It has fewer than 20 full time staff, very little IT infrastructure of its own and all its customer service is handled out of Australia. Yet First Electric aims to be the energy retailer of choice for hundreds of thousands of New Zealanders. To reach this goal, the self-proclaimed "virtual" company spawned from the split of ECNZ is relying on a combination of innovative but inexpensive technology solutions and some canny business partnerships.
"First Electric sees itself as a virtual organisation," says channel and product development manager Graham Dawson. "We have significantly fewer than 20 people in our operational environment. Most of our service delivery capacity is handled by our business partners, and our customer service centre is an important part of that. Running a virtual model also means we don't want a huge systems infrastructure. A virtual organisation is characterised by its responsiveness and flexibility, not the amount of IT in the back office. The emphasis is not on the systems so much as on the information flow."
First Electric has only recently begun marketing itself to electricity consumers in the main centres, but it is aiming high.
"We're definitely looking for economies of scale. Internationally, that is achieved once you reach around 1.5 million customers. In New Zealand, we expect to see similar economies of scale at around 400,000 customers," says Dawson.
Initial advertising has seen aggressive stances on all sides, with First Electric putting the wind up its competitors by promising price cuts of up to 15%. Smart use of IT is a significant element in being able to do this, Dawson states. "The key issue is keeping internal overheads as low as possible. We've chosen a flexible, low-cost systems architecture that is going to reap significant business benefits, both now and in the future."
To win over new customers, the company is relying on three main sales channels: a customer service/call centre, direct selling and account management, and the Internet.
The customer service centre, outsourced to Melbourne-based United Customer Management Solutions, forms a hub for the company and a single point of contact for customers. The Australian operator was chosen earlier this year, after the dissolution of a partnership with EDS which would have seen a solution developed in-house.
"There was a cost component [in the decision to outsource], but also the argument of why spend time building the capability in-house when there were already players in the market with the expertise to handle it," Dawson explains. A billing system and rating engines sit on either side of the customer service system, feeding data in and out.
The rating engine technology, developed on a Unix platform using Powerbuilder, is likely to prove a significant point of competitive advantage for First Electric as power retailers start to look for new ways to add value. When it comes to straight power supply, the rating engine takes information from a meter reading organisation and converts that into invoice line items which are fed through to the billing system. However, as rating engines can be built to handle the task for any other metered service, there is the potential to provide rating and billing for services such as gas and telecommunications.
"We believe there is a competitive advantage in the rating engine software, and we recognise the benefits of selling the approach to non-contiguous markets — for example, selling it abroad," says Dawson.
First Electric is concentrating on its core business of power retailing at the moment and Dawson is cagey about talking specifics on other services. However, he cites international examples that may well show the way of the future. "Internationally, the range of services offered includes products like insurance and telecommunications, as well as core value adds such as enhanced metering, detailing on-line billing information and security-related products re-using the call centre infrastructure."
The Internet is also a significant part of First Electric's growth strategy. "The basic philosophy behind this is one of acting as a broker, and to do that we are looking at exploiting the [Internet] portal technology that is starting to evolve. We are saying that according to your personal preferences, you should be able to select from a range of core and value-added products. Internet portals provide a way of getting the information you need in one step, and that is where we see some value-add.
"One of the values we are about is trying to make things easier for the customer. With our call centre, we have the ideal of one-call resolution. We see both themes being brought together by the Internet, with portals providing one answer," says Dawson. "The Internet is fully integrated with our customer service centre. Everything is developed onto an intranet, and then deployed via an extranet."
One of the things that's surprising about First Electric is that all this has been achieved in just six months. While the original rating engine technology came from ECNZ, it has since been enhanced by First Electric's development partner Innovus. Otherwise, says Dawson, little has been taken from ECNZ.
"We've done all this in a short timeframe by choosing existing best of breed partnerships, proven technologies and robust business frameworks. Starting with a 'clean slate' has been a definite advantage, but there is nothing we have done that any other power company couldn't do with fairly minimal investment."
"But the biggest drawback for incumbent players is data migration. We don't have an issue with that. There's also the aspect of the freedom power company managers have to develop alternative business streams."