Assessing the impact of outsourcing in the electricity network industry

Abstract

Purpose

Electricity networks in Europe have been experiencing drastic changes driven by deregulation. The old monopoly businesses do not always find it easy to make the required improvements, and some are outsourcing the functions to private service providers. Outsourcing is a fairly new phenomenon in electricity distribution, however, and there are few studies on the subject. The purpose of this paper is to narrow the gap in assessing the affecting factors and the impact in a case involving outsourcing the underground cabling functions of a publicly‐owned network company to a private service provider.

Design/methodology/approach

The study is based mainly on qualitative interviews and an expert group session set up to analyse the acquired data. The affecting factors and the outsourcing impact levels were determined in the group discussion, and analysed in accordance with the risk/benefit framework developed, taking account of both the short‐ and long‐term aspects.

Findings

Outsourcing in the electricity network industry should be assessed holistically from the perspectives of the outsourcing company and the service provider. The results of outsourcing depend on the function in question, and there are wide differences in how it affects different elements of the organisations involved. A risk/benefit framework provides significant insights into the impacts and increase understanding about the causalities of the phenomenon and the goals of the partners.

Originality/value

The paper provides new knowledge with regard to electricity distribution by illustrating the affecting factors and the impacts of outsourcing. The presented framework gives a holistic picture of the impacts in an analysis of both parties' viewpoints and the short and long time scales in the relationship.

Citation

Vilko, J. (2013), "Assessing the impact of outsourcing in the electricity network industry", Baltic Journal of Management, Vol. 8 No. 1, pp. 27-44. https://doi.org/10.1108/17465261311291641