When your legacy systems are reliably working away in the background, albeit at a slow pace, it’s tempting to stick with the status quo, resist the upheaval of a new system installation, and put off an upgrade for another day.

But while aging tech may not (yet) be unstable, it impedes energy data management and doesn’t give pricing teams access to the data they need for innovation in a dynamic market. And retailers that can’t offer competitive pricing and the tariffs that today’s customers are looking for, are putting their profitability and long-term survival at risk.

Legacy systems are not only getting in the way of competitiveness and growth but likely running up unexpected costs, reducing profit margins, and storing up problems for the future.

In this article, we’ll explore how an incremental approach to transformation can help energy retailers access the benefits of new technologies without a disruptive full-scale replacement.

The Hidden Costs of Doing Nothing

Maintaining legacy systems may seem the safer option, but they’re quietly eating away at profit margins. Here’s how:

1. The total cost of ownership increases over time

Legacy systems are notoriously expensive to maintain with inefficiencies growing year-on-year. They require extensive support from IT teams and new hires unfamiliar with the systems need specialist training.

And while they may still be performing their function, legacy tech can’t keep pace with the demands of today’s energy markets. As they struggle under growing volumes of energy data, the risk of instability increases. Teams looking to bypass overloaded and slow systems may turn to alternative tools, adding to IT costs.

2. Security risks

Cyberattacks are on the increase in the electricity sector and legacy systems with known, unpatched security vulnerabilities make life easier for cybercriminals. Attacks can be costly for organizations, impacting customer trust, business operations, and potentially their credit rating in financial markets.

Unauthorized access to a customer database for U.S. utility, Duke Energy, exposed the personal data of 8 million people, including dates of birth and social security information.

If, as in this case, an attack leads to a data breach, organizations may face a costly fine from data protection regulators. 

3. Regulatory compliance risks

The energy sector is becoming increasingly regulated with regions including the E.U., the U.K., and ERCOT in the U.S. moving towards greater data sharing and transparency. Compliance often involves traceability and faster reporting, which is made significantly more difficult with siloed information and a lack of real-time data.

4. It’s an energy drain

More and more customers are looking to switch to green energy tariffs, but legacy tech could also impact retailers’ sustainability. Research has found that legacy IT infrastructure accounts for more than a third of enterprise energy power consumption.

5. Losing out to competitors

Legacy systems are holding pricing teams back. In an increasingly volatile market, fast, accurate pricing is more important than ever for meeting requests for quotes, creating bespoke Industrial & Commercial packages, or offering competitive rates on pricing comparison websites.

Your Legacy Tech May Not Be Broke But It Still Needs Fixing

Legacy systems reduce energy retailers’ profit margins, make scaling much harder, and hamper agility.  Retailers risk missing out on fresh opportunities and can’t capitalize on the opportunities new energy models present. Some of the legacy system bottlenecks include:

1. Hindering Automation

Automation helps pricing teams manage complex portfolios and large datasets. Manual processes slow operations and lead to duplicated data and costly errors. They also take up an outsized proportion of employee time – time that could be better spent on innovation.

With a lack of automation, retailers risk high staff turnover as employees get frustrated by clunky tech and inefficient systems.

2. Building Data Silos

Data may be the new gold, but only if it’s accessible. When it’s trapped in silos, your organization can’t use it to its fullest potential to create insights and value.

Retailers need near real-time data for forecasting, pricing, and portfolio management. Siloed data means teams are operating with outdated information and without full visibility.

3. Preventing innovation

Maintaining legacy systems drains time away from innovation and growth. The average IT department invests over half (55%) of its tech budget on maintaining business operations and only 19% on building innovative new capabilities.

As renewables take a greater share of the energy mix and more customers choose green tariffs, implementing energy forecasting tools in retail is increasingly important.

Outdated systems make it hard to use advanced energy data analytics and AI systems that could be critical for analyzing real-time data and for energy data management.

4. Creating customer churn

Just under a third of households across Europe are considering switching their energy provider at any one time. And cost is a key motivator. With legacy systems, retailers struggle to keep pace with markets and can’t offer competitive prices or innovative new products. 

And it is the newer entrants to the energy retail market that are winning the switchers. These retailers are leveraging new technologies such as digital platforms to help create more competitive pricing and AI to improve customer service and efficiencies.

Digital Transformation is Unavoidable for Energy Retailers

There’s only so long you can carry on with the typical band-aid and workaround approach. Quick fixes with little or no documentation lead to inflexible systems that are time-consuming, and expensive to manage. They’re also prone to downtime, impacting customer loyalty and profitability.

The technical debt of past IT teams soon comes up against the challenges of today’s energy retailers. A system that gets in the way of innovation, agility, and growth becomes an expensive risk.

How Future-Focused Retailers Take Action

The expense and disruption of a rip-and-replace approach to legacy tech is often prohibitive. An incremental strategy is a more viable and cost-effective method. This strategy can still deliver the data handling capabilities and transformative benefits of new technologies such as advanced analytics and AI while minimizing the risk of interrupted business operations.

Integration offers a bridge between legacy systems and modern platforms. This strategy breathes new life into existing systems, bringing modernization at a sustainable pace.

One of the big problems with legacy systems is siloed data. Integrating with a unified, cloud-based platform eliminates the legacy patchwork. Information flows more easily between trading, billing, and customer-facing systems and is more accessible to advanced technologies.

Improved data visibility enables automated workflows and pricing models. Pricing teams can become more agile, responding to changes in the market as they happen, instead of playing catch up a day or two later. Retailers can not only offer competitive pricing, but also more innovative, customer-focused products, helping the organization stay one step ahead in a competitive market. 

By leveraging integration as part of an incremental approach to transformation, retailers are able to access the benefits of modern platforms. Instead of being the blocker, IT becomes the springboard for innovative, data-driven energy retailers.

Building long-term resilience through transformation

Energy retailers can’t afford to stick to the status quo. By taking a proactive stance on transformation, retailers can address today’s challenges and build long-term resilience and competitiveness. They can prepare for an imminent future where remaining competitive depends on effective energy data management.

Why not speak to Gorilla and chat through the key changes we’re seeing in today’s energy retail sector?

Learn how other energy retailers have broken free of the status quo and are charting a new path toward efficiency and profitability.

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