Why are utilities moving IT applications to the cloud?
As recently as two years ago, many utilities challenged any discussion related to cloud computing with sharp comments such as “Unthinkable, the barriers are just too high!” and “One compromised piece of data could mean the CEO’s job!” with most utilities stating they would never go to the cloud for their core business.
Fast forward to today and several of those same utilities have completely changed their business models and several are now adopting those “unthinkable” cloud solutions to quickly adapt to their new models. Utilities are discovering that the cloud offers flexibility with scalable solutions, virtually unlimited data access, advanced computation systems and potential cost savings.
What is Cloud computing?
The NIST definition is clear to some and confusing to others. Simply, cloud computing uses a network of remote servers hosted on the Internet to store, manage and process data, rather than using a personal computer, local server or servers at one location. It promotes convenient access, availability and serviceability.
There are three service models for cloud computing:
1. Software as a Service (SaaS): runs the cloud provider’s applications on a cloud infrastructure. Each application is accessible from a specific device through a portal such as a Web browser. There is no client management or control of network, servers, operating systems, storage or individual application capabilities. Access to limited userspecific application configuration settings might be an exception.
2. Platform as a Service (PaaS): provides clients the ability to deploy cloud provider-supported applications onto the cloud infrastructure. Clients have no management or control permission on the cloud infrastructure but control the deployed applications and possibly application hosting environment configurations.
3. Infrastructure as a Service (IaaS): allows clients access to processing, storage, networks and other fundamental computing resources, giving clients the ability to deploy operating systems and other applications. Clients have no cloud infrastructure management or control options but can control operating systems, storage, deployed applications and possibly limited select networking components such as host firewalls.
There are four deployment models to be considered:
1. Private cloud: designed to be managed by one client or a third-party administrator on-site or off-site.
2. Community cloud: shared by several clients and supports a specific community group sharing concerns
regarding mission, security requirements, policy and compliance considerations.
Management may be conducted by clients or a third party and may exist onsite or off-site.
3. Public cloud: available for use by the general public and owned by a cloud service provider.
4. Hybrid cloud: two or more clouds that can be private, community or public. Individual cloud models must remain separate but are bound by standardized technology, allowing data and application portability and load balancing between clouds.
Cloud computing typically costs less than the on-site server-based system required to manage the same amount of processing power and data, and it eliminates on-site servers, storage devices and software applications. Providers fully manage the services, which are licensed on demand per day or per month, giving users as much or as little service as they need.
Who is moving applications to the Cloud?
Per a recent cloud survey from IDC, 18% of utilities indicated a propensity to move to a public cloud in 2018. Smaller municipalities and water utilities often own little of their infrastructure, which makes them good candidates for outsourcing their applications to the public cloud. For these smaller public utilities to move to the cloud, they just need to get permission from city hall, while investor owned utilities (IOUs) must get permission from the public utility commission.
Meanwhile, many of the larger utilities are making the move to a private cloud to reduce the concerns of running applications in a public cloud.
Movement to the cloud seems to be occurring in three utility sub-segments: - Retail only, where customer engagement is delivered in a public cloud around an omni-channel experience along with commodity billing (using interval meters) as well as non-energy billing.
- Distribution only, where smart meter and grid data is managed as an energy cloud service with a need for more complex billing (Distribution System Operators and Meter System Operators).
- Fully Integrated utilities are mainly moving to a private and/or a hybrid cloud approach where core functions are kept on premise, but edge processes to reduce costs and leverage a more agile environment are moving to a public cloud especially within retail and distribution operations.
How safe is the Cloud?
Cyber security is still a major concern when moving into the cloud. But as one Chief Security Officer explained, the inherent SaaS configuration makes it possible to analyze cloud applications and associated data constantly to optimize delivery, providing the highest reliability and scalability. This real-time analysis can detect anomalies in application code or related data much more quickly than on-premise installations which could have hidden vulnerabilities that go undetected for months or years.
What benefits have been realized to date?
Retailers are starting to take advantage of public cloud flexibility with advanced customer engagement and self-service apps.
The Green Button initiative in California has built an energy cloud to allow consumers to download their data to manage their appliances more efficiently and has encouraged utilities to build applications and make the data anonymous yet available to third parties for research and marketing.
Many utilities are already performing advanced visualisation to improve customer service so they can see their assets on a map using real-time geospatial solutions in the cloud to see if weather will impact their field assets. Vegetation management can be monitored by satellite images provided by cloud systems and when compared to a digital twin of transmission and distribution lines, smarter vegetation investments can be made at the right time to avoid outages.
Cloud computing was not initially welcomed as warmly as in other industries, but adoption is dramatically increasing as utilities face increasing disruption from companies such as Tesla, Google and Apple.
Cloud computing enables the utility to quickly incorporate advanced applications in customer engagement, machine learning, artificial intelligence and in-memory processing to address these new threats as changes to regulations and improvements in cyber security are reducing the barriers once thought too high to overcome. MI
About the author
James McClelland is the Senior Global Director of SAP Utilities & Energy Industry Marketing. James has over 25 years’ experience creating business strategy for utilities deregulation.
Mr. McClelland is a graduate of the University of Toronto, Canada, holds a degree in Business & Commerce, and currently resides in Dallas, Texas.