The outsourcing of systems management can be an effective way for utilities to contain costs and improve efficiency within the competitive environment. However, the inherent pitfalls involved in relinquishing control of mission critical systems to third parties can cause as many problems as solutions.
Outsourcing has always been an attractive strategy for deregulated utilities to pursue. This is because of the inevitable fragmentation and duplication of internal systems that is driven by the M&A activity which has characterized the deregulating European energy market. Outsourcing the management and integration of systems allows companies to re-engineer processes and achieve cost savings.
Utilities must, however, be aware of the dangers of poorly designed and implemented outsourcing initiatives. Detailing aims and objectives in a strong set of service level agreements is crucial to the ultimate success of the outsourcing agreement. Failure can leave the supplier with a costly and protracted mess. For example, in 1998 Scottish-Hydro had to cancel a GBP5.5 million contract to have an outsourced billing system installed when its service partner could not deliver on time.
Source: Data Monitor
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