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May 9, 2001

Peace Software and IBM Sign Customer 
Management Deal with Xcel Energy 

By Will McNamara
Director, Electric Industry Analysis 

[IMAGE]


IssueAlerts LIVE FROM THE CIS CONFERENCE NEXT WEEK 

Next week I will be attending the 25th Annual CIS conference in  Albuquerque, 
N.M. On Wednesday, Thursday and Friday, I will be writing  SCIENTECH's daily 
IssueAlert directly from the floor of the conference,  providing you with the 
latest news and analysis about emerging technologies  in the energy industry. 
Key issues to be addressed at the conference  include CIS / CRM activities, 
billing strategies and billing software,  meter reading, the application 
service provider (ASP) model, and a  technology forecast for the industry. 
Each day at the conference I will  select the most important issue of the day 
and provide you with the  independent analysis that you've come to expect 
from IssueAlert. So even if  you can't attend the conference, you can still 
participate in the dialogue  and information exchange. --Will McNamara 

Peace Software announced that it will join with IBM Global Services to 
deliver large-scale and advanced technology solutions to utility and retail 
energy companies operating in regulated and deregulated markets. Using 
"state-of-the-art and proven approaches," IBM Global Services and Peace 
Software will plan, develop, test, and deliver customer-specific 
implementations of Peace's Energy suite. Services will span the life cycle of 
an installation from rapid deployment through production site enhancement and 
maintenance. Peace and IBM have secured a contract to provide full customer 
management services for Xcel Energy, which expands upon a strategic alliance 
that has already existed between the utility and IBM. 

Analysis: Both Peace Software and IBM have been aggressively pursuing the 
same customer management space for some time. The fact that the two companies 
have now come together to combine their unique skill sets establishes a 
strong competitive force in this fast-growing arena, which can include 
outsourced billing, meter reading, data collection, customer care, CRM, and 
CIS systems. IBM Global Services, as an information technology services 
provider, brings an operational and management capability for back-office 
requirements. In turn, Peace Software provides a unique suite of billing and 
customer data software that many utilities are purchasing as they move from 
legacy systems to more flexible solutions. 

As noted, Peace Software and IBM Global Services immediately followed the 
announcement of their partnership with a new multi-million, five-year 
contract with Minneapolis, Minn.-based Xcel Energy. Under the contract, the 
two companies will implement Peace's Energy suite to support Xcel's 3.5 
million regulated and deregulated electricity and gas customers located in 11 
Western and Midwestern states. In addition, the Peace suite will be used to 
support Xcel Energy's participation in Texas' deregulation pilot program, 
which begins in June. The project will replace Xcel Energy's mainframe and 
client / server legacy system. The implementation plan for Xcel Energy 
includes all customer management, commodity billing and Internet components 
that are offered in the Peace Energy software. 

The contract with Xcel expands upon an already-established alliance between 
IBM and the utility that dates back to 1995 (IBM originally contracted with 
Public Service Co. of Colorado, an early predecessor to Xcel Energy). Under 
the $400 million, 11-year alliance, IBM has provided data-center operations 
and disaster recovery for Xcel Energy, including networking, help desk, PC 
and LAN support, distributed services support, and application development 
and maintenance services. Through the agreement, Xcel Energy awarded IBM 
"preferred provider status," making IBM the vendor of choice for any IT 
products and services that the utility may need.  

In this next phase of the partnership with Xcel, IBM appears to be moving the 
focus on a mainframe and client-server system to a packaged product for Peace 
Software. This is a major step for Xcel, as many utilities still retain 
internal control over their own applications and are reticent to outsource 
these functions to an outside company. In addition, this is a huge deal for 
Peace and IBM as they may be planning to eventually extend the platform 
beyond the partnership with Xcel. 

In fact, Xcel Energy is just the latest in a growing list of competitive 
utilities and energy companies that have outsourced or replaced their billing 
/ customer care needs. In competitive markets, a prerequisite for the 
continued growth of an energy company or utility is a comprehensive billing 
software system that can handle the complexities of an unbundled environment, 
which is where the value of Peace Software comes in. Most competitive retail 
providers realize that they must be able to provide customers with online 
energy usage and billing data on a 24/7 basis. Further, as competitive energy 
providers operate in different states, it is important that they eliminate 
the different automated and manual processes that are common in legacy 
systems. This can result in a real cost savings for an energy company as it 
can eliminate back-office functions such as taking calls for final reads and 
address changes, all of which can be handled directly by the customer through 
online software.  

An energy company basically has two options with regard to billing / customer 
care solutions. The first option is for the energy company to purchase the 
billing software directly from a software provider such as Peace and manage 
its own billing needs. The second option is to completely outsource the 
entire billing / customer care services to a company such as IBM Global 
Services. By joining forces, Peace Software and IBM are anticipating that 
energy companies will be inclined to not only select the Peace software, but 
also opt to use IBM Global Services' implementation and management services.  

Peace's Energy software, which reportedly is being rapidly deployed in 20 
transitioning energy markets around the world, is designed to provide several 
self-serve features, including customer enrollment, summary billing, more 
flexible due dates and electronic payment options. The Energy suite was 
developed for retail energy companies and is capable of handling many 
functions required by retailers, from enrollment and registration to billing 
to settlement and load forecasting. The last two features are particularly 
noteworthy as, up to this point, they have been rarely found in billing 
software. Many systems in the United States today are building this 
competency or are "bolting on" the technology; Peace already offers it in an 
integrated tool. 

Peace's Energy Version 6 software, which was released in December 2000, is 
billed as the first e-business solution to integrate customer and commodity 
management. The upgraded features of Energy Version 6 include B2C e-commerce 
functions, an advanced third-generation browser user interface (BUI), 
enhanced billing capabilities and expanded industry-standard support for the 
Oracle 8i database system. The result of these technical improvements, 
according to Peace, is a "capability to exploit the latest Web browser 
technologies to support and streamline large scale, mission-critical customer 
service operations." Further, the Energy software is centered around the UNIX 
operating system and thus can be moved and upgraded from one hardware 
platform to another. The Energy software can accommodate billing services 
around natural gas, electricity, water, home security, and home mortgaging. 
The end result is that an energy service provider can group all of its 
services into one bill stating one cost, which is a market edge against 
competitors that only provide multiple billing. 

On its own, Peace Software has become a dominant player in the energy billing 
software market, offering its "one-stop-shop" billing tool to a variety of 
utilities and energy companies. Peace boasts customers such as AEP, 
MidAmerican Energy, Enron, BC Gas, Dominion Retail, Nordic Electric, Exelon 
Energy, and Pepco Services. Peace has also entered the Canadian gas market by 
implementing its Energy suite at BC Gas, headquartered in Vancouver. The 
company is based in Miami and maintains a large presence in its country of 
origin, New Zealand, the first country to deregulate its electric utility 
market. 

The company has used strategic partnerships as one method of growing its 
business. Prior to this partnership with IBM Global Services, Peace Software 
announced in early April an alliance with Exolink, a provider of retail 
energy business process integration services. Under this partnership, Peace 
and Exolink are marketing a platform for energy retailers in both regulated 
and unregulated markets in which customer data can be shared in and out of 
multiple markets. Peace also just signed a contract with Delinea, a vertical 
services provider, in which Delinea has licensed Peace's Energy software as a 
customer management application targeted at mid-sized utilities.  

However, the billing / customer care market is arguably one of the most 
competitive businesses to have emerged from electric deregulation. 
Consequently, the list of competitors that Peace Software and IBM Global 
Services face grows literally every month. I cannot list all of the 
competitors here, but a few are worth mentioning as they have grown at a 
similar pace to Peace and IBM. Such competitors include Alliance Data Systems 
(ADS), ConneXt, Enlogix, Excelergy, Itron's MV-PBS, LODESTAR, Orcom 
Solutions, SCT Banner, SPL Worldgroup, and US Power Solutions. Some of these 
companies offer just the software solution, which is licensed to utilities or 
energy companies, while others serve as the outsourced management company 
that implements the software package. The partnership between Peace Software 
and IBM Global Services runs parallel to similar partnerships between ADS / 
Excelergy and Enlogix / SCT software. 

Currently, SCIENTECH is witnessing a trend away from large license-only 
agreements and into Strategic Sourcing agreements. In the customer care field 
today, Enlogix is the largest application service provider with over 3 
million end customers in production today. Orcom is the second largest, with 
over 1 million "live" customers. Realistically, it will be about two years 
before Peace and IBM are able to fully migrate all of Xcel's 3.5 million 
customers to the Peace software. However, if this transition materializes, it 
could represent the largest outsourced customer care contract to date.   

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



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Copyright 2001. SCIENTECH, Inc. All rights  reserved.