London, 11th October, 2017 – European utilities are struggling to attract new customers and are diversifying into new areas such as connected home propositions in order to grow the business, according to a new study of the region’s energy and water retailers.

Almost three quarters of European utilities (73%) see new customer acquisition as a major challenge, according to a new study from IT market analysis and consulting firm, PAC – CXP Group.

With just one of the region’s ten largest utilities reporting revenue growth in 2016, it is no surprise that ‘new customer acquisition’ tops the list of their biggest challenges. New customer acquisition is followed by concerns around customer retention (60%) and worries about the ever- evolving cyber security threats (58%).

The study ‘Digital Utilities: From Behind the Curve to Innovation’ is based on briefings with 200 senior business and technology executives at major energy and water retail organisations across Europe.

Utilities face unprecedented pressure to rethink their business models against a backdrop of rising customer churn, massive technological disruption and a changing competitive landscape. While 32% of participants see incumbent utilities as their main competitors, 28% cite new start- ups as a potential disruptor, and 15% see entrants from other sectors as the biggest threat to their stability in the market.

Technology will be key to future success, both in terms of enhancing the customer experience and driving efficiency. More than half of European utilities (54%) have already invested in AI agents, and expect them to deliver the greatest value in improving service responsiveness (53%). Meanwhile, 82% plan to invest in connected home propositions in the next three years as they look to shift their position away from being commodity energy suppliers.

Figure 1: Main challenges
Figure 1: What are the Main Challenges Facing European Utilities in 2017? (Source: PAC)

One of the biggest changes impacting the sector is the switch to smart metering infrastructure, with more than half of energy retailers (59%) at either an advanced or relatively mature stage in their implementation. However, consumer acceptance (51%) and security concerns (43%) are seen as the top challenges to gaining full value from their investment. The majority have yet to fully leverage the potential of the data being generated by smart meters, with only 48% currently analysing interval (half-hourly, hourly etc.) data.

Nick Mayes, Principal Analyst at PAC, said: “Europe’s utilities face some big decisions to safeguard their future. Should they ’stick’ and focus on delivering a better service to their existing customer base? Or should they ‘twist’ and diversify into potentially more lucrative areas, which may include products and services from way outside the traditional utilities domain? Many utilities are looking at how telecoms operators have managed to develop beyond their landline offerings into providers of more valuable bundled services.”

Our premium sponsors comment:

Tara McGeehan, Senior Vice President, UK Energy, Utilities and Telecoms, CGI UK, said: “This study is published at a pivotal moment for Europe’s energy and water retailers. Competitiveness is creating new growth opportunities but also challenges utilities to engage with their customers in completely new ways. Digital technology enables them to transform and thrive in dynamic marketplaces, forging deeper customer relationships while driving efficiency. Many utility retailers are already on this journey: by embracing digital fully they can progress faster and outpace their competitors to win.”

David Townshend, Global Retail Utilities Offering Lead at EY, said: “European utilities face an unprecedented period of change. Key to surviving in the market will be making the correct decisions on technology investment and deployment in their business. These decisions must balance the need to improve core operations and reduce costs against building new capabilities and channels to meet the changing expectations of their customers to drive profitable growth.”

About the study:

‘Digital Utilities: From Behind the Curve to Innovation’ is based on a study conducted during the first half of 2017 and has been published today. More than 200 utility companies in the United Kingdom and Ireland, France, the DACH region, Southern and Eastern Europe as well as the Nordic and Benelux regions were surveyed by telephone (CATI). The sample comprises companies with more than 250 employees, operating in electricity, gas and water retail.

The study was prepared in the multi-client model and supported by premium sponsors CGI and EY. An executive summary of the key findings is available here:

About PAC – CXP Group

Founded in 1976, Pierre Audoin Consultants (PAC) is part of CXP Group, the leading independent European research and consulting firm for the software, IT services and digital transformation industry.

CXP Group offers its customers comprehensive support services for the evaluation, selection and optimization of their software solutions and for the evaluation and selection of IT services providers, and accompanies them in optimizing their sourcing and investment strategies. As such, CXP Group supports ICT decision makers in their digital transformation journey.

Further, CXP Group assists software and IT services providers in optimizing their strategies and go-to- market approaches with quantitative and qualitative analyses as well as consulting services. Public organisations and institutions equally base the development of their IT policies on our reports.

Capitalizing on 40 years of experience, based in 8 countries (with 17 offices worldwide) and with 140 employees, CXP Group provides its expertise every year to more than 1,500 ICT decision makers and the operational divisions of large enterprises as well as mid-market companies and their providers. CXP Group consists of three branches: Le CXP, BARC (Business Application Research Center) and Pierre Audoin Consultants (PAC).

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Nick Mayes
Principal Analyst
Phone: +44 (0) 20 7553 3968

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