How Octopus Energy Built Its Own Software and Became Britain's Largest Energy Supplier

The Conventional Energy Market

The UK energy market, until recently, was dominated by the "Big Six" — household names with decades of legacy infrastructure, both physical and technological. Their software systems were old, siloed, and expensive to run. Customer service was notoriously poor. Switching was complicated. Bills were confusing.

Into this market, in 2016, came Octopus Energy.

The Technology Bet

Most new energy suppliers in the UK buy or rent their billing and customer management systems from established software providers. It's the path of least resistance — you pay a licence fee, you get a working system, and you focus on acquiring customers.

Octopus chose differently. They built their own platform, called Kraken, from scratch.

At the time, this looked like an extraordinary risk. Building enterprise energy software is genuinely hard. It requires deep domain knowledge, enormous technical complexity, and the ability to integrate with Ofgem systems, smart meter infrastructure, and the half-hourly settlement market. Most startups wouldn't even try.

But Octopus had a theory: if the system was genuinely better — faster, more flexible, cheaper to run per customer — the competitive advantage would be durable. Unlike a price promotion, which competitors can match overnight, a ten-year technology investment is very hard to copy.

What Kraken Actually Does

Kraken is Octopus's proprietary energy technology platform. It handles billing, customer management, meter data, tariff management, smart meter integration, and — crucially — the algorithmic optimisation that underpins their innovative tariff products.

Agile tariffs, for example, give customers electricity prices that fluctuate with wholesale market rates — sometimes negative in periods of excess renewable generation. This isn't possible with legacy software that was designed around fixed-rate billing. Kraken makes it technically straightforward.

The platform also automates enormous amounts of customer service. Octopus consistently ranks highest in Trustpilot scores among UK energy suppliers — not because they have more agents, but because their system resolves more queries automatically, accurately, and quickly.

The Numbers

Octopus launched in 2016 with a handful of employees and ambitions that most industry observers found implausible.

By 2023, they had become the UK's largest domestic energy supplier, with around 6 million customers — having absorbed Bulb's customer base when Bulb collapsed. They now supply energy in multiple countries, and Kraken has become a separate revenue stream: they licence the platform to other energy companies globally, including Eon's UK operations.

The valuation, as of 2023, was around £7 billion.

The Lesson for Other Businesses

Octopus's story is instructive for any business in a sector with poor technology incumbents. The key insight is this: when everyone in your industry is running on the same mediocre software, building something genuinely better is a competitive moat.

Legacy software providers serve the whole market. Their systems are designed to be acceptable to everyone, which means they're exceptional for nobody. They can't innovate fast because they have thousands of clients with conflicting requirements.

Custom software, built for your specific business model, can do things off-the-shelf software never will.

The question for most businesses isn't whether they could benefit from purpose-built software. The answer to that is almost always yes. The question is whether the investment is proportionate to the advantage. That's exactly the kind of analysis we do in our [consulting and strategy engagements](/services).

For Octopus, building Kraken was a bet-the-company decision. For most of the businesses we work with, the investment is far more modest — a targeted system that automates a process, integrates disconnected tools, or enables a service capability their competitors don't have.

What Kraken Taught the Industry

The broader energy industry took note. Legacy suppliers are now scrambling to modernise. Several have attempted to build competing platforms. Others have licensed Kraken rather than fight it.

This is how software-led competitive advantages work. You build. You learn. You compound. By the time competitors catch up to where you were two years ago, you're somewhere they can't yet see.

The energy market — one of the most regulated, technically complex, and operationally demanding industries in the UK — was transformed by a startup willing to invest in the right technology from day one.

It's a story worth knowing.