“Outsourcing” as we know it today traces its modern roots back to the business climate of the 1970s and 80s.  It was around this time that many organizations turned to outsourcing as a way to remain competitive in a global economy.  During this time, the mindset was that in order to compete, organizations must focus on their core service offerings.  All additional services that were considered critical but not “core” were outsourced.

Since then, the outsourcing movement has picked up steam in nearly every kind of organization, from government agencies to private-sector companies.   Today, many companies – from commercial real estate and hospitality organizations to medical facilities and government entities – outsource essential (but non-“core”) services such as billing, payroll, customer service, and technical support.  Despite this shift toward outsourcing, many organizations have shied away from outsourcing electricity procurement and energy management.

There are a few key reasons for this reluctance:  Some organizations are concerned that outsourcing energy management and electricity procurement to an energy consulting firm will add cost and time to the process.  Others simply feel that energy procurement is something that should be handled in-house.

But in many cases, outsourcing energy procurement can be a great choice that saves both time and money.  When does it make sense for an organization to outsource the management and procurement of energy?

Here are three signs that it might be time for your organization to discuss outsourcing.

1.  Lack of Personnel: When you don’t have the staff available to devote the necessary time to energy procurement or management, outsourcing almost always makes sense.  Although in theory you could simply hire more people to do the job, the reality is that the funds needed to hire those people never seem to materialize.  You’re in the position of “doing more with less” – which is not the ideal way to handle energy procurement.

If you don’t have the time and talent to devote to monitoring the market and do a thorough competitive analysis, it’s all too easy to simply stay with the local utility or rely on your current supplier to continue providing service.  Any option that does not involve a full, competitive procurement process ultimately leads to a less desirable price and a higher utility budget.

2.  Lack of Resources: Let’s say that your organization’s purchasing department has the personnel available to conduct a fully competitive procurement for energy services.  That’s a step in the right direction – but there’s more to energy procurement than personnel.  You also need to know whether the department has the resources necessary for maximum success.

In terms of energy procurement, the most essential resource is daily, direct access to the wholesale energy markets.  More than any other factor, it is the wholesale price of energy that directly affects the retail price your organization will pay.  Therefore, to increase the likelihood of contracting at a favorable time, it is critical to actively monitor the wholesale market on an ongoing basis.

If your organization does not have the resources available to directly monitor the market and keep a close eye on the factors that may cause prices to rise or fall from day to day, outsourcing may be a good choice.

3.  Lack of Energy Market Expertise: So, what if your organization has both the personnel and the resources necessary for the somewhat time-consuming task of procuring energy?

The next step is to determine whether the staff has the expertise necessary for bringing these pieces together.  This is critical, because even if you have all the right tools, you have to know how to use those tools to ensure success.  Ideally, the person coordinating the procurement should be an expert in the field of energy – and he or she should have a thorough understanding of both the wholesale and retail markets and many years of experience advising users.

Outsourcing Brings the Energy Experts “In”

So, should your organization outsource its energy procurement?

The bottom line is that in order to reduce energy costs and get the right price, at the right time, under the best possible terms, you must have dedicated staff with a high level of expertise in the energy sector.  You also need the resources necessary to access, understand, and interpret movement in the wholesale market.

If you have all of these pieces in place, it’s probably safe to keep your organization’s energy procurement and energy management services in-house.  But if you lack even one of these key components, it may be time to consider outsourcing.

If your organization has concerns about the cost of bringing in the experts, remember that it’s all about “return-on-investment.” By outsourcing energy procurement to an experienced company, you’ll more than likely make up for it with lower energy costs and more favorable contract terms.

And when that happens, everyone will agree that it’s definitely in to outsource energy.