Internet Billing

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PII: S0268-4012(01)00003-2

International Journal of Information Management 21 (2001) 101121

Internet billing: the experience from four UK utility companies

Maureen Milroy, Feng Li*

Department of Management Science, Strathclyde Business School, University of Strathclyde,40 George Street, Glasgow G1 1QE, UK

Abstract

The deregulation of the utilities in the UK has forced most companies to improve eciency and developinnovative services, often through the aid of new technologies. In the last two years or so, Internet billing isemerging as a strong competitive weapon in the energy sector. Using the evidence gathered from theliterature and from four recent case studies in the UK, this research investigates the new technologies thatare making Internet billing feasible, outlines the main models that are emerging and assesses the impacts itgenerates in terms of cost, organizational structure and customer relationships.Our research has found that introducing Internet billing is an extremely complex process, and so far all

companies have adopted a staged approach to its introduction. At the moment, several billing models exist,and no one model appears to satisfy the multiple driving forces for its introduction. However, once aparticular model is adopted it will have long-term implications. In particular, Internet billing will redenethe customerbiller relationship and the internal billing process, thereby generating structural changes tothe utility companies. Due to the barriers of cost and security, the positive impacts of Internet billing willnot be instantaneous, predicting that the unraveling of a complete Internet billing service to gaincompetitive advantage will be a struggle for any utility in the evolving networked economy. # 2001Elsevier Science Ltd. All rights reserved.

Keywords: Internet; Utility companies; Internet billing; E-commerce

1. Introduction

The deregulation and privatization of public utilities in the UK have brought about majorchanges in these industries. Fierce competition has put enormous pressure on the main companiesto provide better services and more choices for customers. In the energy sector (as well as a fewother utility sectors), one of the latest innovations being introduced is Internet billing. AlthoughInternet billing appears to have gained recognition in the US, little research has been carried out

*Corresponding author. Tel.: +44-141-548-3612; fax: +44-141-552-6686.

E-mail addresses: mmilroy@uk.ibm.com (M. Milroy), feng@mansci.strath.ac.uk (F. Li).

0268-4012/01/$ - see front matter # 2001 Elsevier Science Ltd. All rights reserved.PII: S 0 2 6 8 - 4 0 1 2 ( 0 1 ) 0 0 0 0 3 - 2

in the UK. Using recent evidence gathered from four utility companies in the UK and a wealth ofsecondary data, this paper investigates the new technologies that are making Internet billingfeasible, discusses the various models that are emerging and assesses the impacts it generates interms of cost, organizational structure and customer relationships.In the next section, some relevant literature will be critically reviewed and the main issues in

Extranet E-commerce, the Internet billing process, and emerging models of Internet billing will bediscussed. Then the empirical work for this research is discussed and emerging trends and mainproblems are examined. Following that the impacts of Internet billing on the utilities and otherkey ndings from this research are discussed; the possible future prospects of Internet billing inthe UK and the main barrier to its adoption are highlighted. It is still very early days in Internetbilling and further research is clearly needed.

2. The principle driving forces for Internet billing

In the utility sectors, deregulation has produced a more competitive environment, allowingaccess to markets that in the past have been excluded. Many companies are diversifying so theycan oer multi-utility bundles to their customers. Moreover, the playing eld is no longerrestricted to the UK, and many companies are expanding aggressively into the internationalmarket. One example is Eastern Electric, which in 1998 committed to purchase 34% of theFinland-based electricity supplier Savon Voima (Sunstrom, 1998).Deregulation also means that customers now have the opportunity to choose their service

providers. For example, customers in the UK no longer have to obtain services from the locallicensed public electricity supplier (PES). They can choose from any of the 14 electricity suppliersin the UK. A survey by Coopers & Lybrand in 1998 revealed that only 29% of customers wouldstick with their current suppliers and 55% would shift to others. Equally, in 1998 the UK gasmarket saw a 20% reduction in their customers as a result of cheaper alternative suppliersentering the market. There has also been further speculation that oil companies such as Shell andBP Amoco could move into the gas and electricity supply business, altogether making the utilitymarkets increasingly volatile and competitive.Such changes have increased the need for the utility companies to satisfy customer demands in

cost-eective ways. In the last two years or so, Internet billing, or Electronic Bill Presentment andPayment (EBPP), has emerged as a possible solution. This solution will enable utility companiesto introduce a new service, allowing them to reach current and new customers on a global scale.The US utility companies are particularly geared up towards this, and it has been predicted thatInternet billing will rocket in the US by the year 2002 (Fig. 1). Our research has found that UKutilities appear to be recognizing the importance of Internet billing in the US market, and it ispossible that this trend may be replicated on a smaller scale in the UK in the near future.

3. Extranet commerce}the gateway to Internet billing

The Internet is increasingly being deployed by utility companies to achieve cost reduction andservice dierentiation, through the the sharing of business information, maintaining business

M. Milroy, F. Li / International Journal of Information Management 21 (2001) 101121102

relationships and conducting business transactions by means of telecommunication networks(Zwass, 1998; Riggins & Rhee, 1998). This is forming a new technological platform for thenetworked economy. Such activities are generally referred to as E-commerce, which can beclassied into three categories, namely, customer-to-business, business-to-business and intra-organizational, supported respectively by the Internet, Extranet and Intranet.The Internet currently generates customer-to-business transactions through for example,

electronic mails and the Intranet is increasingly adopted as a cost-eective way of distributinginformation within a company. The Extranet is often viewed as a bridge between the Internet andthe Intranet, strengthening the new business platform of the future from which innovative servicescan develop.Extranet commerce, a form of E-commerce has its roots in Electronic Data Interchange (EDI),

which has been part of the business world for over 20 years. The main dierence between Extranetcommerce and EDI is that EDI operates through a closed set of standards which requires hugeinvestment compared with Extranet commerce, which uses the same infrastructure and technologiesas the already established Internet. Extranet therefore provides a gateway for synergisticrelationships to be established between companies enabling them to strengthen business-to-businessrelationships. It has been predicted that by the year 2003, 86% of the E-commerce market willinvolve business-to-business transactions (http://www.sk.ibm.com/events/prez 1).The Extranet, located outside the corporate rewall, provides the same key services as an

Intranet including communication and collaboration, internal information access and sharing,and application access. Additional advantages that the Extranet has generated are that it canprovide inter-company business communication and transactions through its ability to conduct

Fig. 1. The potential of EBPP (source: Singer et al., 1998). This exhibit is taken from Ouren, J., Singer, M., Stephenson,

J., and Weinberg, A. L. (1998). Electronic bill payment and presentment. The McKinsey Quarterly, no. 4, and can befound on the publications Web site, www.mckinseyquarterly.com. Used by permission.

M. Milroy, F. Li / International Journal of Information Management 21 (2001) 101121 103

E-commerce in a secure, encrypted manner. It also allows customer and supplier access toinformation resources within the company, thereby providing worldwide service leverage. SinceExtranet transactions can be conducted without an intermediary, it can maximize processingspeed and improve the accuracy of data.The main aims of the Extranet are to integrate customers into the mission-critical business

processes (http://www.dierential.com/architecture.html) to establish a stronger communicationbond through tighter customer relationships while still maintaining control over internal businessprocesses. This suggests that the Extranet, as todays mission-critical tool, has the potential torevolutionize the structure of utility companies and their internal processes in the new Internet-driven economy.Extranets are a logical extension of Intranets, but the survey of Fortune 500 companies in 1998

(Johnson, 1998) highlighted that 7580% of businesses have Intranets and only 3% have anExtranet. Despite the fact that Extranets create an opportunity to conduct E-commerce,companies are slow to adopt this application due to its immaturity and security concerns.Research suggests that 80% of companies believe that security is the leading barrier to engaging inExtranet commerce (http://www.ibm.com/e-business/ecommerce).