Energy companies are beginning to look at outsourcing as a way to generate operational efficiencies while gaining access to current technologies and scarce expertise. The provision of software solutions and services by an application service provider (ASP) can generate significant benefits by offering best-in-class technology and cost predictability in support of business goals and the conservation of capital.
Choosing the appropriate vendor is essential to the success of any outsourcing initiative. In order to do so, a company must first understand its specific business needs and must also have the ability to communicate strategic organizational goals to a potential vendor. Because outsourcing arrangements require synergies between vendor and outsourcer to be effective, lines of communication must always be open. Companies must be prepared to ask the right questions of potential vendors from the outset, as well as being prepared to effectively manage the outsourcing relationship.
Finding a Vendor: Asking the Right Questions
Companies can ensure that they find an ASP solution that will work for them by asking pertinent questions early in the evaluation process. Key questions include:
Company and Customer History
When searching for an ASP, it is vital to look for a service provider with extensive experience, established processes and long-term customers. These providers will have a better understanding of the industry and will have addressed many of the challenges facing companies in today’s energy markets. Ask for customer references (both current and former), and visit as many client sites as possible to obtain information on how the solution works in a real-world setting. It is important to ask existing clients about their satisfaction with the ASP’s performance including their plans to renew their contract at the end of its term. This will provide critical information on the ASP’s ability to provide reliable, long-term solutions.
Industry Experience and Knowledge
The ongoing evolution of the energy industry requires continual commitment by ASPs to help customers by anticipating new technology and service requirements in response to market changes. By choosing an outsourcer who specializes in the industry, customers can take advantage of in-depth industry knowledge in addition to the many benefits offered by the ASP model.
Technology
Research shows that customers seldom use more than 50 percent of a system’s features and functionality. As a result, customers in the process of evaluating a new system may find it useful to speak with a client who is using the features and modules that are most relevant to their business. The will help the buyer to gain an understanding of the system’s fit with the company’s own business needs. Look for an ASP who is committed to evaluating and implementing new technologies to reduce future system expenses and to meet future technology demands. It is also a good idea to ask the potential vendor to provide information and diagrams on the system’s infrastructure – both current and future plans. Technical analysis of the provider’s infrastructure will ensure that the ASP can deliver services in a secure, reliable manner.
People and Partners
When evaluating any new system, it is important to meet the team who will implement and manage the outsourcing initiative. The customer and ASP need to operate as a team, making communication essential. By meeting the key players, companies ensure that the ASP is committed to using high quality, dedicated professionals and that their partners are reputable.
Service Level Agreements (SLAs)
A Service Level Agreement is the contract between an ASP and its customer specifying services and service levels. According to META Group, only 20 to 25 percent of its IT clients actively use Service Level Agreements. Choosing an ASP that employs Service Level Agreements to manage the quality of its services allows management to minimize the risk of service level disputes, to obtain invaluable metrics to judge the services being provided and to ensure protection from a potential service lapse. Service Level Agreements guarantee that a company gets what it is paying for.
Customer Service
An established ASP will provide clients with a single contact – typically a Customer Relationship Manager - who is instrumental in managing the outsourcing relationship. They will also offer a 24-hour technical support help desk to deal with issues such as system availability and system response time concerns. It is important to look for outsourcers who have gone beyond traditional methods of support to offer online support services – typically in the form of a Web-based client center. Online tools allow customers to request technical infrastructure changes, obtain information and communicate with their dedicated ASP team, all with the click of a mouse. An online support center allows clients to report on and track the progress of customer service issues, from a centralized place, at any given time. It must be easy for customers to obtain help for the outsourcing arrangement to be successful.
Security
Prior to making a purchasing decision, a company must ensure that the ASP has appropriate safeguards in place to protect against unauthorized modification, destruction or fraudulent use of the system. The ASP’s infrastructure should provide redundancy to minimize impacts due to loss-ofavailability from hardware failure, and backups should be created and stored off-site to ensure swift recovery if necessary. Make sure to ask the provider to present a detailed overview of their data recovery planning and testing.
Ensuring a Successful Transition
The key to successful outsourcing is to have the delivery of services aligned with a customer’s business strategy. Once system functionality requirements are determined, the ASP and the customer must establish service level requirements.
Using a Proven Methodology
After finding an ASP with a mix of services and support that meet a buyer’s business needs, their next step is to ensure that the provider is able to successfully implement the new system.
In order to reduce the risks associated with implementation, it is wise to choose an ASP that uses a proven implementation methodology, preferably one that is based on previous client experience. The implementation methodology should cover the entire project spectrum from initial gap analysis and business process analysis to custom modifications and postimplementation support. Real-time project tracking is a helpful tool that enables project status to be analyzed at various levels of detail, with issues documented, escalated and resolved in a timely manner.
Complete a Gap Analysis
An essential component of any technology implementation, the Gap analysis process determines the presence of ‘gaps’ in function between a client’s business processes and the functionality offered by the solution. Because this phase is critical in making the transition from the legacy system, it is important that buyers ensure that the ASP has a proven methodology to identify gaps in functionality. At a minimum, the analysis should include job function mapping, test script planning and execution - for assessment of gap impacts on business processes and resulting modifications - implementation team training, and technical specifications for implementation.
This phase ensures a smooth transition by listing deliverables produced from the gap analysis, and by laying the foundation for project, conversion and interface planning. It also feeds into the design of business processes and workflows that will ultimately dictate the configuration of the new system. Successful implementations always contain a thorough Gap analysis.
Post-Implementation Support
Traditionally ASP contracts have a term of three to five years. Throughout that term, the ongoing success of the outsourcing relationship is evaluated using a number of different tools.
Setting Service Levels
The work doesn’t stop once the Service Level Agreement is in place. A company must have a thorough understanding of its business requirements in order to set service levels and determine the investment costs for the new system. Areas to consider when determining service level requirements include performance, availability, opening times, incident handling, security, continuity and change management.
The agreement requires constant discussion and renegotiation as the energy industry evolves. The Service Level Agreement should be tracked, reported and analyzed regularly. It is therefore essential to examine the ASP’s processes and review systems and how they track quality results. One way ASPs do this is through a series of reports that are combined into a single scorecard and made available to clients online. Reporting should address key areas including online availability and help desk service, and should be detailed enough to identify areas for potential improvements.
Penalties
It is possible that the ASP may fail to meet a specified service level during the length of the term. When examining a potential vendor’s agreement, companies should be sure to examine the liability section of the agreement. It should state how disputes will be handled, and any legal exemptions or repercussions for the ASP if service levels are not consistently met. Nonperformance penalties may include a rebate in maintenance fees or mandatory management meetings. If the ASP uses partners or third party vendors, any liability must be clearly detailed in the agreement in the event that either fails to deliver on their agreement with the ASP. This provides a uniform way for all disputes to be handled and protects the customer from poor service.
Training
It is essential that employees understand the technology and services provided and how to use them effectively. A qualified ASP will offer comprehensive training programs for the client’s implementation team, and to a group of employees who will be responsible for training other users. Some ASPs may also offer end-user training. Training programs should be instructor-led, should offer content specific to the company’s business processes, and should include manuals, handouts, assessments and course evaluations. An efficient training program will enable a company to get their new system up and running quickly.
Conclusion
Outsourcing agreements are not simple one-off deals. They are long-term partnerships. A project roll-out schedule must be finalized before signing a contract, and should include details on the implementation timeline, a communication plan, and procedures for dealing with deviations from the schedule Due to the evolving nature of the energy market, an ASP should provide flexible Service Level Agreements to support integration and customization, and should specify how changes in the agreement will be managed. To outsource successfully, it is essential that a company has a clear understanding of its business strategies, and is able to communicate them clearly to their new partner – the ASP. Setting design reviews, milestones and regularly scheduled meetings will help ensure the ongoing success of the outsourcing relationship.
About the Author
Anthony Haines is president of Enlogix Inc., which has offices in the U.S. and Canada and is the World’s largest outsourcer of energy industry customer information systems and associated services. Enlogix provides billing services to over three million North Americans in the energy industry. For more information, please visit www.enlogix.com or email enlogix_info@enlogix.com.
Choosing the appropriate vendor is essential to the success of any outsourcing initiative. In order to do so, a company must first understand its specific business needs and must also have the ability to communicate strategic organizational goals to a potential vendor. Because outsourcing arrangements require synergies between vendor and outsourcer to be effective, lines of communication must always be open. Companies must be prepared to ask the right questions of potential vendors from the outset, as well as being prepared to effectively manage the outsourcing relationship.
Finding a Vendor: Asking the Right Questions
Companies can ensure that they find an ASP solution that will work for them by asking pertinent questions early in the evaluation process. Key questions include:
Company and Customer History
- How long has the ASP been in business?
- How long has it offered its current services? How many client installations are currently active, and are they happy?
- What was the reason past customers terminated the agreement?
When searching for an ASP, it is vital to look for a service provider with extensive experience, established processes and long-term customers. These providers will have a better understanding of the industry and will have addressed many of the challenges facing companies in today’s energy markets. Ask for customer references (both current and former), and visit as many client sites as possible to obtain information on how the solution works in a real-world setting. It is important to ask existing clients about their satisfaction with the ASP’s performance including their plans to renew their contract at the end of its term. This will provide critical information on the ASP’s ability to provide reliable, long-term solutions.
Some outsourcing companies provide clients with annual, monthly and daily view Service Level Agreement Scorecards that allow for the tracking of performance. Clients can drill down to the monthly summary view to review and analyze the monthly view feature of their scorecard. This view allows them to track their daily progress and identify above/below average days and days of the week at a single glance.
Industry Experience and Knowledge
- Is the ASP knowledgeable and experienced in the utility industry?
- Is it involved in energy industry organizations?
- Is it in touch with key decision makers?
The ongoing evolution of the energy industry requires continual commitment by ASPs to help customers by anticipating new technology and service requirements in response to market changes. By choosing an outsourcer who specializes in the industry, customers can take advantage of in-depth industry knowledge in addition to the many benefits offered by the ASP model.
Technology
- How long has the software been available?
- What hardware does the ASP use?
- What operating system?
- Does the ASP have servers at its own facility?
- What are the system’s weaknesses and strengths?
- What modules are included in the ASP’s solution?
- What version is available?
Research shows that customers seldom use more than 50 percent of a system’s features and functionality. As a result, customers in the process of evaluating a new system may find it useful to speak with a client who is using the features and modules that are most relevant to their business. The will help the buyer to gain an understanding of the system’s fit with the company’s own business needs. Look for an ASP who is committed to evaluating and implementing new technologies to reduce future system expenses and to meet future technology demands. It is also a good idea to ask the potential vendor to provide information and diagrams on the system’s infrastructure – both current and future plans. Technical analysis of the provider’s infrastructure will ensure that the ASP can deliver services in a secure, reliable manner.
People and Partners
- Does the ASP employ people with the necessary skills?
- What level of customer support do they provide?
- Are the ASP’s partners well established?
- What are the details of their partnership agreements?
When evaluating any new system, it is important to meet the team who will implement and manage the outsourcing initiative. The customer and ASP need to operate as a team, making communication essential. By meeting the key players, companies ensure that the ASP is committed to using high quality, dedicated professionals and that their partners are reputable.
Service Level Agreements (SLAs)
- Does the ASP provide guarantees, in the form of Service Level Agreements, for system performance and the reliability, quality, and security of its services?
A Service Level Agreement is the contract between an ASP and its customer specifying services and service levels. According to META Group, only 20 to 25 percent of its IT clients actively use Service Level Agreements. Choosing an ASP that employs Service Level Agreements to manage the quality of its services allows management to minimize the risk of service level disputes, to obtain invaluable metrics to judge the services being provided and to ensure protection from a potential service lapse. Service Level Agreements guarantee that a company gets what it is paying for.
Customer Service
- Does the ASP provide a dedicated contact to manage the outsourcing relationship?
- Does the ASP provide customer support 24 hours a day seven days a week?
- What support services does it offer?
An established ASP will provide clients with a single contact – typically a Customer Relationship Manager - who is instrumental in managing the outsourcing relationship. They will also offer a 24-hour technical support help desk to deal with issues such as system availability and system response time concerns. It is important to look for outsourcers who have gone beyond traditional methods of support to offer online support services – typically in the form of a Web-based client center. Online tools allow customers to request technical infrastructure changes, obtain information and communicate with their dedicated ASP team, all with the click of a mouse. An online support center allows clients to report on and track the progress of customer service issues, from a centralized place, at any given time. It must be easy for customers to obtain help for the outsourcing arrangement to be successful.
Security
- What type of security solutions does the ASP provide?
- What provisions has it made for disaster recovery?
- Is the environment continually monitored and updated?
Prior to making a purchasing decision, a company must ensure that the ASP has appropriate safeguards in place to protect against unauthorized modification, destruction or fraudulent use of the system. The ASP’s infrastructure should provide redundancy to minimize impacts due to loss-ofavailability from hardware failure, and backups should be created and stored off-site to ensure swift recovery if necessary. Make sure to ask the provider to present a detailed overview of their data recovery planning and testing.
Ensuring a Successful Transition
The key to successful outsourcing is to have the delivery of services aligned with a customer’s business strategy. Once system functionality requirements are determined, the ASP and the customer must establish service level requirements.
Using a Proven Methodology
After finding an ASP with a mix of services and support that meet a buyer’s business needs, their next step is to ensure that the provider is able to successfully implement the new system.
In order to reduce the risks associated with implementation, it is wise to choose an ASP that uses a proven implementation methodology, preferably one that is based on previous client experience. The implementation methodology should cover the entire project spectrum from initial gap analysis and business process analysis to custom modifications and postimplementation support. Real-time project tracking is a helpful tool that enables project status to be analyzed at various levels of detail, with issues documented, escalated and resolved in a timely manner.
Complete a Gap Analysis
An essential component of any technology implementation, the Gap analysis process determines the presence of ‘gaps’ in function between a client’s business processes and the functionality offered by the solution. Because this phase is critical in making the transition from the legacy system, it is important that buyers ensure that the ASP has a proven methodology to identify gaps in functionality. At a minimum, the analysis should include job function mapping, test script planning and execution - for assessment of gap impacts on business processes and resulting modifications - implementation team training, and technical specifications for implementation.
This phase ensures a smooth transition by listing deliverables produced from the gap analysis, and by laying the foundation for project, conversion and interface planning. It also feeds into the design of business processes and workflows that will ultimately dictate the configuration of the new system. Successful implementations always contain a thorough Gap analysis.
Post-Implementation Support
Traditionally ASP contracts have a term of three to five years. Throughout that term, the ongoing success of the outsourcing relationship is evaluated using a number of different tools.
Setting Service Levels
The work doesn’t stop once the Service Level Agreement is in place. A company must have a thorough understanding of its business requirements in order to set service levels and determine the investment costs for the new system. Areas to consider when determining service level requirements include performance, availability, opening times, incident handling, security, continuity and change management.
The agreement requires constant discussion and renegotiation as the energy industry evolves. The Service Level Agreement should be tracked, reported and analyzed regularly. It is therefore essential to examine the ASP’s processes and review systems and how they track quality results. One way ASPs do this is through a series of reports that are combined into a single scorecard and made available to clients online. Reporting should address key areas including online availability and help desk service, and should be detailed enough to identify areas for potential improvements.
Penalties
It is possible that the ASP may fail to meet a specified service level during the length of the term. When examining a potential vendor’s agreement, companies should be sure to examine the liability section of the agreement. It should state how disputes will be handled, and any legal exemptions or repercussions for the ASP if service levels are not consistently met. Nonperformance penalties may include a rebate in maintenance fees or mandatory management meetings. If the ASP uses partners or third party vendors, any liability must be clearly detailed in the agreement in the event that either fails to deliver on their agreement with the ASP. This provides a uniform way for all disputes to be handled and protects the customer from poor service.
Training
It is essential that employees understand the technology and services provided and how to use them effectively. A qualified ASP will offer comprehensive training programs for the client’s implementation team, and to a group of employees who will be responsible for training other users. Some ASPs may also offer end-user training. Training programs should be instructor-led, should offer content specific to the company’s business processes, and should include manuals, handouts, assessments and course evaluations. An efficient training program will enable a company to get their new system up and running quickly.
Conclusion
Outsourcing agreements are not simple one-off deals. They are long-term partnerships. A project roll-out schedule must be finalized before signing a contract, and should include details on the implementation timeline, a communication plan, and procedures for dealing with deviations from the schedule Due to the evolving nature of the energy market, an ASP should provide flexible Service Level Agreements to support integration and customization, and should specify how changes in the agreement will be managed. To outsource successfully, it is essential that a company has a clear understanding of its business strategies, and is able to communicate them clearly to their new partner – the ASP. Setting design reviews, milestones and regularly scheduled meetings will help ensure the ongoing success of the outsourcing relationship.
About the AuthorAnthony Haines is president of Enlogix Inc., which has offices in the U.S. and Canada and is the World’s largest outsourcer of energy industry customer information systems and associated services. Enlogix provides billing services to over three million North Americans in the energy industry. For more information, please visit www.enlogix.com or email enlogix_info@enlogix.com.
