NiSource Outsourcing Information

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U.S. Utilities Intensify Outsourcing Plans — NiSource Raises the Bar

Interest among U.S. utilities in BPO remains high, with at least six large utilities actively evaluating proposals from vendors. At Accenture's recent International Utilities and Energy Conference, a roundtable of industry executives discussed lessons learned from previous BPO engagements, particularly in the United Kingdom, where companies such as Welsh Water serve approximately 1 million customers with only 130–140 employees, and explored the justification and process related to major outsourcing decisions. Without announcing the choice of a vendor, NiSource presented an overview of its BPO initiative, which expands the scope beyond that of previous initiatives such as the TXU/Capgemini deal signed last year or the BC Hydro/Accenture deal signed the previous year.

NiSource decided to evaluate outsourcing primarily for financial reasons — as an opportunity to reduce operations and maintenance (O&M) costs while maintaining or improving service levels and to redeploy capital to growth areas such as gas storage. Additionally, the company wanted to explore the opportunities to transform key business processes and their supporting technology and to enable the company to focus on its core business. Processes chosen for outsourcing needed to satisfy certain criteria:

  • The process is transactional in nature.
  • The process requires significant amounts of medium to low-skilled labor.
  • The process is currently fragmented and needs to be consolidated and/or transformed.
  • Management is not willing or able to invest in change.
  • The process has been successfully outsourced before.

Based on these criteria, NiSource decided to outsource significant portions of finance and accounting, human resources, supply chain, customer care and billing, and work management. The work management outsourcing, which goes beyond the scope of previous utility BPO deals, will not include any union labor and will focus on scheduling and dispatching processes.

NiSource met with legislators and regulators early in the process to ensure political issues were resolved up front. For example, although the customer call center will be outsourced, it will not be moved offshore. Also, regulatory "clawback" of any achieved savings will not be an issue because the outsourced processes are not part of the utility rate base.

We believe that interest in BPO among U.S. utilities will continue to be driven primarily by financial pressures including the need to achieve M&A synergy savings and the friction between a "back to basics" business strategy, which decreases the ability to grow revenue, and earnings growth objectives of 5–10%, which require a sharp focus on cost cutting.


We predict that business process outsourcing will become the norm instead of the exception, especially for shared services such as finance, HR, supply chain, and IT, as well as for customer service and billing.

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