IDC Energy Insights’ latest annual survey of Western European utilities shows that utilities have positive expectations for the near future, with 86.7% of respondents indicating a positive business outlook, IDC reported.
The 2011 survey shows that utilities have a preference for internal spending over external ICT spending, primarily due to the uncertain economic conditions and the need to maximise the efficiency of internal IT departments, analysts said.
A new study based on the survey results shows that as of September 2011, Consensus Forecast’s expectations for GDP growth for the year were generally less optimistic than GDP growth for 2010, which reflects the current global economic uncertainty.
There is no doubt that the utilities industry is affected by industry trends that potentially have very strong IT implications, such as smart metering, intelligent grids, plug-in electric vehicles, active customer participation in energy markets, security of supply, energy efficiency, and environmental protection, analysts pointed out.
Even though there is growing excitement in the market about new technologies in these areas, utilities seem to be cautious when it comes to IT spending, facing pressure to prove ROI or TCO reduction before implementing any new initiatives, it was said. It is not surprising to see that the most important business initiatives to support IT decisions in the Western European utilities sector are reducing operational cost, followed by increasing energy efficiency, and driving product or services innovation.
Utility CIOs’ budgets are still subject to numerous influences, including cost containment, compliance with regulations, and maintenance of existing infrastructure, IDC said.
Around 80% of Western European utilities expect their total ICT operating budget to stay the same. While expected ICT budget increases for the next 12 months (16.8%) are still quite low in comparison to pre-crisis levels, utilities’ expectations are stable to leaning on positive.
The study shows, in general, that utility CIOs are facing significant challenges in determining how to make the most effective budget allocations. “On one hand, they are expected to undertake new initiatives to ensure the most productive alignment between business processes and IT to be effective and efficient. On the other hand, they are being asked to reduce their current expenses — a challenge given increasing hardware and software maintenance costs, along with employee expenses, especially if a radical redesign of the enterprise architecture has not been implemented recently,” analysts explained.
“Overall, the utilities industry in Western Europe appears to have positive expectations for the near future,” said Gaia Gallotti, senior research analyst, IDC Energy Insights. “Concerning the allocation of ICT budget between internal staff, telecom services spending, and external purchases of hardware, software, and IT services, utility executives indicate a preference toward internal spending over external spending, at 40.1% and 32.8% respectively. Utilities also indicate that a 27.1% share is dedicated to telecom service spending,” Gallotti concluded.