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Business Process Outsourcing: Myth or Reality?

Fortnightly Magazine - September 2004

have an appropriate people strategy at its core.

Managing the Partnership

Outsourcing at a deep strategic level clearly creates significant management issues concerning the governance of the deals and ensuring the commercial aims are achieved. Indeed, when an outsource provider is deployed to take responsibility for functions that are critical to the success of the business, the relationship between the provider and the client has to go deeper, approaching partnership at its extreme. Also, complexities arise from the number of options available, and most managers lack a standardized framework on which to build outsourcing decisions.

Why integrate? Because utilities operations are growing more sophisticated. Add the fact that utilities have to explore options such as multi-utility offerings or cross-selling allied services, and a picture of near constant flux emerges. This means that for utilities, as with other businesses, when seeking the right people with whom to entrust responsibilities that are pivotal to the business, it is a high-risk move to fragment the operation and hand over the pieces to an assortment of agencies offering commodity services under contract.

Customer relationship management (CRM) is a key differentiator between average and top performers in the utility industry. The right investment in CRM capabilities could have a direct impact on a utility's bottom line, generating hundreds of millions of dollars in additional profits. As utilities unbundle services and seek new ways to differentiate themselves and provide better services at lower costs, one area they look at is outsourcing customer-care capabilities.

The potential for better risk management reinforces the power of outsourcing in today's utilities marketplace. Across all industries, the attractions of outsourcing include a guaranteed level of service at a lower cost than the in-house alternative. For utilities, these generic benefits are augmented by the ability to guarantee costs and therefore margins, smooth the entry to new markets in line with the evolving commercial and regulatory environment, and minimize the risk involved in any merger and acquisition deals.

The outsourcing business model and the management statistics it generates are a powerful combination, providing a platform for better workforce intelligence at both an operational and strategic level. This is a critical factor in helping the retained HR function provide higher-value strategic services to the enterprise. The visibility and value of HR will increase as HR departments, spending less time on transactional work, are able to concentrate on making more strategic contributions to their organizations.

This compelling business case is winning over a growing numbers of utilities. And by putting it into practice, they are hastening the rapid reshaping of the industry.

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