Powering UpBy Nick Wreden | Posted 2009-05-27 Email Print
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Energy and utility companies rely heavily on technology solutions to meet complex customer, operational and service demands.
How do you get a once-good IT relationship back on track?
After Allegheny Energy outsourced nearly all of its IT operations to EDS, growing pains over responsibility and execution affected both users and service levels. However, mutual buy-in to an IT and business process framework that provides structure, control and accountability has enabled the two companies to achieve their goals and strengthen their relationship.
Of course, outsourcing is just one approach energy and utility companies use to meet complex customer, operational and service demands. For the oil and gas industry, technology is the glue that binds together a complex supply chain that stretches from oil rigs in harsh environments to local gas station pumps. Among utilities, IT failure can lead to outages that leave homes and businesses in the dark.
In some cases, the IT challenge consists of managing a web of suppliers to meet service levels and other requirements. For Enbridge and other large energy distribution companies, the challenge consists of managing costs and communications among far-flung offices. Other utilities, such as Pacific Gas and Electric (PG&E), must work continuously to keep electronic barbarians outside the IT gates.
Improving an Outsourcing Relationship
Allegheny Energy, a $3 billion utility headquartered in Greensburg, Pa., tied the outsourcing knot with EDS in 2006. EDS assumed responsibility for almost every IT operation, ranging from hosting and security to application development and desktop support, and many IT employees replaced their Allegheny Energy badges with EDS ones.
By the time Rick Arthur, vice president and CIO, arrived at Allegheny Energy in January 2008 after working for EDS for 19 years, teamwork and IT performance were suffering. According to Arthur, 14 quarterly service-level agreements, such as system uptime and problem resolution time, were not being met. Incident backlogs were growing. EDS was incurring service penalties, and profitability was threatened. No one focused on upcoming challenges.
“We were constantly fighting with EDS over service delivery, reaching a crescendo of frustration and anxiety,” recalls Arthur, who had begun a plan to improve service delivery while working for EDS. “We were even writing letters about hair-splitting interpretations of the outsourcing contract, which raised the stakes for both sides.
“The us-versus-them mentality had spread throughout the organization. SAP experts were battling legacy application support, while application development was trading shots with the infrastructure support team.”
Accountability was a major issue. Vendors other than EDS were tackling issues with one methodology, while others used another, thereby complicating integration and problem resolution. Teams had oversight duties, but, as Arthur notes, “Sometimes when teams are responsible, no one person is accountable for delivery.”
The IT staff responded to individual user issues, which resulted in inconsistent problem tracking through the service desk. This made it difficult to spot recurring problems and prioritize solutions. Yes, challenges were being met, but problems were being solved based on a “get-’er-done” mentality rather than through repeatable processes or, better yet, issue avoidance. Arthur was not pleased. “I was determined that we were going to meet service levels while not increasing costs, and that Allegheny and EDS would function as an integrated team,” he says.
Realizing that the issue was about business processes and outcomes rather than technology, Arthur started by addressing the issues—absence of trust, fear of conflict, lack of commitment, avoidance of accountability and inattention to results—outlined in the business book The Five Dysfunctions of a Team by Patrick Lencioni. Then more specialized teams, comprising both EDS and Allegheny Energy employees, focused on such specific issues as project delivery, operations, process management and strategic planning.
To renew the relationship, Arthur depended on EDS to bring in standard Information Technology Infrastructure Library (ITIL) processes and tools, which provide a common IT service management framework and outline consistent outcomes in a multisupplier environment. ITIL structures such processes as support, service desk management, incident management, problem management and availability management so that Allegheny Energy can align and track how every IT operation is implemented, managed, supported and even paid for, while meeting business objectives.
ROI is covered not just in terms of cost savings, but also in terms of business value. For example, ITIL places greater emphasis on outcomes, such as better cash flow, rather than outputs, such as the number of invoices generated.
“Today, we have a stronger and more consistent foundation to drive service delivery and continuous improvement,” says Arthur. “Before ITIL, issues were often ill-defined and unpredictable, and accountability was unclear. Now we know exactly how to troubleshoot and pinpoint responsibility.”
For example, Allegheny Energy exercised the ITIL structure while upgrading its digital workflow system. “The ITIL framework enabled the teams to understand how the various processes were linked, who was responsible for support, and, most important, how the upgrade would affect operations,” Arthur says. “The upgrade proceeded without difficulty.”
The biggest obstacle was change management. IT personnel often relish playing hero, swooping in to help the company recover from a crash or other event. ITIL, however, makes the system the hero with formalized structures.
Allegheny Energy has seen substantial gains from working with EDS. Service-level failures were reduced by 67 percent from 2007 to 2008. Early this year, Allegheny Energy met 100 percent of its service-level targets in 57 service areas. Now, the utility is focused more on successful outcomes and less on contract management.