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CRM and Outsourcing: Inventing the Modern Utility

Developments in IT, outsourcing, customer information and customer relationship systems are challenging long-held notions on essential operations.

Fortnightly Magazine - May 2006

technology systems, but keep their existing employees, in the hope that the utilities will drive business process improvement using the new technology.

Meanwhile, Kim Padilla, principal of Energy & Utilities at Capgemini, acknowledges that utilities still need to get more comfortable with large outsourcing deals like TXU. She says utilities are moving toward a virtual service provider model. “Utilities will still retain control over the operation and assets, but will focus on being the asset owners, while firms like Capgemini are the asset service provider. That’s the model that we see utilities starting to move toward,” she says. “Capgemini does not take ownership of TXU’s customers, but it treats them as customers.

“We’ve seen the extreme model of the virtual service provider, which leaves a core management team at the acquirer in a merger, acting as a portfolio manager, and everything else being sourced to a service provider,” she says.

This extreme model has been pursued by investment bankers and financial firms are “looking at being a utility owner/investor—their core business is managing an investment portfolio, not necessarily running a utility,” Padilla says.

Of the concern that utilities could become only as good as their service provider, or that there will not be enough competition among service providers to maintain pressure on service, Padilla offers an interesting answer. She says you won’t find someone who does the complete utility outsourcing where they would actually perform each one of the services.

“What you find is a network of service providers that would be able to accomplish what the utility is trying to do. I don’t think we’ll end up with one service provider that does it all. I think we’ll end up with one service provider that manages it all,” she says.

She doesn’t believe that there is a service provider that could replicate and improve upon the myriad of functions within a utility. “You don’t get the best of every piece,” she says. Rather, the service provider or outsourcer will work with many different companies that have shown they can improve on utility specific functions and can be replaced if service levels fall off.

The Political Reality

The regulatory and political climate sometimes are not conducive to a significant outsourcing of people. Furthermore, benchmarking call centers and back-office productivity can be a difficult endeavor.

Because of these difficulties, utility executives have been focusing on systems. Greg Dennis, a senior executive in Accenture’s North American Utilities practice, says, “I think you have more established IT metrics that are easier to manage across utilities. You are not seeing that many TXUs, BC Hydros, and NiSources. There’s more activity on the, ‘Hey, can you run my data center for me? Can you run this application space for me?’ That’s what I would say [is] probably the second leading area, and then you fragment IT in to a number of subsets.”

Dennis says too many disparate applications have made IT departments too costly.

“Utilities have so many [IT] applications they don’t have [enough] people to deal with it,” Dennis says. Accenture hosts the IT system, giving