Strong Data Management and AI Key to Digital Transformation of Utility Companies. But What’s Holding Them Back?

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Today, AI-powered digital transformation and sustainability are necessities for the utilities sector. Although 82% of executives recognize it as essential to their strategy, only a fifth (20%) of companies have completed their digital transformation journey. Respondents are split on where ownership should lie (22% reference the CFO, while the same percentage cite the CTO).

That’s according to new research by IFS, the leading technology innovator in cloud and Industrial AI software. The company polled 863 C-level executives and VPs from utilities companies around the world, including the Middle East.

While 84% of organizations recognize data analytics as important to their digital transformation approach, the research highlights the complexity and challenges inherent in fully realizing digital strategies. The primary obstacles include the inability to measure value accurately from investments (32%), a lack of clarity on necessary resources and skills (25%), and a lack of consensus on priorities among leadership (23%).

Asset management has emerged as a critical factor in delivering new services and outcomes as part of a digital transformation, with 36% of respondents emphasizing its importance in ensuring reliable and efficient service delivery. This focus is driven by aging infrastructure and increasing asset complexity. Many grid components are well past their intended lifespan and operate under conditions far more severe than originally designed. At the same time, the shift to renewables and distributed energy resources adds further complexity.

Other operational areas are mentioned in this context, with 39% citing resource optimization, 38% highlighting the need for a robust customer experience strategy, and 36% mentioning field service management.

Strong data management and AI capabilities can ensure that companies successfully achieve their transformation. In addition, utilities must adopt a comprehensive approach, utilizing end-to-end digital tools and building strong partnerships to navigate this intricate landscape.

When executing digital transformation strategies, composable enterprise platforms that empower businesses to mix and match/assemble different software modules to meet their specific needs are in high demand, with 38% of decision-makers seeking solutions to support their journey. This underlines the need for flexible and modular technology infrastructures as companies look to adapt quickly to changing requirements while being able to integrate various applications more seamlessly.

The research also reaffirmed sustainability as a top priority for utilities businesses. 46% of respondents are currently at the stage of setting timelines and goals for achieving sustainability targets. However, only 31% have hit their first milestones. The key strategies for meeting these goals include improving asset efficiency (43%) and investing in energy-efficient assets (42%).

Sustainability in the utilities sector involves more than just carbon reduction. It includes revenue models, workforce retention, and safe operations. Integrating sustainability across operations ensures resilience and compliance. “We don’t see sustainability as a trade-off but as an opportunity to create value for our customers and society. Utilities also increasingly understand the importance of accurate data and reliable reports in measuring progress to key sustainability goals and avoiding greenwashing. Effective strategies include optimizing resource use, selecting sustainable suppliers, and engaging customers in programs like energy audits and solar panel installations,” said Carol Johnston, VP of Energy, Utilities and Resources at IFS.

It is significant that four of the core themes from this research—AI, digital transformation, asset management, and sustainability—are connected. “Utilities must recognize that these elements are interconnected. By leveraging AI and digital tools to optimize asset management, they can effectively meet sustainability goals. This comprehensive approach ensures a balanced and strategic transformation journey,” added  Johnston.