High-Tech Co-Op Delivers Cutting-Edge Computer Services for Rural Utilities
Campbell, Dan, Rural Cooperatives
When a rural utility cooperative selects a computer information technology for crucial services such as customer billing and data protection, it may in effect be "betting the farm." The goal is to find a competitive edge, but a wrong choice can have a devastating impact. For most of the 40 years since its inception, National Information Solutions Cooperative (NISC) (and its predecessor co-ops) has been making the choice a pretty safe bet for members.
The idea behind NISC was originally conceived in the early 1960s by the Rural Electrification Administration (now the Utilities Program of USDA Rural Development). The goal was to help smaller, rural electric distribution coops better compete with larger utilities by developing jointly owned information technology support centers. Starting with three members in 1964, NISC has grown into an organization with 473 rural utility and telecom members that provide service to 7.2 million electric consumers and telecommunications subscribers. The co-op generates $85 million in annual sales, most of it from leasing computer software and support services to members.
NISC operates in an industry known for very thin margins, in which efficiency at all operational levels is crucial. As a mark of its reputation in this regard, NISC also provides services to a number of Fortune 500 companies, on a non-member basis. This helps generate a revenue stream that subsidizes the fees charged to members. The co-op provides billing and other services for customers such as AT&T, WalMart and GTE, also helping some of them analyze energy-consumption patterns to help with energy conservation efforts.
"There hasn't been one year in our 40 years that we have failed to add members and increase revenue," says Vern Dosch, the co-op's president and CEO. "This is a very volartile business. Technology, energy and telecommunications have all been in turmoil, particularly during the last 10 years. Yet, when you look at the history of this organization, you see very steady, stair-step growth. We are adding 10 to 12 new members per year and revenue goes up every year. Not one year in the past 40 has our revenue or membership declined."
NISC membership includes about 44 percent of its potential market of 800 rural electric cooperatives and 8 percent of the nation's 1,300 rural telecommunications co-ops and privately held companies (the latter are typically family-owned).
Expanded broadband facilitates merger
REds original plan had been to create six regional information technology cooperatives to serve the rural utility sector. Computers were just coming onto the landscape in the early 1960s, and rural electric and telephone businesses were still largely handling billing and accounting by hand. REA leaders met with statewide utility co-op associations, promoting the idea that these associations were in the perfect position to serve as business incubators to foster this type of cooperation among co-ops.
It made no sense, REA said, for each electric distribution co-op to buy a mainframe computer at a cost of more than $1million, hire their own programmers and develop their own software (which could not be licensed at that time). "Even in '64, they recognized that the technology business was all about economies of scale," Dosch says.
The North Dakota statewide co-op association took the lead with the concept, and, ultimately, two co-ops sprung out of the original data processing business venture: the North Central Data Cooperative (NCDC) in Mandan, N.D., and the Central Area Data Processing Cooperative (CADP) in St. Peters, Mo.
"Perhaps the greatest driver behind the success and growth of NCDC, CADP and NISC during the last four decades has been the steadfast relationships built with members," noted Joe Harris, chairman of the NISC board of directors. "The fact that all but two of the original 17 member systems are still with us today speaks volumes about our commitment to people, processes and technology. …