STRATEGY IT OUTSOURCING
parts of the company are still regulated, and others operate in competitive markets. It therefore has to prove that IT services procured by the regulated components are not being used to support the competitive divisions, giving them unfair advantage. “They have to be able to say how much each line of business is being charged for each IT service.” The other key driver for the new IT
operating model is flexibility, says White. Even the IT service management layer itself scales according to demand, he says. For one thing, the company hopes to
[cloud-based services]. So there’s a huge amount of potential, and with the right focus it could work, but it’s not without risk.”
GRID COMPUTING
When National Grid Plc signed its seven-year IT service management outsourcing deal with HP in April 2011, it was the first step in a far-reaching reinvention of the company’s entire IT operating model. The company was created in 1990, when the UK’s national electricity distribution infrastructure was privatised. In 2000, the company began to diversify, acquiring the country’s privatised gas distribution operator and a number of energy companies in the north-east of the US. In 2003, it outsourced much of its UK- based IT operations to CSC, but the US divisions continued to operate their own in-house IT departments. These various divisions often use their own systems, and today the company uses around 17,000 different applications. Now that the original CSC contract has
expired, National Grid is moving to a single, global outsourced IT operating platform. This will consist of a number of component services, each sourced individually, most of
which have yet to be awarded to any supplier. They include data centre services, network management, application development and management, email and collaboration, cloud hosting and more. Under the seven-year deal announced in April, HP will provide IT service management functions, including help desk support, incident resolution and supplier management, from its offshore facility in the Philippines (with some extra resources in Tulsa, Oregon, to meet data protection requirements in the US). According to Martin White, National Grid’s account manager at HP, the service management contract was awarded first because it will be the point of integration for all the other services. “They’ve always said they need the service management supplier to be able to manage onboarding and offboarding the other service providers,” he explains. That also explains why the contract is for seven years – longer than any of the contracts are expected to be, he says. The service management layer, White explains, sits across all the other services, providing a bird’s eye of view of how much IT is being consumed and where. One driver for this is regulatory compliance, he says:
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explore new geographical markets. “They want to expand into new parts of the world, but they also want to be able to move out of those areas if need be too,” White explains. “Their business depends heavily on the regulatory environment, and if the environment changes in a market they don’t want to be stuck there.” This underlines the need to be able to scale down IT operations at will. The other reason National Grid in particular needs flexible IT provision is that it is at the sharp end of the Smart Grid revolution. Its customers – energy producers, distributors and retailers – may soon require detailed, real-time data about the performance of its gas and electricity grids, which would require an altogether more complex IT infrastructure than it operates today. White says that the implications of Smart
Grid were not explicitly discussed as the HP deal was being negotiated, but he nevertheless says it is something that the National Grid is giving serious thought to. “They have a big programme around Smart Grid, but I believe that they are as uncertain as anybody as to what it really means to them as a company,” he says. The magnitude of that approaching
challenge is another reason why energy companies are keen to outsource conventional IT, White argues. “I think energy companies are going to have so much on their plates managing Smart Grid that they just want to get rid of all the normal IT stuff they’ve done in the past.”
INFORMATIONAGE APRIL2011 27
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