Utilities can monitor the progress of in-house and outsourced projects
To stay competitive, successful utilities are committed to reconciling the cost benefits of outsourcing non-core services with their dedication to maintaining customer satisfaction and performance. Organizations such as TXU, Xcel Energy and NSTAR are leading the way by outsourcing an increasing percentage of their IT services and specialized financial services, such as credit card and payroll processing. But to balance the lower overhead costs achieved by outsourcing with continued quality service and support, these organizations must demand transparency and develop strong, collaborative relationships with outsourcing vendors that they can trust.
A 2005 Capgemini study highlighted the consensus among utility executives that deregulation and the need to gain market share would drive mergers and acquisitions. More than 70 percent also anticipated that outsourcing would play a key role in corporate strategies employeed to strengthen their financial position while increasing their competitive edge.
Those days are over. Today, deregulation in the United States has created a mixed bag of benefits and drawbacks. Although another cycle of M&A activity is possible, the value of outsourcing in the utility industry is not completely clear. Utility companies struggle with deciding which of their core functions to keep in-house in order to remain competitive, and they are fearful of losing control and impacting customer satisfaction in areas that are commonly outsourced, such as billing and customer service. It only takes one unsuccessful venture into outsourcing to damage a utility’s bottom line as well as its brand.
The utility industry operates in a conservative environment where change happens slowly. And because outsourcing involves giving up control of responsibilities to the customer that have traditionally been the utility company’s, outsourcers need to demonstrate that they have the infrastructure, credibility and experience in place to handle those responsibilities.
Communication is crucial throughout the process, from the initial planning stages to rollout. As the relationship unfolds, and control is carefully ceded, the utility becomes more familiar with the process and the level of trust grows. The relationship will continue to thrive if both sides feel they are part of the same team. This means setting, documenting and managing an agreed upon set of expectations, with room to expand. To evaluate progress, both parties should agree on stage-gate reviews before expanding the level of outsourcing services.
Defining the methodology leading to cost reduction goals is also critical. According to a 2005 report from Gartner, many companies looking to outsource in the next couple of years will fail to cut costs. Although the most effective outsourcing can reduce costs by 30 percent, a poorly managed model can lower the quality of various customer-facing transactions.
To demonstrate the required levels of expertise and customer service, outsourcing firms should:
- effectively manage the project pipeline by evaluating demands and assigning the proper mix of people.
- monitor and manage risk and performance through internal project leads to oversee implementations and ensure consistent, unobstructed, efficient delivery of the work.
- preserve knowledge and intellectual capital from all teams working on a particular project-essential for reducing costs and improving efficiency and profitability on subsequent projects- and standardize processes and disseminate best practices.
- as project scope changes, have common tools and processes in place to manage the subsequent resource, time and financial costs of both their domestic and offshore workforce.
- maintain customer satisfaction by developing standard ways to share information, both internally and with the customer, regardless of location.
- as projects close, minimize the time and effort needed to transfer knowledge to the customer.
Benefits of Project Management Technology
Utilities run their businesses cautiously. However, an increasing number are focused on exploring the financial rewards that outsourcing provides while learning to leverage project management controls to mitigate financial risk and maintain the “hometown” brand of customer service.
Effective project management is essential to successfully manage outsourced teams. Technology can play a critical role in facilitating collaboration and increasing communication, regardless of geography, which helps utilities monitor the progress of both their in-house and outsourced projects more closely. It also gives outsourcing firms a powerful tool to better serve their clients.
For utilities and outsourcing firms, project management technology provides these major benefits:
Create winning proposals
Project management solutions enable project managers to define key performance indicators and incorporate them, along with potential risks and costs, into their project analyses. By enabling a rigorous examination of potential resources, available skills, and costs in an integrated manner-and by running various delivery and pricing scenarios-project management provides the means to create strong, competitive proposals.
Gain access to outsourced workforce skills and availability
By giving project managers and senior management a clear window into workforce skills, availability and performance across the globe, project management solutions enable managers to access the specialized skills they need for any project at any time and to effectively manage that project regardless of location. Project managers can see resources in a variety of views, perhaps listed by function or separated by domestic and offshore resources.
Deploy consistent project delivery methodologies for in-house/outsourced teams
Maintaining consistent business processes can be particularly challenging. As the hub of enterprise communication for outsourced programs and projects, project management solutions are powerful tools for maintaining or implementing the consistent business processes, such as delivery methodologies, reporting, and issue handling, upon which quality work relies. Utilizing documented best practices, project managers are able to provide employees with step-by-step templates for use in future projects, thus ensuring proper approval work flows.
Many utilities are exploring the financial rewards that outsourcing provides while learning to leverage project management controls to mitigate financial risk and maintain the “hometown” brand of customer service.
Centralize collaboration and capture intellectual capital
Using the document management capabilities, templates, and discussion threads available in project management solutions, companies can enforce consistent language (many companies create a glossary of common terms) and bridge communication differences among vendor teams. Managers can create role-based access to various documents, including timesheets and time and expense tracking, and also documents that include essential company knowledge and intellectual capital. Geographically dispersed teams can gain immediate access to key information and to artifacts when they need to dig deeper or want clarification.
Demonstrate a thorough understanding and close the loop on potential security risks.
Protecting the utility enterprise network and sensitive customer information cannot be overemphasized. To carefully and efficiently manage this risk, outsourcers must demonstrate that they have the financial capability and skills to develop and maintain a security infrastructure to close the loop on potential financial and legal risks to the utility.
Manage risk with on-demand visibility
Monitoring risk and performance in near real-time is a business imperative when utilities create outsourced teams. It may only take one failed venture to endanger a utility’s bottom line and brand. The sooner firms uncover problems, the sooner they can correct course and keep customers apprised of issues that might arise, thus increasing customer satisfaction. Project management solutions enable this type of on-demand visibility. Reporting issues and risks, escalation practices, handling scope changes, and transferring knowledge to customers are all possible because of this instant visibility.
Capgemini’s joint venture experience with TXU is one example of a successful outsourcing project, reducing operating costs by 30 percent in its first year. Ultimately, if managed effectively, outsourcing utility services – whether they are IT, business process development, or customer service – can help utility companies improve customer satisfaction, and increase their competitive edge.
Daniel Palomino is the global industry marketing lead for the energy sector with Primavera Systems, a solutions provider in project management solutions for the power, energy and process industries.