The adaptation of outsourcing in the utility industry is nothing new. Since 1995, the utility industry has seen over 20 outsourcing deals of notable size. However, given the industry's need to meet financial targets by achieving excellence, hundreds of utility companies still have room to streamline, modernize, and rationalize their back office business processes with the help of third-party companies.

As utilities re-examine their business processes with the goal of cutting costs and focusing on core competencies, they have often found that outsourcing allows them to reduce operating expenses, focus managerial attention on the aspects of their businesses that permit competitive differentiation, and access skills and capabilities not present in their organizations.

Additionally, outsourcing can ensure adequate investment in technology in non-core areas of utility businesses. In short, outsourcing vendors can, in many cases, offer the same or better services at a lower cost while reducing demands on the utility’s capital budget. However, actually achieving these goals is critically dependent on understanding certain aspects of these transactions.

Failure to adequately understand and control items such as vendor qualification and selection, or to define up-front the structure of the outsourcing relationship, the working conditions, and the performance metrics, are lapses that will make it virtually impossible to obtain a successful -outsourcing relationship.

The benefits of outsourcing include the restoration of predictable growth, improved service levels and quality, and increased profitability for investors. Outsourcing can transform a utility’s customer service, establishing expectations for state-of-the-art solutions.

Whilst outsourcing works for most companies, transforming a business through outsourcing, especially applying outsourcing to the utility industry, is no easy task. This report on Utilities Outsourcing focuses on what it takes to successfully outsource the operations of a utility. This report analyzes the political and regulatory risks that utilities are facing today, and the factors driving this change towards the outsourcing model of business.

This report focuses on how, as outsourcing makes further inroads into the utility industry, companies are taking a closer look at the differences between operational and transformational outsourcing. The act of outsourcing demonstrates more than just business vision. With proper governance models in place, utilities can find significantly better economics through an outsourcing venture. This report on Utility Outsourcing brings forth a new representation of the outsourcing model as applicable to the Utility Industry.



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Pages: 73
Publication Date: December 2006
Publisher: Energy Business Reports