Gentrack is an IT success story hampered by technical staff shortages as it pushes out into new markets

By Andrew Patterson

Software solutions provider Gentrack has cornered a market niche few people might ever consider but has proven to be very lucrative for its bottom line, particularly in Australia, where it recently opened a new office in Brisbane.

However, its biggest challenge is finding sufficient IT staff to maintain its current growth rate.

The Auckland based company has more than 20 years’ experience developing specialist billing and customer management software solutions for energy, water and airport utility companies in competitive and regulated markets worldwide.

Chances are your latest water or gas bill has been generated using its software and, if the company has its way, plenty more customers globally will be joining you in the future.

As the dominant utility software provider here in NZ, Gentrack recently announced in Sydney the launch of its next generation billing and CRM software designed for Australian water utilities.

Its specialist software is now in use in five States and Territories.

The future rollout of smart meters to further improve the management of electricity by consumers also offers significant potential growth opportunities in the medium term.

Gentrack CEO James Docking says the company has evolved rapidly in the last decade.

“Gentrack was developed as a software supplier specifically for the utilities space including gas, water and electricity companies and most of the major providers and network companies would be using our system here in NZ and increasingly in Australia which is now our biggest market.”

“It’s a hugely complex process managing the billing interface between the generator and the end user. You’ve obviously got meters at every household, including some with the new smart meters that measure your power usage every half hour. Our systems have to take account of different tariff rates and mark ups, people switching between providers and a host of other factors so there are plenty of challenges for us from an IT perspective.”

Business Model

The early deregulation of the energy sector has obviously been good for companies like Gentrack who have been able to develop significant expertise ahead of the market internationally giving them the benefit of first mover advantage.

“Obviously we were greatly assisted by the deregulation process over the last decade and we have been able to take that model to Australia where we have won a number of energy company contracts. At the same time we’ve also been able to take advantage of the commercialisation of the water sector there where the idea has been to take that function away from Councils and get it on a more commercial footing. For the last four years I think we’ve managed to win every water billing contract in Australia that’s been put up for tender.”

“While there are differences between measuring water and electricity, the core knowledge really came from the energy sector that made it suitable for the Australian industry.”

These days competition in the energy sector is intense with different retailers vying to win customers over by offering special deals and one off bonuses to switch providers.

James Docking says this is a fundamental difference in the sector compared to twenty years ago and requires utilities to have comprehensive billing, information and customer relations management systems in place.

“We can all remember the time where, if you didn’t pay your power bill on time the company would simply cut you off. These days the utility suppliers have to be a lot more commercially minded because they operate in a very competitive space; consumers can easily switch providers.”

Energy efficiency has become another key factor driving Gentrack’s rapid growth.

“In the US and the UK we’re seeing governments subsidising solar energy on people’s roofs and that involves what is known as a feed in tariff for any energy that you’re not actually consuming yourself so our billing has to handle those situations to ensure customers are being appropriately credited.”

Revenue model

Software companies have the advantage of locking in revenue based on the licences they sell and when you’re selling your product to utilities it also means the risk of bad is very low. However, the nature of the customer relationship is different to most businesses.

“It’s a very long and deep sales cycle. In many cases it might take our sales people up to three years to close a deal but that’s just the nature of the sector we’re in.”

“One of the things we impress on our staff, at all levels, is that we see ourselves as a utility company that happens to deal in software rather than a software vendor that deals with utility companies. That way we encourage our sales people and all our staff to get involved in the utility sector as a whole, not just the billing component, and that way we can really understand our customers and their businesses better.”

Innovation

We invest very heavily in R&D and the government has been quite supportive of that with grants to help companies like ours to grow. Our competitors are some of the biggest companies in the world such as SAP and Oracle and obviously they have huge R&D teams compared to us so we have to remain focused. We see ourselves as specialists rather than generalists, so we get very deeply involved with our customers and trial products regularly.”

“What we find these days is that our customers understand that our business helps them with the performance of their business so it’s a vital relationship that helps them decide where they want to go in the future.”

Growth

While Gentrack’s billing software dominates in the utility sector locally, Australia has grown to the point where revenues from across the Tasman exceed those from NZ.
The goal is to double Australian revenues in the next five years.

“We’ve just opened our latest office in Brisbane to add to our existing office in Melbourne but the United Kingdom also offers significant opportunities for us in the future.”

“We recently opened an office in Manchester and we’ve actually had several water companies there chasing us too because we offer a lower price point for our billing system compared to Oracle and SAP.”

It’s a good example of how being one of the dominant players in the space isn’t always best. There’s plenty of business around the edges where price sensitivities can often be an issue.

For Gentrack, business is almost coming to it at a faster rate than it can handle and in some cases it’s had to actually turn away business.

“Managing our growth can be tricky because we need to ensure we can offer the necessary support for our customers at the same pace so our strategy is to grow regionally and right now our focus is on Australia and the UK and eventually it will be the US after that.”

Staff

As we’re heard from other businesses in this series getting staff is the biggest challenge facing high growth tech companies like Gentrack.

With IT staff in hot demand both locally and globally, and able to command premiums in their starting salaries, it seems there are not enough graduates to go around right now.

“Our biggest challenge is staff recruitment. IT qualifications are not in vogue as much as the used to be with many students opting to do law or finance instead and that creates a real headache for us. We need staff who are prepared to do the hard yards, particularly when it comes to travel, to feed the business as it grows.”

Gentrack though is one of only a few NZ technology companies that can offer a truly global career track which over time is likely to become increasingly attractive for graduates keen to attach themselves to a high flying local business.

KEY FACTS

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