Utility services

Posted on Thursday, October 4, 2018 by Michael La Cour

Outsourcing enables utilities to stay in control of their business

Many utilities are taking a new approach to their business that allows them to focus on developing their business model and adding new consumer services.
Subscription-based solutions are trending
There is currently a clear market trend of moving towards ‘As a Service’ solutions in the utility sector. And no wonder! Strip away the buzz and hype of terms like Fully Managed Services, Cloud Metering (and many more along those lines), the ’as a Service’ concept is essentially a subscription-based package much like the popular streaming services of Netflix or Spotify. Users have access to what they need, when they need it, and the service provider takes care of everything else.

Three main reasons
More and more power utilities are discarding the traditional model of owning, maintaining and hosting everything in-house. Most notably within system operations including software, IT and hosting, a highly complex area characterised by rapid technological development as well as a need for highly specialised knowledge and competencies.  

An extensive survey carried out recently among Swedish utilities revealed that as many as 25 % have decided to leave system operation, entirely or in part, to a supplier while another 25 % are still considering their options. The survey also revealed three main reasons for their choice, which happen to correspond with what we hear from utilities worldwide:

It may be worth considering if the ‘As a service’ concept is less about losing the control you have today and more about staying in control of your future.

Letting go to hold on 
Despite significant advantages, some utilities remain hesitant to outsource system operation. Many of them state that the loss of control is the primary reason for their hesitation. However, sticking with the traditional approach may eventually become a hindrance to a utility’s continued ability to service their customers and further develop their business, so it may be worth considering if the ‘As a service’ concept is in fact less about losing the control you have today and more about staying in control of your future.

Reason 1: Tech tribulations
Making sure the IT setup is up-to-date – not to mention secure and compliant – is a challenge for many utilities. Especially smaller utilities may not have the necessary budget or in-house competencies; something that several of them stated explicitly in the survey. The investment in hardware is left to the service provider who assumes responsibility for system upgrades, maintenance and ensuring regulatory compliance, including to the GDPR. Also, buying access to a system that is already set up makes it both easy and fast to get started.

Reason 2: Cutting to the core
Several utilities responded that outsourcing system operation releases resources they can then spend focusing on their core business: keeping their grid in excellent shape and delivering power and service – and new services – to their customers. It also lets them to buy their way to a higher level of specialist knowledge than what they can uphold internally. And since the ‘As a Service’ comes in a variety of packages it allows utilities to buy only what they need, and then add additional layers such as analytics to get even more value from their meter data.

Reason 3: Cost is key
Typically, the Total Cost of Ownership (TCO) for an outsourced system solution will be lower than if a utility buys and maintains hardware and software themselves. This is due to the economy of scale that a larger service provider benefits from. Just as important is the full transparency of costs that comes with a subscription-based service with a flat fee and no investment up-front.