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What Are the Cost Drivers for System Integration?

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Frederik ten Sythoff's picture
VP Marketing Communications Greenbird Integration Technology

Utilities worldwide are starting to recognise the need to become a platformed utility that can innovate rapidly and offer new services quickly. At Greenbird, I can fulfil my ambition to help...

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Connected technologies have matured significantly in recent years, with specialized implementations being developed for practically every industry on the planet. The utilities industry has warmly embraced this disruption by introducing smart meters, intelligent sensors, and other connected technologies into their existing infrastructure.

The costs associated with this change have always been closely analyzed by business leaders. However, the impact that system integration has on such costs can sometimes be overlooked. This has resulted in the system integration market booming later than the disruptive technologies that preceded it. In 2020, integration services represented over 40% of global IT expenditure. Here is how utilities can accurately determine the total cost of owning and managing an integrated system of connected technologies.

System Integration Market Insights
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How utilities can determine total cost of platform ownership

Calculate the initial cost of putting a platform in place

The most obvious cost for business leaders to consider is the expense of purchasing and implementing an integration platform for information to be collected, stored, and analyzed when needed. This cost includes the expense of initially acquiring or building the software or hardware required for full integration as well as the expense of aligning these systems with a utility's existing technology stack.

Additionally, business leaders must consider the complexity of data that has to be managed. For businesses that rely on simple data exchange and manual operational processes, basic file-based point-to-point integration solutions might suffice. However, utilities that must operate digitized processes or manage customer data and complex operational information will need solutions that are more sophisticated and by extension, more costly.

Consider additional developments on top of the platform and delivery

Apart from the initial cost of purchasing integrations that are available on the market, utility leaders must also consider the developments needed to ensure the platform is well integrated with the meters, software, and connected technologies that are already in use. Businesses that use legacy utility applications must consider the costs of developing connectivity and integration with those bespoke systems from scratch or find a partner that can serve the unique needs of their systems.

Determine the platform’s management and maintenance needs

As with any other technology, integration platforms require management and maintenance to be scheduled at regular intervals. For utilities, this could be the combination of government-mandated maintenance and the day-to-day maintenance that companies conduct for business continuity. These costs should also be considered over a platform’s lifetime.

Provide a financial buffer for the costs of monitoring and error handling

When considering the total cost of ownership of system integration solutions, business leaders must factor in all the above and leave an additional buffer for unintended error handling costs.

For utilities, any error in handling operational and customer data can be extremely costly once sanctions and business costs are considered. This means that businesses must be prepared to monitor and resolve operational challenges in a timely manner. These monitoring and error handling costs must also be factored into the costs of owning and operating a data integration platform.

Utilities have two options to consider when choosing a system integration solution: the legacy Enterprise Service Bus (ESB) and the more modern integration Platform as a Service (iPaaS). Here is how the two platforms compare in terms of cost.

Comparing cost drivers of commonly used platforms: ESB vs iPaaS

Initial investment

Before a system integration solution can be put in place, utilities must consider the costs of establishing a complete data strategy that can make the most of such systems. Business leaders must be aware of the location of their company’s master data, the completeness and accuracy of system interface documentation, and the frequency with which data is expected to be accessed following integration to keep costs down.

ESBs, which are typically on-premise solutions, were mostly implemented during the “SOA hype” (early years of the millennium) as a centralized messaging backbone to break up utilities’ data silos. Using an ESB as a foundation for SOA (Service Oriented Architecture) has created enormous operational complexity and costs especially in mission critical scenarios requiring high availability. Therefore, most modern utilities are likely to opt for the iPaaS approach, which is hosted on the cloud and can be scaled as a business’ needs change.

The cloud computing market, which is expected to almost double in size over the next five years, offers utilities cost savings due to its flexible nature. Heating companies, for example, must handle vastly different amounts of data depending on weather conditions, and iPaaS solutions allow companies to retain a certain amount of flexibility in how much they spend on system integration over the course of a year. This only remains true, however, when all data is stored on the cloud. For companies that require data to be transferred regularly, it would cost less to store only what is necessary on the cloud while taking advantage of edge computing to lower storage and data transfer costs.

Worldwide Whole Cloud Outlook
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Maintenance and management costs

Millions of customers rely on uninterrupted utility services to go about their daily lives and managing and maintaining mission-critical systems is crucial to ensuring business continuity. Companies that insist on high availability, SSL encryption, and disaster recovery must consider that these features drive costs up. While these features are considered necessary for businesses that rely on ESB solutions, systems integrated through iPaaS do not require such extensive features and still deliver the ability to monitor and respond to data issues while delivering regular updates to keep the platform free of bugs and security issues.

Once these considerations are carefully examined, business leaders can accurately gauge the costs that will be incurred during the deployment and maintenance of a system integration platform. Modern cloud-based iPaaS solutions allow utilities and their system integration partners to access a system that is built specifically for the unique needs of the industry and the data complexities that come with them.

Frederik ten Sythoff's picture
Thank Frederik for the Post!
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Paul Gwaltney's picture
Paul Gwaltney on Mar 27, 2022

Excellent article.  With experience as a Director of delivery for utilities, I have deep experience delivering complex projects.  The reality we faced is that our utility (and most) had systems that ran the range of product life cycle and modernity.  Virtually every integration effort was complex from the start, working with systems that, in some cases, were years out of support.  Even with more modern cloud and SaaS solutions, we frequently had to build a hybrid model that used modern iPaaS along with ESB integrations to reach our more legacy data and systems.  I would posit that this is more common for most companies, as we find it difficult to remain completely updated across our entire portfolio. 

 

Paul Korzeniowski's picture
Paul Korzeniowski on Apr 11, 2022

Interesting points. The reality is a handful of technologies (cloud, containers, mobile, social, AR/VR, IoT) emerged in the past few years that provide energy companies with the potential to dramatically alter their existing business processes. Systems integration is growing in importance because they solutions come in a Lego like fashion, they need to be connected to one another. Most energy companies lack the internal expertise to do the work themselves, so they need help from outside experts.  

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