Madrileña Red de Gas, a regulated natural gas distributor operating in Madrid, was formed in 2010, after being sold off by gas distribution company Nedgia.
While it had an existing network and customers, the company had no existing IT systems. It needed a temporary service agreement with the distribution company to provide IT services, and as such, there was a business incentive to deploy an IT system at Madrileña Red de Gas as quickly as possible.
Glen Lancastle started off as its chief information officer (CIO) back in 2010, but with emerging customer-facing activities, the company saw a need to use IT to drive value for its customers, which meant he took on a dual role, as chief operations officer as well as CIO.
Having previously worked for IBM on SAP IS-U Meter-to-Cash flow implementations for utilities in Spain, Ireland, UK and Greece, Lancastle selected a vanilla implementation of the core SAP Enterprise Core Components (ECC) system and the IS-U module, which was fully implemented within six months.
Discussing the original deployment of SAP, Lancastle says: “My philosophy, and also that of our CEO, who comes from an IT background, is that you’re buying a package and you do it how the package tells you.
“We had very little customisation, which did create some difficulties in terms of change management,” he adds.
But now, 10 years down the line, the system has required a higher degree of customisation.
No support
Although SAP IS-U has evolved over this time, Lancastle felt it was not worth keeping the implementation at Madrileña Red de Gas in line with the latest SAP release. “SAP has been evolving, but where it has been behind is from an architecture perspective, which has meant gas distribution businesses have stayed where they are instead of evolving with SAP and moving to each successive version,” he says.
Lancastle feels SAP has not been very clear on its strategy. “First, you had the Hana database, then then you had S/4Hana; now it’s the cloud and SAP Rise, but it’s never been that clear what the relationship is,” he says.
Lancastle says SAP is focused on maintaining revenue streams, which has supplier relationship management implications, especially in organisations like Madrileña Red de Gas, which do not need the latest versions.
“Depending on the type of business you are, your relationship with SAP can be very difficult,” he says, pointing to SAP’s software audit of Diageo, which resulted in £54m in licence fees associated with indirect access to the SAP system. This, says Lancastle, created a lot of distrust among SAP customers. “We actually stopped talking to SAP,” he says. “We had no key account manager and no support contract with SAP.
“As a gas distribution company, we try to be efficient because we really can’t generate more business,” says Lancastle. “That efficiency is also in IT. We implement SAP, and since then, we really didn’t want to be buying more licences.”
When SAP started talking about end of life for ECC, the business case for changing was a very difficult one to make, which generated a lot of uncertainty and frustration among its customers.
“One of the things I think we do well is assess our risk,” he says. “We have a provider for application support. But SAP licence support is focused on, when you have an issue, you can go into the SAP licence maintenance platform, read the notes and then implement the fix. I think it’s very important for a company that’s a heavy user of SAP, but over the years we had SAP support, our usage was almost zero.”
Having dropped SAP support, Lancastle says the company eventually decided it was time to purchase support again, but this time, using third-party support provider Spinnaker instead of SAP, to provide the business with a kind of insurance policy.
“It really is just an insurance policy, which I hope I’m never going to use,” says Lancastle. “But if I have to use it, I want the people on board who can give me the support I need.”
An insurance policy
While the business has a large IT footprint, it’s managed by just three people. “Everything else is outsourced,” he says. “We manage services, and value the relationship with the third-party service providers and the lack of bureaucracy.”
Lancastle says the company’s choice of Spinnaker made sense. “It was a very easy conversation to have,” he says. “They [Spinnaker] understood where we were coming from when I said I’m not going to use their service very much; it’s more of an insurance policy.”
This, for Lancastle, is important as there is a big difference between a company that relies heavily on the third-party support provider, and one where the service is hopefully only rarely used. “As a CIO, you always want the insurance policy,” he says. “I think Spinnaker understood that.”
ECC going out of support in 2027 has been one of the conversations the company has had with Spinnaker, as it renegotiated its support contract. “They were very helpful in giving me access to people within their organisation who share our point of view, which is basically that there’s actually no need to leave ECC until you want to, and they showed me cases of where they are maintaining not ECC, but older SAP implementations and Oracle systems that are 20 years old,” he says.
For Lancastle, the ability to continue running ECC past its official end of support date gives the business time to look at how it will replace the ageing IT system.
The fact that Spinnaker has other customers also assessing where they want to with ECC gives him the confidence that he is not alone.