Northern Electric has signed a £30m, five-year outsourcing deal
with IT services company Logica in a bid to reduce costs and help
it assimilate the distribution business of Yorkshire Electricity,
which it acquired last year.
Although it is a straight IT outsourcing contract, the deal could
be extended to include business process outsourcing (BPO) in
future.
Eric Connor, president and CEO of Northern Electric, said the deal
was part of a drive towards improving its business processes and
Steve Burnett, Logica's director of energy and utilities, also
hinted at a move into the business process field.
"There is no BPO in this deal but we expect to work with Northern
to identify business processes for improvement," said Burnett.
"There's a lot of duplication at the moment," he added.
Leveraging its existing customer base to win new BPO deals looks
set to become a good moneyspinner for Logica. Last week the company
announced a £16m BPO deal with residential conveyancing firm
Countrywide Property Lawyers, following on from a £10m IT
outsourcing deal signed in August.
"Although this contract is relatively small, Logica has got itself
into the pole position to win some bigger deals down the line,"
said outsourcing expert Robert Morgan.
All utilities are looking to cut their costs, said Morgan, and
outsourcing functions like billing and HR was one way of doing
this.
"It's not that difficult to turn an application management deal
like this into a BPO and that's an area I'd expect Logica to go
into with Northern Electric," added Jamie Snowdon, a research
director at analyst firm IDC. If Logica does a good job it will be
"highly likely" to win any contracts for HR and payroll, he said.
Logica will manage Northern Electric's IT infrastructure from its
service centres in Nottingham and Bridgend, providing an integrated
IT service, including helpdesk, technical and applications support
and desktop maintenance for over 2,000 users.
The chief aim of the deal is to provide a common IT platform across
the two companies, set up a single helpdesk and drive application
consolidation.
Fifty people from Northern will move to Logica under Tupe
regulations in the first quarter of 2003.
Northern Electric is the second largest electricity distribution
business in the UK and is a subsidiary of MidAmerican Energy
Holdings.