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Agile IT powers 40% gain in bundled utility customers
A hybrid cloud platform helped Trustpower successfully execute its multi-utility retail strategy, and increase the number of customers that use its bundled services from 23% to 40%.
Trustpower Limited, a leading electricity generator and retailer in New Zealand, supplies gas and telecommunications services to its customers.
Founded in 1993, the billion-dollar company is New Zealand’s fifth largest electricity generator and fourth largest energy retailer by market share. Trustpower owns and operates 39 power stations, generating 99% of its electricity using renewable hydro energy sources.
In 2007 the company launched telecommunication services, and i s now New Zealand's fourth-largest internet Service Provider (ISP). Trustpower has 750 full-time employees.
It’s been exciting to expand into the telco and ISP space. We’ve moved from a corporate IT team to an operational ISP team.Simon Clarke
A highly competitive energy market spurs creative thinking
New Zealand is a highly competitive energy market: over 30 separate retail brands compete for the country’s 2 million or so electricity connections. In 2015, new providers launched services in three-quarters of New Zealand’s regions; a record number of consumers – 418,000 – switched electricity suppliers during that same year. 1
Trustpower has a unique competitive edge, however. Although the company began as a provisional electricity supplier, since 2007 it has been something else entirely: a multi-utility services provider offering telecommunications as well as energy services. Trustpower’s unique portfolio allows it to create and offer utility services bundles – and consumers love them. Trustpower bundles are often less expensive than purchasing energy and telecom services a la carte from multiple providers. They also simplify tasks such as bill-paying and scheduling service calls.
The multi-product strategy also makes business sense.
Offering bundled services helps Trustpower compete by differentiating its offerings, innovating on pricing, and building customer loyalty. Trustpower can build unique incentives to win new customers and grow market share. It can upsell existing customers to multiple-utility services, growing revenues. Customers that purchase multiple services from Trustpower are also less likely to switch to a different utility or telecom provider. Because earning new customers is more costly than retaining existing ones, this contributes over time to Trustpower’s success.
Tough competition demands strategic IT
For Trustpower to compete successfully with its bundled energy and telecom services, its IT organisation must be a strategic asset.
To maximise the value of its multi-service retail strategy – that features bundled energy and telecom services – Trustpower must be agile and lean. It must be able to adjust its offerings based on customer feedback or market trends. It must equip its employees with the tools they need to make fast, smart decisions and respond to customers in ways that reinforce its position as a customer-centric innovator.
Nor can Trustpower afford to rely exclusively on its multi-service retail strategy. It must also keep abreast of other advances in its industry, such as smart metering, solar PV, electric vehicles, and battery storage. And it must have the resources in place to take advantage of new sources of data as they become available from its smart metering project.
Trustpower recognises that all of these challenges have a common component: IT is more central to the business. Until recently, however, the company was hampered by its legacy data centre, which had grown over time into a siloed ecosystem that was increasingly difficult to manage. Trustpower needed an IT foundation that was much more flexible and scalable.
The company also had concerns about the flexibility of its IT operations. While energy services typically remain stable for years if not decades, telecommunications providers continually innovate, launching new services and refining service terms to attract customers and reduce churn. Trustpower recognised that its IT operations needed to deliver strategic value to the business. Minimally, IT must function as an internal services provider to the business, rather than a traditional “break fix” IT team. But Trustpower also saw beyond that model: it wanted its IT organisation to bring innovative capabilities to the business.
Technology is now more at the centre of our business rather than a service function. It is a key enabler of strategy. Without strong technology capability and an innovative and collaborative mindset, we cannot execute our business strategy.Simon Clarke
Transitioning to a hybrid cloud approach
Trustpower moved its infrastructure, servers, and legacy applications to a hybrid cloud model with three distinct environments.
Trustpower took a number of steps to achieve its business strategy. It spun off its wind generation line of business to enable it to focus more fully on its core multi-product retail business. It moved its corporate offices from an industrial space to a new office building, and designed the new space without fixed desks or personal offices to encourage a more transparent, collaborative work environment.
Trustpower also made fundamental changes in its data centre architecture and operations. It considered moving its legacy IT infrastructure to its new headquarters, but after examining that option’s costs, it decided instead to adopt a hybrid cloud approach by partnering with HPE to rationalise its applications portfolio.
Next steps required the migration of 200 legacy software applications to a hybrid mix of public cloud and on-premise environments, which were essentially divided into three categories based on type: development and test applications, compute and database services applications, and business-critical applications.
In addition to moving applications to the cloud, Trustpower’s initiative also included:
- Software version upgrades and updates
- Cloud enablement of applications
- Smoke testing and development support during testing and production deployment
Trustpower paired the roll-out of its new hybrid cloud environment with a re-alignment of its IT organisation as an IT services provider better fit to the fast-paced telecommunications business.
We decided that anything new we build would be in the cloud, and we’d move our legacy environments as close to the cloud as we could.Matt van Deventer
Satisfied customers, boosted revenues
Trustpower’s sharpened focus on its multi-product retail strategy has delivered results, more than doubling the number of customers that purchased two or more services.
The changes Trustpower made to its business and IT organisations paid off.
With its new hybrid cloud solution in place, Trustpower has shortened the time needed to develop new business services, such as ultra-fast broadband services and home phone services.
As it compressed the time needed to launch new services, the company launched a marketing campaign to raise awareness about its bundled power and telecom offerings. Within months, the number of customers purchasing two or more services began to climb.
There are signs that the bundled services is healthy for Trustpower’s market share: 80% of its new customers are purchasing energy and telecom packages.
Securing bundled services customers, in turn, results in improved customer loyalty. Trustpower characterises its customer churn rate consistently lower than the market average; as its penetration of bundled services continues, it expects its churn rate to continue to drop.
The new hybrid data centre is also highly scalable. As Trustpower rolls out smart metering to its customers, it has the IT resources it needs to implement big data solutions; these will enable the company to better understand its customers and manage its electricity grid.
The new hybrid cloud also reduced Trustpower’s IT capital costs, freeing capital and labour for other purposes and helping to support a stronger balance sheet on behalf of the utility’s shareholders.
Tally up the total costs of an in-house IT infrastructure. In many cases it’s unsustainable and restrictive if you are growing fast. Transforming to a hybrid infrastructure is the way to go.Simon Clarke
To transform its data centre, Trustpower called on HPE’s proven experience to design, build, and support a new hybrid cloud environment.