Head of Sales and Marketing for Cognera
The debate around outsourcing non-core functionality within a utility has been on for more than a decade. Advocates insist that outsourcing non-core functionality is a natural step towards business process efficiency—with a focus on outsourcing IT functions that otherwise would be costly infrastructure investments coupled with IT support fees.
Opponents argue that utilities are recklessly trading in highly concentrated tasks that require specialized training for cost savings. Challenging that; with outsourcing, utilities lose control and cannot manage service assurance as well as they should.
But with the national media attention focused currently on unemployment and job security, utilities are stressed more than ever to find a way to boost efficiencies, lower operating costs, and keep employees.
Hybrid BPO, also referred to in other industries as Software as a Service (SaaS), enables utilities to maintain ultimate control of their resources, while leveraging technology and support mechanisms from a third party. In the Hybrid BPO model, the maintenance, upgrading, reliability and behind the scenes work on the system is the responsibility of the partner, however, the utility actually uses and engages with the system and service often enough that the control and quality assurance of the system is evaluated in real time. In the Hybrid BPO model users enjoy all the benefits of working in their traditional office environments, but on systems that are owned, maintained and updated by the partner.
Utilities are looking at the Hybrid BPO model as the answer to their current pressures around technology upgrade, particularly with Smart Grid legislation looming.
Specifically in areas of IT infrastructure and even more specifically CIS or billing related systems, a recent survey found that up to 60 percent of utilities surveyed are either outsourcing these functions or contemplating the outsourcing of these functions. This trend is due in no small part to the large capital costs associated with these systems and the fact that many utilities are finding the most efficient ways to focus on their core business; the provision of reliable and uninterrupted service.
The Hybrid BPO approach allows utilities to avoid large up front infrastructure costs, typically be up and running in a third of the time of an in-house implementation and assures the utility of best in class resources at their command. Resources that would require highly specialized training for maintenance and updating of only one of many systems they use are not a drag on costs, but it keeps the jobs and the control in the hands of the people who are ultimately responsible for delivering the service that is the utilities core business.
Another key reason that the utilities are starting to consider a Hybrid BPO approach is the dynamic move from legacy systems and infrastructure to smarter utility infrastructure. AMI implementations, dynamic pricing, automated meter reading and terabytes of data will become the new reality for electric utilities, and gas and water probably aren’t far behind. As utilities look to build out their smart grid projects and provide customers with the knowledge and power to make new choices, their ability and capacity to deliver these services is dependant on an entirely new set of skills and systems.
Looking to Other Industries, SaaS and Hybrid-BPO Successes
Consider the last 15 years in telecommunications and, specifically the last five years in mobile. The speed and options of these industries grew exponentially year over year while the providers became more skilled at managing data, delivering to customer needs and desires and refining their profit models.
Similar skills that catapulted the telecommunications industry forward will need to be developed and applied in the new world of the utility. The access to funds for projects has been confirmed, and executing to these projects is the next key step. This has produced ample amounts of pressure on the utilities to find a way to make this new world a reality.
While balancing the financial reality of the projects, many utility planners have realized that ongoing funds to support the projects may be difficult to find. Expertise and resources will be at a premium and hiring internally for many of these skills is a difficult thing to justify given the specialized nature of the work. It is of dire importance, however, that the high level knowledge and control of these processes exists within the utility.
The CIO position along with the CFO are aligning with the concept that so long as there is working knowledge and expertise within the utility, the real ability to use the systems, data and outputs, that finding great partners to facilitate or deliver the system is not only a viable business strategy but also an excellent risk mitigating strategy as they move into a new world.
To conclude, utilities are moving forward into a new era. A large percentage of their workforce is approaching retirement in a time when the technological and economic pressures of the business are hitting an unprecedented level.
Traditional models around in-house development and the required resources have the tendency to put enormous pressure on the budget, specifically in smaller and mid sized utilities. Traditional models around full business process outsourcing leave the utility without control or ability to correct quality issues quickly, and in many cases reduces jobs that are the backbone of their community.
New skills and systems are required for the next phase of utility evolution, and the best approach to meet these needs is a Hybrid BPO model that introduces and makes available the best systems, skills and expertise required for the transition; but leaves the jobs and control in the hands of the men and women delivering the core business of utilities across the nation — outstanding service.