Contact Energy reaps rewards after troublesome SAP rollout

Contact Energy reaps rewards after troublesome SAP rollout

Contact Energy is finally making progress after a massive SAP roll-out

It's been a long road to payback, but Contact Energy is poised for progress after its investment in SAP and a shift to the cloud.

It's been a long road to payback, but Contact Energy is poised for progress after its investment in SAP and a shift to the cloud.

New Zealand energy generator and retailer Contact Energy is putting struggles with a delayed SAP roll-out behind it to deliver aggressive new customer offers in the market.

The company, which today revealed new power plans offering hefty petrol discounts, has also ditched a 16-year relationship with the Fly Buys loyalty scheme and shifted to AA Smartfuel as part of its renewed customer and product strategy.

And behind all these changes is an SAP project that just two years ago looked anything but successful.

In the process, Contact also successfully decoupled its systems from former parent Origin Energy and shifted them to the cloud as part of its massive modernisation.

It was January 2014 when cracks began to appear in the company's SAP-based customer and billing project.

Contact Energy was forced to delay the roll-out, scheduled for the end of 2013, after project testing indicated improvement was needed.

The project aimed to replace 35 legacy applications, save $5.5 million a year, cut customer churn from a high of 20 per cent a year and complement SAP systems in finance, operations and asset management.

The costs of the project have never been revealed but one news report indicated they were over $100 million and well over budget.

The roll-out delays were costly too.

By February 2015, teething troubles in the implementation had caused deferred billings. Contact lost 6,500 customers in the six months to December 31, attributed to increased competition and "reduced activity during new system stabilisation".

"Following the go-live of our new retail customer billing and service system, we have made considerable progress in stabilising the system and the processes that support it," Contact CEO, Dennis Barnes, said at the time.

"A system change of this size always creates challenges, and I am pleased with the way we have been able to manage this process and hold sales volumes stable during a period of continued intense competition and price discounting."

While Contact's latest market updates indicate system stabilisation has been ongoing, it is also reaping rewards from its IT investment.

A March shareholder update said Contact's focus has been on "delivering products which provide customers with greater choice, certainty and control as well as utilising data, real-time analytics and customer feedback to drive improvements in customer experience."

"Pleasingly, this progress has been reflected in an improvement in our key customer advocacy measure, Net Promoter Score which is up to +12 from -3 in 1H16.

"The customer business recorded a $6 million improvement in EBITDAF on the back of our operational focus."

Average customer numbers were, however, down by 1,100 on the first half due to competition and price discounting by large competitors and offers by new entrants.

The SAP project's over-riding goal was to help Contact avoid the kind of price competition it is clearly still facing. Contact told shareholders it remains a challenge to find products and services which allow us it leverage its investments and scale to offer a unique services.

"We have recently completed the simplification and migration of our core IT systems to the cloud which, amongst other things, will make it easier for us to deliver services through lower cost mobile and online channels," the update said.

Contact is using Spark's Revera platform and AWS to enable its cloud services.

"We have also embedded data and analytics capability to better understand our customers’ needs, with real-time customer insight improving the customer experience as well as lowering future operating costs."

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Tags enterprise resource planningcrmSAPCustomer Relationship Managemententerprise applicationsContact Energy



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