Utility giant to save £100m with SAP

London Electricity (LE) Group expects to save up to £100m a year with a new company-wide SAP implementation across human resources, payroll, procurement and finance modules.

LE Group, which has an annual procurement budget of between £700m and £800m and staff costs of between £200m and £300m, needs to consolidate IT systems following the acquisition of rival electricity firm Seeboard last July.

Bernard Cottrant, group technology and business performance director at LE, told vnunet.com: "It is early days, and we don't have a defined target for cost savings, but I'm expecting to save between five and 10 per cent of our overall costs over the next two years. SAP is certainly a way to get control over procurement."

LE Group will today put the multimillion pound SAP enterprise resource planning implementation project out to tender.

It will replace two different versions of the OLAS financial application - one mainframe and one running on Unix - as well as different payroll systems across LE Group and Seeboard.

Cottrant admitted that the IT impact of the Seeboard acquisition had been huge.

"The business case for SAP shows a payback period of three years, counting only the hard savings such as shutting down some systems and not having to integrate others," he explained.

"We have not taken into account the soft savings, such as unifying processes or getting more consistent management data across the group."

But LE Group will not be using SAP's utilities-specific billing application, believing that its Genie project to develop its own bespoke application has more to offer.

To create Genie, LE Group added a Siebel customer relationship management front end to two existing legacy gas and electricity billing applications using a data hub for queries.

The initial phase of the project was completed in December.

Cottrant indicated that the company will use an existing contract between Seeboard and IT services company Accenture to help migrate between 1.5 and two million Seeboard customer records by the end of the year.

"The Seeboard migration is a huge project and it's a year-long project, but we already did it when we acquired the SWEB supply business two years ago, and that was a success," he said.

Phase two of the project, to offer customer segmentation and targeted sales campaigns using Siebel, is due to go live before the spring.

In addition to Accenture, LE Group works with implementation partners Cap Gemini Ernst & Young, Xansa and Deloitte & Touche.

But Cottrant warned that all partnerships, and the group's outsourcing strategy, would be reviewed following completion of this year's systems integration projects.