Outsourcing Information Technology: One Step at a Time
The challenges facing the information technology (IT) industry into the next century are significant. Yet so are the opportunities. For the first time since the industry's inception in the 1950s, strategy-minded chief executives (CEOs) are beginning to break the industrial age paradigm and look upon their technology resources as assets instead of little understood and highly questionable expenses.
Senior executives are beginning to understand the "time value of information" and the strategic value technology can provide. Organizations are demanding higher-quality IT services that use newer technologies, delivered in less time and with higher impact on the bottom line. As a result, today's chief information officers (CIOs) must release the day-to-day management of some of their more sacred business processes to third parties.
This situation should not surprise the more business-oriented CIOs. They already share a common perspective with their CEOs. A partnership is evolving as CEOs order their CIOs to seek partnerships with the corporation's
business unit officers to improve processes, enhance customer service, and generate increasingly favorable financial results.
IT Worked for Us
The practice of outsourcing IT activities, while more common in competitive industries, is receiving increased attention by public utilities. Over the past year, many electric utilities have announced outsourcing agreements that range from small single-function activities to a company's entire IT capabilities. As electric utilities continue their journey through deregulation, outsourcing of nonstrategic IT activities will likely become the rule.
My own experience with outsourcing began five years ago in the international ocean freight industry. Outsourcing all of the planning, installation, and support for physical data and voice topology resulted in improved customer function. This, in turn, resulted in a 50-percent financial savings, a 300-percent increase in personnel availability, and a significant increase in overall technical competency.
My next projects were to jointly outsource a data center operation with one vendor, while upgrading and providing long-term support for a suite of financial systems with another. The result?
Significant operational improvements, implementation of a disaster recovery agreement, expansion of the technical support resource base, and financial rewards. A year later we outsourced the data center operation that supported the company's core business application, using the same processing service provider. Again, we achieved improvements in operations, support, and finances.
Joining Central Louisiana Electric Co. in October 1994, I faced a situation that led me to outsource a data center operation (including technical support). Again, we achieved operational improvements, developed a disaster-recovery arrangement, augmented maintenance issues, and stabilized short-term expenses. And since the company is drawn toward client/server technology, our contract's unit-pricing structure promises significant financial rewards in future years.
Following this experience, we outsourced the application support for the company's new Customer Call Center, using the primary vendor engaged in its development. At the same time, the company closed many of its local offices and outsourced payment collection activities. Next, we outsourced the utility billing, printing, inserting, and mailing activity (which is still in progress). Central Louisiana continues to review other areas for outsourcing:
processing of mailed payments, select IT Customer Service Center activities, client/server network management, distributed client/ server