Today's IssueAlert Sponsors: 

[IMAGE]

We are providing the industry with the first open platform for third party 
application development and easy access to the critical usage data stored in 
your MV-90 Data Collection and Management System.  Visit our booth at the CIS 
Conference to learn more about our new MV-90 ENTERPRISE EDITION information 
exchange server. 

Learn more about the "new" Itron at www.Itron.com
[IMAGE]

Are you looking to invest in, attract investors for, provide services to or 
understand the business and technology dynamics of the hottest companies 
emerging in the energy sector?   Attend the Energy Venture Fair, June 25 & 
26, 2001, in Boston, MA and hear CEOs from 75 hot energy companies present 
their business plans.  Complete event description available at 
www.energyventurefair.comor call Nannette Mooney at (818) 888-4445, ext. 11. 


[IMAGE]

"Global Power & Western U.S. Coal:  Domino Factors at Play in Today's Energy 
Markets" is the theme of the 2001 Spring Pacific Coal Forum (Coal Forum'2001) 
to be hosted by the Western Coal Council, June 4-6, 2001 in Park City, Utah.  
Keynote Speakers include: Honorable Mike Leavitt, Governor, State of Utah; 
Hitoshi Tagawa, Tokyo Electric Power Company; Eng. Jesus Buentello, Comision 
Federal de Electricidad; Malcolm Thomas, Kennecott Energy Company; Manfred 
Raschke, International Strategic Information Services (ISIS).   
Contact Janet Gellici at (303) 431-1456 or info@westcoal.org
www.westerncoalcouncil.org.



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May 18, 2001

Many Challenges Ahead for the CIS Market 

By Will McNamara
Director, Electric Industry Analysis 

[IMAGE]The 25th Annual CIS conference closed today in Albuquerque. Over the 
past three days, the conference focused on the changes that deregulation will 
continue to necessitate alongside the IT side of the energy industry. As 
various software and customer management companies identified their unique 
service offerings in the exhibit hall of the conference, an important 
dialogue exchange also occurred that highlighted new trends and challenges 
that utilities and retail companies will continue to face with regard to 
customer care.  

At the conference, I spoke with executives from a good number of the 
companies that are directly involved in the CIS space, including Excelergy, 
Peace Software, LODESTAR, Orcom, Enlogix, and Itron (among many others). 
Through these conversations, several common denominators emerged that 
highlight a list of key drivers that will continue to shape this market.  

The CIS space has become intensely competitive over the last two years, and 
will continue to offer additional opportunities for new business models. In 
the exhibit hall, over 100 companies were featured, some of which have been 
around since before deregulation and others that have just emerged within the 
last year or so. The vast majority of the companies represented fell into one 
of two categories: software license companies or operations that offer total 
customer management support on an outsourced basis. In particular, we are 
finding that companies capable of multi-service offerings across multiple 
verticals (electricity, gas, water, waste management, etc.) have a market 
edge over competitors that are more squarely focused on a single commodity. 
In addition, opportunities for CIS implementation appear to be far greater in 
Europe and Asia when compared to North America. Although activity in North 
America is expected to increase, many of the companies I spoke with are 
currently more aggressive across Europe and Asia. 

The debate over software licensing versus outsourced customer management 
support continues within this segment of the energy industry. A utility or 
retail operation basically has three choices: build its own CIS (modify 
existing legacy system), purchase best-of-breed capability (software 
licensing) or outsource the full customer management. Much of the decision 
between software licensing / outsourcing lies within the business model that 
the utility or retail company has established for itself, and its own 
capability of managing customer data without external support. Many customer 
management support companies would offer that, as retail operations begin to 
expand into various markets, the complexities among various state regulations 
require outsourced customer management support.  

Certainly, the cost investment is another key factor driving the CIS decision 
made by a utility or retail company. Many energy companies are hesitant about 
CIS and customer management implementation because they fear the system will 
become obsolete in three to five years and the company will be forced to 
write off its investment. Consequently, most energy companies are 
aggressively searching for an off-the-shelf product that is adaptable and can 
be expected to still be around in 15 years (if such a product exists). The 
overall hesitancy to invest in a CIS solution is part of the explanation why 
only a handful of significant contracts among utilities and software license 
companies / outsource companies have been announced to date. 

Within the various business models, utility operations have a different 
approach to CIS. Generator companies, which typically have less than 100 
customers, have a primary need to store customer information that is easily 
accessed, and therefore do not typically need a large-scale CIS. However, 
wires and retail operations are the key markets for advanced CIS and CRM 
platforms. Wires companies, which need to administer the data for a large 
number of customers, need CIS systems that focus on work management, outage 
processing, and billing of either end-use customers or market participants. 
Wires companies only have a need for CRM if state law allows marketing by the 
incumbent wires affiliate of the utility. This trend may subside in time as 
more retail operations assume the responsibility for marketing. Like wires 
companies, retail operations also need to administer the data for many 
customers. The requirements of retail operations focus on commodities plus 
value-added products and services. Within the systems employed by retail 
operations, innovative and robust pricing applications are a must. Retail 
companies also use CRM systems, in which market intelligence, sales 
automation, campaign management, and customer profiling are high priorities. 

EDI will be replaced by XML. As the transition is made from legacy systems to 
fourth-generation client service solutions, XML will replace for 
communicating large complex documents and information. This process is 
currently taking place and will most likely continue for the next year or so. 
XML is a common language used on the Internet that makes it easier and more 
cost-effective for buyers and sellers to exchange data between applications 
and data sources that otherwise might have been incompatible. However, the 
future remains open and it is anyone's guess what will eventually replace 
XML. 

California has thrown a real scare into the IT industry nationwide. Most of 
the CIS executives present at the conference agreed that the uncertainty of 
deregulation that emerged as a result of the California crisis has cast a 
pall over the near-term future for CIS opportunities. As other states 
possibly slow down or abandon their restructuring plans, many software and 
outsource companies admit that this could have an impact on their business 
and the CIS market as a whole. A number of factors impact whether or not a 
company operating in the CIS space would be impacted by a return to 
regulation. These include limitations put into place by legislative and 
regulatory bodies, the business model of the company, and its technical 
capabilities to operate in both a deregulated and regulated environment. 
Ironically, despite the slowdown, new competitors continue to emerge, mostly 
based on the belief that the need for a new CIS is building under "pent-up 
demand" and will break soon. In addition, the renewed emphasis on power 
supply as included in the Bush administration's energy plan has positive IT 
implications, according to some of the attendees at the conference. As more 
power is produced and delivered to end-use customers, the need for data 
management and billing solutions also increases. 

Other trends that will continue to drive the CIS market include: 

The rapid growth of the Internet as the primary form of communications media. 
FERC's Order 2000, which is sparking the continuing emergence of RTOs / ISOs 
/ transcos. The simplified rate structures will make it easier to bill a 
transmission tariff. 
The business lines among utility companies will become more clearly 
separated, and consolidation among the lines will most likely occur. This 
separation and consolidation process will impact the opportunities available 
for CIS companies (the available market will shrink). 
Retail customers will be turned over to new entities outside of the incumbent 
utility, which will also impact CIS opportunities. 
Outsourcing efficiencies should improve, which will heighten the ongoing 
debate between software licensing or outsourcing full customer management 
support. 

Moreover, attendees at the CIS conference generally agreed that customer 
relationship management begins with effective management of the customer as 
its core. Customer management includes the millions of transactions that must 
be accurately recorded; bills that must be disseminated, recovered and 
stored; and competitive customer data that is critical to a the operations of 
a utility or retail company. As deregulation not only opens up new 
opportunities for the companies operating in the CIS space, it also is 
forcing these companies to become more flexible, adaptable and opening to 
forming partnerships that would have seemed quite unlikely in past years. 
Consequently, the CIS market continues to change at a very rapid pace, and it 
is hard to predict what players will become visible at next year's 26th 
Annual CIS Conference. One thing remains clear, however. As the complexities 
of customer billing and management become more intense, the role of software 
providers and data management outsource companies should take on a greater 
prominence in this industry. 

An archive list of previous IssueAlerts is available at
www.scientech.com


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