North American energy utilities are investing billions to create a smart grid to enhance service for retail electric customers. The smart grid, a disruptive technology, will provide utilities and...
CIOs Under Pressure
IT officers are getting more efficient, but guess what keeps them up at night?
lights on is less than 2 percent of revenue, closer to 1 percent. Then I typically have an investment profile portfolio that can be up to 1 percent. It hasn’t been at 1 percent for a couple of years. It’s been closer to three quarters of a percent of revenue.
Fortnightly: So are cost reductions the result strictly of technology and efficiency, or is there pressure from above to find more ways to reduce IT spending?
Carlson: It’s a combination of both. As a public utility, we have a mandate and a responsibility to the ratepayer, so we’re always looking at that. More important, I’m making sure that discretionary investments have a return, so that when I net them out, I’ve got a positive impact to the company, whether ratepayer or shareholder.
As far as mandates from high, if you count the mandate that [Xcel Energy CEO] Richard Kelly has provided all his leaders with, as running a top-tier utility, absolutely we’ve got a mandate. As far as someone saying, “You got 512 people and I think you should have only 479 people,” no.
Fortnightly: Can you talk about the extent of IT outsourcing?
Carlson: We’re predominantly outsourced. If you look at my costs, I’m probably 80 to 85 percent outsource. I think we’re on the high end. Our model is nearing its 12th anniversary, and we’ve had 70, 80, 90 percent of our IT operations being outsourced.
Fortnightly: Will IT outsourcing at Xcel Energy increase, given its already high rate?
Carlson: I met with the head of Accenture’s group who flat-out acknowledged that IT outsourcing is still the driver.
Now you have the play of going off-shore, and utilities are becoming more off-the-shelf software driven than legacy-application driven. That’s definitely been one of the things that has enabled us to control costs.
Fortnightly: What system changes did you make last year, or are you contemplating for the year to come?
Carlson: We swapped out our last energy management system last year, so our entire three-territory system is all now standardized on a Siemens platform. That was an initiative started in 2004, and we completed it. Because we’re multi-territory, the standardization gives us a natural-disaster recovery fail-over.
In 2008, we don’t see major system investment. We’ll continue to expand our mobile footprint, which will be our biggest investment this year and possibly into next year.
Fortnightly: Have you learned any lessons in the past year?
Carlson: All kinds. As an industry, and as a company, we are investing in how to use all this information we’ve been able to create. I would argue that we’ve created huge amounts of data, and turning that data into useful information can create value. That’s our big driver. My major initiative this year is all around business analytics and value creation.
I’ve got a core responsibility to do what traditional CIOs do in keeping the lights on. That’s certainly a major focus for a subset of my business. But if you look at my corporate scorecard, you’ll see very little of what would be