CIS Outsourcing
By Greg Galluzzi, President (October 2003)

Successful CIS outsourcing solutions remained elusive for both providers and potential customers for years. Take a look at the following list of entities who at one time offered an outsourced CIS solution to the market—today they are no longer in business or have changed market direction.

• Connext
• First Point Utility Solutions
• Convergys
• Insite Services
• EnergyOne
• Utiligent
• En. Able
• UtiliPro

The list provides a sampling of a few of the larger and more visible providers within the industry. The history speaks volumes about the past, present, and near-term state of CIS outsourcing in the utility industry. In the present however, new entrants such as Accenture, IBM Global Services, Alliance Data Systems, and ORCOM are beginning to make headway with the outsourcing model.

Outsourcing Models
The market uses several terms when referring to outsourcing. Today, providers identify themselves as Application Service Providers (ASP's) or a variation thereof in order to use the latest jargon and promote the ASP offering. The following model presents the components of outsourcing followed by a typical progression of installation.

The outsourcer typically provides the transition services necessary to migrate the customer to the outsourced environment where operation, support and maintenance services are provided for a defined contract period. The solution may include: the CIS application, hardware, system software, database software, data center facilities, connectivity to a point on the customers network, business services including payment processing, metering, and bill production, call center services, and a franchise of product and service offerings.

Historically, the outsourcing solution viewed its offering as being implemented in a phased approach. Phase one focused on the technology aspect of the solution by successfully implementing the application and operating it within the data center. Phase two would focus on the turnover of business services associated with metering, cashiering, billing, etc. Next, phase three would focus on transitioning the call center or forming a joint call center. The fourth phase would find the utility becoming a franchiser offering various products and services as part of a national or regional brand.

Since 1995, the emphasis has been in providing retailers and marketers with a complete front-office and back-office solution capable of supporting the retailer as it participates within various retail markets. Phasing typically does not apply to the retailer or marketer.

There are many variations of outsourcing offered in the market. The following diagram defines variations at the highest level.

1. In-house Solution. This alternative is provided as a baseline for comparison to the various outsourcing options. It represents an in-house custom or product solution which the utility is operating and managing internally without the help of a third party or vendor. Historically, this has been the most popular operational model.

2. Hosted Facility. A third party or application vendor assumes responsibility for the management and operation of a remote or local data center. The application continues to be supported by product vendors or in-house personnel. This model once popular in the late 1970's to mid-1980's, has realized a recent resurgence making it the 2nd most popular outsourcing model.

3. Managed Application. The product vendor or a 3rd party assumes full responsibility for application maintenance & support, product releases, help desk, training, and consulting services. This model is the most popular as the utility retains physical control of the solution and its data.

4. Shared Services. Responsibility for application management and data center management is assigned to a 3rd party which may be: a third party vendor, an investor owned utility, a public owned utility, or other outside entities as identified. If the entity is an organization created by the utility to provide service to multiple subsidiaries it is known as a Shared Services environment. If an entity is external to the organization and is attempting to operate the solution for multiple energy utilities it is a co-sourced solution. The success of the co-sourced solution is spotty as it requires a significant investment in time to obtain agreement by multiple utilities on a CIS solution.

5. Outsourced Timeshare. The product is tailored to the specific needs of the utility and subsequently supported and operated from the outsourcer's facility. Service is provided through the Internet, VPN, or other provider connectivity. Typically, the utility does not own a product license, it is simply renting the application.

6. Application Service Provider. The base product is accepted with customization only allowed through product setup and definition tables. In theory the customer is renting time on the application with access through the Internet with a very thin client required. For complex CIS solutions this model remains an elusive one. In reality vendors offer an Outsourced model and have named it an ASP solution.

Third Party Hosted Solution
The following diagram presents a hosted facility solution consisting of three entities: the hosting provider, the solution integrator, and the software vendor.

• The solution integrator will contract with a hosting provider to provide the facility and data center operation.
• The solution integrator will provide installation services and will function as the application support group for the CIS product solution.
• The utility will contract directly with the CIS vendor for the license. However, the utility will not contact the CIS vendor directly for product support. Instead the utility will contact the solution integrator who in turn may contact the CIS vendor to assist in resolving the problem.
• The hosting provider through the solution integrator will assume responsibility for all hardware, system software, database and other 3rd party providers required to provide the utility with this solution to a point of connectivity on the utility's network.

Vendor Hosted Solution
The following diagram presents a hosted facility solution provided by the CIS Software Vendor.

• Vendor operates the solution within its own host data center.
• More than likely the vendor will be required to assemble the solution utilizing existing facilities from a hardware provider such as IBM, HP, etc.
• The solution is specific to the utility typically with no other customers running within the same environment.
• The vendor supports the software product providing all support, maintenance and enhancements.
• The vendor assumes responsibility for all hardware, system software, database and other 3rd party providers required to provide the utility with this solution to a point of connectivity on the utility's network.
• The vendor has licensed the software to the utility.

CIS Operational Platforms
Today, the outsourced or ASP solution is highly touted by industry analysts and business publications who deal in information. Yet, for the financial and vendor community it remains a tough offering to fund, sell, and support as a viable CIS solution.

The majority of utilities, 70% in one industry survey, continue to operate the CIS solution within an in-house data center with the vendor managing the application. The hosted facility is quickly becoming the operational platform of choice growing to 16% of the survey sample. Co-sourced or shared services solutions make up 10% followed by the outsourced or ASP solution at only 4% of the survey sample.

Greg Galluzzi is the President and Senior Consultant with TMG Consulting. Greg has 25 years of information technology, and consulting, experience across 200 CIS projects. experience across 200 CIS projects. Greg can be reached at gregg@tmgconsutling.com.