service staff workload.

Case study – Southern California Edison

INDUSTRY: Utilities | SOURCE: SAP

Background

Southern California Edison, a large utility company, had an old billing system that was inflexible, expensive to maintain, and incapable of keeping pace with changing market requirements. To improve customer services and keep up with competition, the company needed a more flexible and efficient solution.

Complication

The old billing system was unable to expand to meet growing demands of the business. In addition, costs and complexity of maintaining the system continued to increase, resulting in lower satisfaction levels for customers. The company needed to come up with a solution that could satisfy the scale and complexity of this activity but also cut costs while increasing efficiency.

Results

The company implemented SAP’s cloud-based billing solution, which offered scalability, flexibility, and agility to support the needs of the business. The solution integrated with the company’s current systems, which improved billing accuracy, reduced invoice processing time, and increased cash flow. The cloud solution allowed the company to respond instantly and easily to change on the market, resulting in an increase in customer satisfaction levels and a whole range of growth benefits for the firm.

Cloud adoption

Operational technology (OT)

Utility companies can benefit from the use of cloud-based operational technology OT systems in various ways. Companies can access real-time data and Analytics as they move OT to the cloud, which will greatly improve monitoring and management of their systems. This is likely to result in improved performance, reduced downtime, and better asset management.

Case study – Axpo

INDUSTRY: Utilities | SOURCE: Microsoft

Background

To enhance its operational efficiency and customer experience, Axpo, a Switzerland-based energy firm, wanted to upgrade their IT infrastructure. Focusing on enhancing reliability and efficiency of their IT infrastructure, Axpo decided to migrate OT to the cloud.

Complication

Axpo’s legacy infrastructure had a number of systems that did not integrate. Their infrastructure had encountered management challenges and did not have real-time visibility into operations. In addition to ensuring data security, compliance with regulations, and minimal interruptions, the firm needed to migrate its OT systems to the cloud.

Results

Axpo achieved several advantages through the migration of their OT systems to cloud based on Microsoft Azure. They achieved greater reliability and availability of its systems, a reduction in the cost of managing infrastructure, and real-time operational visibility. In addition, the company achieved regulatory compliance and data security while minimizing interruptions during the migration process.

Why cloud vision?

Due to a variety of industry-specific factors such as legacy systems, regulatory requirements, geographical distribution, critical infrastructure, and operating complexity, cloud adoption can be difficult for utilities companies.

• Use the Define Your Cloud Vision blueprint to overcome these challenges and exploit the benefits of clouds. By solving key issues such as which part of your organization should move to the cloud, what type of cloud solution would best suit your needs, and how risks and obstacles must be considered during migration, the blueprint provides a comprehensive set of tools that will assist you in developing an overall transparent and contextual cloud strategy.
• Ensure that your cloud strategy is aligned with the overarching organizational objectives and goals, while ensuring a well-planned and -implemented migration without affecting operations in any way.
• Use the Cloud Vision Workbook to evaluate the organizations readiness for cloud adoption and to determine specific needs for the project.

Info-Tech’s approach

Goals and drivers
Service Model What type of cloud makes the most sense for workload archetypes? When does it make sense to pick SaaS over IaaS, for example?	Delivery Model Will services be delivered over the public cloud, a private cloud, or a hybrid cloud? What challenges accompany this decision?
Migration path What does the migration path look like? What does the transition to the cloud look like, and how much effort will be required? Amazon’s 6Rs framework captures migration options: rehosting, repurchasing, replatforming, and refactoring, along with retaining and retiring. Each workload should be assessed for its suitability for one or more of these paths.
Support model How will services be provided? Will staff be trained, new staff hired, a service provider retained for ongoing operations, or will a consultant with cloud expertise be brought on board for a defined period? The appropriate support model is highly dependent on goals along with expected outcomes for different workloads.
Highlight risks and roadblocks
Formalize cloud vision
Document your cloud strategy

The Info-Tech difference:

1. Determine the hypothesized value of cloud for your organization.
2. Evaluate workloads with 6Rs framework.
3. Identify and mitigate risks.
4. Identify cloud archetype.
5. Plot initiatives on a roadmap.
6. Write action plan statement and goal statement.

What is the cloud, how is it deployed, and how is service provided?

Cloud Characteristics:

1. On-demand self-service: the ability to access resources instantly without vendor interaction
2. Broad network access: all services delivered over the network
3. Resource pooling: multi-tenant environment (shared)
4. Rapid elasticity: the ability to expand and retract capabilities as needed
5. Measured service: transparent metering

Service Model

1. Software-as-a-Service: all but the most minor configuration is done by the vendor
2. Platform-as-a-Service: customer builds the application using tools provided by the provider
3. Infrastructure-as-a-Service: the customer manages OS, storage, and the application

Delivery Model

1. Public cloud: accessible to anyone over the internet; multi-tenant environment
2. Private cloud: provisioned for a single organization with multiple units
3. Hybrid cloud: two or more connected clouds; data is portable across them
4. Community cloud: provisioned for a specific group of organizations

A workload-first approach will allow you to take full advantage of the cloud’s strengths

• Under all but the most exceptional circumstances, good cloud strategies will incorporate different service models. Very few organizations are “IaaS shops” or “SaaS shops,” even if they lean heavily in one direction.
• These different service models (including non-cloud options like colocation and on-premises infrastructure) each have different strengths. Part of your cloud strategy should involve determining which of the services makes the most sense for you.
• Own the cloud by understanding which cloud (or non-cloud!) offering makes the most sense for you given your unique context.

Migration paths

In a 2016 blog post, Amazon introduced a framework for understanding cloud migration strategies. The framework presented here is slightly modified – including a “relocate” component rather than a “retire” component – but otherwise hews close to the standard.

These migration paths reflect organizational capabilities and desired outcomes in terms of service models – cloud or otherwise. Retention means keeping the workload where it is, in a datacenter or a colocation service, or relocating to a colocation or hosted software environment. These represent the “non-cloud” migration paths.

In the graphic on the right, the paths within the red box lead to the cloud. Rehosting means lifting and shifting to an infrastructure environment. Migrating a virtual machine from your VMware environment on premises to Azure Virtual machines is a quick way to realize some benefits from the cloud. Migrating from SQL Server on premises to a cloud-based SQL solution looks a bit more like changing platforms (replatforming). It involves basic infrastructure modification without a substantial architectural component.

Refactoring is the most expensive of the options and involves engaging the software development lifecycle to build a custom solution, fundamentally rewriting the solution to be cloud native and take advantage of cloud-native architectures. This can result in a PaaS or an IaaS solution.

Finally, repurchasing means simply going to market and procuring a new solution. This may involve migrating data, but it does not require the migration of components.

Migration paths

• Retain (Revisit)
  • Keep the application in its current form, at least for now. This doesn’t preclude revisiting it in the future.
• Relocate
  • Move the workload between datacenters or to a hosted software/colocation provider.
• Rehost
  • Move the application to the cloud (IaaS) and continue to run it in more or less the same form as it currently runs.
• Replatform
  • Move the application to the cloud and perform a few changes for cloud optimizations.
• Refactor
  • Rewrite the application, taking advantage of cloud-native architectures.
• Repurchase
  • Replace with an alternative, cloud-native application and migrate the data.

Support models by characteristic

IT services, including cloud services, can be delivered and managed in multiple ways depending on the nature of the workload and the organization’s intended path forward. Three high-level options are presented here and may be more or less valuable based on the duration of the expected engagement with the service (temporary or permanent), the skills specialization required, and the flexibility necessary to complete the job.

By way of example, a highly technical, short-term project with significant flexibility requirements might be a good fit for an expensive consultant, whereas post-implementation maintenance of a cloud email system requires relatively little specialization and flexibility and would therefore be a better fit for internal management.

There is no universally applicable rule here, but there are some workloads that are generally a good fit for the cloud and others that are not as effective, with that fit being conditional on the appropriate support model being employed.

Risks, roadblocks, and strategy components

No two cloud strategies are exactly alike, but all should address 14 key areas. A key step in defining your cloud vision is an assessment of these strategy components. Lower maturity does not preclude an aggressive cloud strategy, but it does indicate that higher effort will be required to make the transition.

Cloud archetypes – a cloud vision component

Once you understand the value of the cloud, your workloads’ general suitability for cloud, and your proposed risks and mitigations, the next step is to define your cloud archetype.

Your organization’s cloud archetype is the strategic posture that IT adopts to best support the organization’s goals. Info-Tech’s model recognizes seven archetypes, divided into three high-level archetypes.

After consultation with your stakeholders, and based on the results of the suitability and risk assessment activities, define your archetype. The archetype feeds into the overall cloud vision and provides simple insight into the cloud future state for all stakeholders.

The cloud vision itself is captured in a “vision statement,” a short summary of the overall approach that includes the overall cloud archetype.

			We can best support the organization’s goals by:
	Cloud Focused	Cloud-Centric	Providing all workloads through cloud delivery.
		Cloud-First	Using the cloud as our default deployment model. For each workload, we should ask “why NOT cloud?”
	Cloud Opportunistic	Hybrid	Enabling the ability to transition seamlessly between on-premises and cloud resources for many workloads.
		Integrated	Combining cloud and traditional infrastructure resources, integrating data and applications through APIs or middleware.
		Split	Using the cloud for some workloads and traditional infrastructure resources for others.
	Cloud Averse	Cloud-Light	Using traditional infrastructure resources and limiting our use of the cloud to when it is absolutely necessary.
		Anti-Cloud	Using traditional infrastructure resources and avoiding use of the cloud wherever possible.

Info-Tech’s methodology for defining your cloud vision

Insight summary

The cloud may not be right for you – and that’s okay!

Don’t think about the cloud as an inevitable next step for all workloads. The cloud is merely another tool in the toolbox, ready to be used when appropriate and put away when it’s not needed. Cloud first isn’t always the way to go.

Not all clouds are equal

It’s not “should I go to the cloud?” but “what service and delivery models make sense based on my needs and risk tolerance?” Thinking about the cloud as a binary can force workloads into the cloud that don’t belong (and vice versa).

Bottom-up is best

A workload assessment is the only way to truly understand the cloud’s value. Work from the bottom up, not the top down, understand what characteristics make a workload cloud suitable, and strategize on that basis.

Your accountability doesn’t change

You are still accountable for maintaining available, secure, functional applications and services. Cloud providers share some responsibility, but the buck stops where it always has: with you.

Don’t customize for the sake of customization

SaaS providers make money selling the same thing to everyone. When migrating a workload to SaaS, work with stakeholders to pursue standardization around a selected platform and avoid customization where possible.

Best of both worlds, worst of both worlds

Hybrid clouds are in fashion, but true hybridity comes with additional cost, administration, and other constraints. A convoy moves at the speed of its slowest member.

The journey matters as much as the destination

How you get there is as important as what “there” actually is. Any strategy that focuses solely on the destination misses out on a key part of the value conversation: the migration strategy.

Blueprint deliverables

Cloud Vision Executive Presentation

This presentation captures the results of the exercises and presents a complete vision to stakeholders including a desired target state, a rubric for decision making, the results of the workload assessments, and an overall risk profile.

Cloud Vision Workbook

This workbook includes the standard cloud workload assessment questionnaire along with the results of the assessment. It also includes the milestone timeline for the implementation of the cloud vision.

Blueprint benefits

IT benefits

• A consistent approach to the cloud enables the utility company to make informed deployment decisions and streamline the execution process, avoiding any potential guesswork or confusion.
• By incorporating cloud services in a proper and organized manner, the utility company can take advantage of benefits such as automation, elasticity, and alternative architectures like microservices and containers.
• The cloud vision project helps the IT team articulate the expected benefits of incorporating cloud infrastructure and work toward achieving them efficiently.
• Having a clear framework for incorporating organizational goals into cloud plans allows the utility company to align their cloud strategy with their overall business objectives and optimize their IT resources for maximum impact.

Business benefits

• Streamlined access to critical IT resources for utility workers enables efficient management of infrastructure and effective delivery of services to customers.
• Improved flexibility and scalability of IT resources enables your utility company to adapt quickly to changing demands and priorities.
• Framework for cost management in the cloud incorporates OpEx and chargebacks/showbacks. A clear understanding of expected changes to cost modeling is also a benefit of a cloud vision.
• IT’s response (and contribution to) IT strategic initiatives is clarified for stakeholders.