Navigant Research Blog

How to Make Outsourced AMI Work

Bob Lockhart — March 4, 2011

My previous blog discussed a trend toward managed or outsourced AMI services. To quickly refresh, Pike Research sees this as possible because many of the largest AMI projects have already been sold, assigned, and planned, leaving a large number of smaller AMI projects on the table. Where early AMI projects might boast of several million smart meters, we see many projects now in the range of 50,000 smart meters. For projects of this size, the economics may not justify a custom-designed, in-house managed system. Managed, outsourced, or even cloud-based AMIs could become logical choices for smaller utilities attempting AMIs.

There are several keys to successfully letting someone else manage your AMI. Among the most important:

  • Before anything else, a utility must have the will to outsource. Handing over control of a key technology to an outside firm requires a willingness to trust the external provider. This is a cultural change issue that must first be addressed within the utility. Beyond that, however, providers must be able to demonstrate their ability to successfully support the utility’s business, through reference clients, lab demonstrations, and pilot installations of a few hundred or few thousand Smart Meters.
  • Utilities must also be willing to change some of their internal business processes in order to better work with the vendor’s systems. Again this can be a cultural change issue inside the utility but often worth the trouble. Managed AMI services vendors usually provide the best service to clients that have requested the fewest modifications. The key for the managed service vendor’s success is to keep variance out of their environment. It is in the utility’s best interest to avoid being the exception to the rule. Also with AMIs having a life expectancy of 15 years or more, the cost to the utility for customizations to preserve internal processes can become significant over 180 months.
  • Utilities should pay particular attention to the “Entire Agreement” clause in the services agreement with the vendor. Any service that is not specifically stated in the agreement will not be provided to the utility, no matter what verbal expectations either client or vendor have expressed. All clarifications and questions of understanding must be resolved before the agreement is executed. Due diligence after the fact is normally of little value. In particular, utilities should identify the one service that is most important for them to receive from the vendor and ensure that it is clearly described in the agreement.
  • Outsourcing works best for a utility that has well documented processes, since automating a known quantity is usually much easier than automating and unknown quantity. However, many managed AMI providers also offer professional services to better understand and document processes before automation.
  • As with any automation project at a utility, it is critical that not only IT but also Utility Operations be included in the outsourcing project from the moment of its inception. Without proper Operations input it is much less likely that the agreement will accurately specify the services that the utility really needs.
  • The agreement must define the success of the services in terms of “Service Level Agreements” that can be measured and reported at least monthly. SLAs could include number of missed readings allowed, turnaround time from reading until availability to the utility, reporting metrics, etc. However, it is important that the SLAs not include every single thing that can be measured – only those that indicate the success of the service are necessary.

This list represents some key approaches that can help make a managed AMI service successful. Most important of all is a willingness by both client and vendor to work together – to develop a partnership relationship, not seller-buyer.

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