About four months ago, at a conference at Stanford University’s Center for International Development, the economist and utility industry expert Frank Wolak turned heads with a not-so-new but very...
Flexibility: Key to Success When Outsourcing Information Technology
In the utility industry's brave new world of deregulation, information technology (IT) (em and, specifically, "outsourcing" (em has acquired an entirely new meaning.
IT has become strategic. And important. So important that utility companies are seeking outside expertise to help them leverage technology to conduct business more efficiently, help grow revenues, and hone their edge in the new competitive world. Time has become an unaffordable luxury. Speed of change and speed-to-market are prime considerations.
In selecting an outside firm as a technology partner (em one that will become acquainted intimately with your business and have access to proprietary company information (em keep the following issues in mind:
Accountability. An outsourcing contract should guarantee satisfactory performance of all measurable practical aspects of the job. These measurements should be expressed in plain language that makes the contract more practical to implement and defines clear expectations. Contracts should also build in aggressive productivity factors that guarantee operating efficiency and effectiveness over time.
Flexibility. Many senior executives feel they may be relinquishing control by entering into a long-term contract. But a technology services arrangement that guarantees price and productivity, and builds in flexibility for the future, allows a utility company to exert greater control over IT operations.
A key consideration is whether the outsourcer's technology infrastructure will meet your needs on a long-term basis. Your technology firm should provide you with an arrangement that builds in flexibility for the future, in terms of variable capacity and variable pricing structure. You need to be able to adjust capacity up and down as company requirements change over time. Your contract should allow you to take advantage of new technological innovations at competitive cost.
Technology. Because technologies overlap, utilities can realize the greatest synergies by examining the potential effectiveness of complete technology infrastructure support, from the mainframe data center through the distributed environment to the end-user desktop. This type of end-to-end service offers a great deal of flexibility at the business unit level, where more utility decisionmaking will be increasingly focused.
A total-scope information technology agreement usually involves all the utility department heads, who individually determine how their operation will use the outsourcer's services based on specific needs. The outsourcer then is accountable to each business unit executive for performance. Your contract needs to extend control and authority to the business unit, while linking all the utility's "islands" of information in an efficient and cohesive whole.
Ownership, Confidentiality, and Ethics. The outsourcer has no marketing or licensing rights to a utility's customer data. It is the outsourcer's duty to protect your ownership rights, and to make sure the data is secure. As far as confidentiality goes, your outsourcer should engender the same level of trust as your outside counsel, your accountants, or your investment bankers.
To be effective, the outsourcer should be considered an extension of your organization. Where data are concerned, the outsourcer should help you better mine your information for marketing possibilities. Your outsourcer can give you the technological tools to leverage your data, package services, and form strategic alliances to compete more effectively under deregulation.