Business Focus is a weekly column providing at-a-glance statistics and commentary on spending priorities and trends in particular sectors. This week we look at utilities companies.
Spending on technology among large electricity, gas and water suppliers is slightly above the national average on a per-desktop basis, at £10,296 a year, compared with a UK-wide business average of £8,455.
And the pattern is similar among smaller utilities firms, with an average spend of £3,551 per desktop, up slightly on the UK average spend among SMEs of £3,132.
In fact, spending on IT among utilities closely matches the UK-wide average in all but one area. The clear exception is spending on IT services.
Large utilities firms spend an average of £4,754 a year on IT services – more than 50% higher than the UK average of £3,052 – and among smaller utilities the differential is even more marked, being 70% higher at £1,446 against £850 among all UK SMEs.
This emphasis on outsourcing illustrates the extent to which utilities companies are well-served by an offshore outsourcing market that is capable of providing horizontal, generic processes such as bill payment processing very cost-effectively.
For utilities firms of all sizes, billing and payment processing is a core IT function that few have retained in-house.
Utilities are also frequent users of workflow, project management and planning systems to keep track of their project- and field-based working practices.
The other key driver for spending on IT services among utilities has been the pressure from regulators over the past 15 to 20 years to reduce costs. This has prompted most to take tried and tested cost reduction and efficiency steps, including reducing operating expenditure, in particular fixed staffing costs, by adopting outsourcing models.
Among other accounting benefits, this has enabled utility companies to restructure their balance sheets to outperform cost of capital targets and develop alternative approaches to asset management.
The analysis is based on Computer Weekly’s database of more than 60,000 IT budget holders, twice yearly user IT expenditure surveys, CBI/Kew senior executive surveys, government surveys, government demographic data, HM Treasury economic forecasts and Cambridge Econometrics industry sector forecasts.
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