Regulatory compliance efforts and investments in grid
reliability and security systems should help fuel a marginal
increase in IT spending among big energy companies this year,
according to research released by Meta Group.
The 5% IT spending gains for power companies - calculated as a
percentage of revenues - is largely in line with 3% to 5%
technology spending increases previously forecast for other
industries this year by Meta and other research firms.
The Meta estimates are based on a survey of 37 power companies
in North America, the UK and Australia which it conducted at the
end of 2003.
The average size of companies surveyed was $4.7bn in annual
revenue, said Zarko Sumic, an energy industry analyst at Meta
Group.
Despite the moderate IT spending gains forecast by Meta,
the emphasis on cost-containment strategies among energy-industry
IT departments will continue to linger.
Energy IT departments "will be charged with managing costs and
delivering added functionality, while improving system efficiency
and reliability", Sumic said.
Efforts by utilities to optimise their IT activities this year
further will be driven, in part, by a desire to improve operational
and business-process efficiencies between siloed power generation,
distribution and retail divisions.
Cost containment should also result in a "significant" increase
in IT outsourcing among US utilities, although US power companies
will continue to lag behind their peers in Canada, the UK and
Australia in terms of the percentage of IT activities
outsourced.
That is largely because US utilities have not been as quick to
adopt IT asset management models, Sumic said.
US power companies, which have been reluctant to outsource
significant chunks of their IT operations, are most likely to begin
farming out activities such as infrastructure maintenance and
network management, followed by application support.
But while a growing number of companies in industries such as
financial services has jumped on the offshore outsourcing bandwagon
to reduce technology and labour costs, US power companies face
regulatory concerns, said Sumic.
"A lot of the chief information officers I'm talking to have
been hands-off on offshoring," said CD Hobbs, a senior
vice-president in Meta Group's Executive Directions consulting
practice.
Their reluctance is being fuelled by proposed federal and state
legislation aimed at restricting offshore-outsourcing activities,
particularly when there are security implications of foreign
workers who have access to US customer accounts, said Hobbs.
But Roger Gray, chief information officer at PG&E, said US
power companies are merely casting homeland security concerns as
"the bogeyman" since the nationwide rancour and political turmoil
over evaporating US IT jobs "is more of a public-policy issue".