In 2021, the UK energy sector was rocked as the energy crisis began to bite, with wholesale gas prices starting to skyrocket.
Depleted gas reserves following the COVID-19 pandemic, combined with other factors like low winds and outages at generators across Europe and particularly cold weather across Asia, turned the gas market highly volatile.
As a result of this, the UK saw nearly 30 suppliers collapse between September 2021 and July 2022, with Bulb also entering Special Administration, as suppliers were caught between the high wholesale prices and the default tariff price cap restricting their ability to recoup costs.
With energy suppliers in the UK collapsing, Octopus took on increased quantities of customers via the Supplier of Last Resort (SoLR) initiative. In July 2022, the energy supplier took on 3,000 customers from the UK Energy Incubator Hub for example, amongst those from a number of other suppliers. This saw Octopus becoming the UK’s fourth largest energy supplier, capping a meteoric rise since the company’s inception in 2015.
The company then successfully acquired the services of Bulb in December 2022 marking a bid to integrate Bulb’s services into its own offering which currently consists of 1.5 million customers.
With a judicial trial having been considered in late November, the High Court approved the transfer with this completed shortly before midnight on 20 December 2022. The deal is subject to final approval, which is expected imminently.
However, with a merger on this scale, what are some of the key aspects that need to be addressed? And how will many of these challenges be overcome?
A spokesperson for Bulb told Current±: “We want to reassure Bulb customers that they do not need to take any action. There’s no change to their supply, and their credit balance is protected. We’ll work with Octopus to make sure there’s a smooth transition for Bulb’s customers, and for our team.
“Customers can find everything they need to know on our website. We’d like to thank our customers for being with Bulb, and our team, who work so hard to look after them.”
The merging challenges
Managing a merger of this size is to be no easy feat. Octopus is acquiring a substantial number of new customers and thus must cater for this. Speaking exclusively to Current±, Mike Kiersey, head of sales engineering, EMEA, at Boomi, an iPaaS firm, identified several primary challenges associated with the merger.
“This M&A effectively brings together two very different titans in the energy industry, and that comes with huge amounts of data that will need to be maintained,” Kiersey says.
“Data sensibility and privacy are important factors in M&As, but so is the quality of the information each organisation has available, and how they make use of it. Octopus Energy will need to determine how to deal with the swathes of data from all the new customers.”
With the influx of new data, a period of transition will be required to successfully move these customers over to Octopus. At the heart of this practice will be the use of integration technologies that can help support the merger.
“Technologically speaking, all of the IT decisions will be on how they can bring the two worlds together, examining the IT complexities of the stacks on both sides. Therefore, they will need integration capabilities that can bind everything together from employees, customers and contracts. They will need to ensure that they have the quality of information, the speed, the tools and the ability to make all of this synonymous with the industry,” Kiersey concludes.
Despite this, Octopus Energy confirmed to Current+ that its technology platform, Kraken, provides a capable means of integrating various companies and customers. It also has proven experience in this field.
An Octopus Energy spokesperson says: “As you may be aware, all of Octopus Energy is run off our own proprietary technology platform ‘Kraken’. We custom built this from scratch to operate a retail energy supply business, and this means we control all the technology and customer migrations (when we move customers from one supplier to another) in house.”
“We have successfully completed 15 customer migrations totalling tens of millions of accounts in the six years that Octopus Energy Group has been incorporated. Most of these have been transferring customers from a Supplier of Last Resort (SOLR) process to our own systems, but we have also migrated customers to Kraken on behalf of our licensees, which include E.ON, EDF, Good Energy and Origin Energy, Australia’s largest energy supplier.
“N.power – which was taken over by E.ON a few years ago – was the first to migrate to Kraken after the deal with E.ON was signed. Its customers moved over from an amalgamation of over 10 different billing and customer relationship management (CRM) systems to just one – Kraken. This enabled the customer services team to streamline processes and drastically improve customer service for those that had transferred. This was completed in under 2 years, which is an unparalleled speed in the industry.
“Kraken is now licensed to serve around 35 million energy accounts across the world and we’re targeting 100 million accounts by the end of this year.”
Technological innovation
“Our strong experience makes us experts in not only transferring customers to our own systems, but working with older, legacy systems of companies to transfer them to a Kraken platform of their own. We know that success for this kind of migration lies in both speed and quality,” Octopus says.
“We migrate in small instances, testing how smoothly customers transfer over to us in small batches before we start doing this in larger and larger batches when we have all the kinks figured out. This is helped by the fact that we do ‘continuous deployment’ of updates to Kraken. Unlike legacy software systems that update twice or three times a year, we update Kraken upwards of 100 times a day with small incremental changes that make big differences.”
The company’s experience and technological innovation could allow the migration of Bulb to be a thoroughly “simple” procedure. With the incorporation of several energy suppliers much in the same vein as Bulb, this could well be yet another task which has been achieved previously.
Kiersey believes the Bulb integration will be a fluid one. “In the case of any M&A, it is always a fluid transition. Rather than take the big bang approach, organisations going through a merger or acquisition should look at it in individual work streams, ensuring elements such as human capital are fulfilled. The key focus for success is that the process needs to be accurate, understood and properly mapped out,” he says.
Octopus also believes that its operations model allows the incorporation of energy suppliers such as Bulb.
“Aside from the technological challenges, a massive part of large tech migrations is our operations model. For most of our clients and any new team members from failed firms (the majority of the time we try to hire the teams of companies we take over) getting to grips with how our system works is the biggest challenge as it’s very different to the usual software available on the market,” an Octopus spokesperson says.
“Whereas legacy suppliers tend to have phone operators who speak to customers and back-office staff who sort the issues separately, we train our team to be ‘universal agents’. This means they are never removed from the customer and know everything about an energy account. Customers only need to speak to one person for the whole phone call.”
However, with the size of Bulb it is vitally important to ensure that the merger is fluid and successful. Kiersey believes that getting a single view of the customer is crucial to ensure all are welcome to the change.
“When it comes to a merger of this nature, getting a single view of the customer is crucial. Ofgem regulations of course play a massive factor in this, but Octopus should also look at how they can leverage this merger for the benefit of the end customer,” Kiersey says.
“Households cannot stomach massive changes from their energy provider so it will be up to Octopus to ensure there is a proper payment profile in place for new and existing customers.”
