Utilities turn to outsourcing to help save costs

The utilities industry is facing unprecedented financial pressure and as a result has no choice but to turn to outsourcing to save costs, according to Ovum.

The analyst firm said that the number of IT outsourcing contracts awarded by the utilities sector in Europe and North America is set to grow steadily over the next 12 months.

"The utilities industry is particularly conservative and until recently very few companies had passed significant business to outsourcing companies," said Stuart Ravens, ovum principle analyst.

"However, we have already seen this conservatism weaken, with a small but significant number of IT outsourcing contracts awarded in recent months.

"We believe this number will steadily increase over the next year and beyond."

Indications of this trend are E.ON's £854m deal with HP in December 2010 to deliver datacentre operations and workplace services for more than 80,000 employees, and EDF's £99m contract with Capgemini in March of this year to provide service desk, procurement and managed desktop services to 15,000 IT users.

"With unprecedented pressure to drive down costs, many utilities are realising that they can no longer afford to ignore outsourcing," said Ravens.

"They are being driven down this path by a number of market forces, including the need for new infrastructure investments, ongoing industry consolidation and increasing interest in smart energy initiatives."