Outsourcing of Industrial Water Systems a Viable Option

Oct. 1, 2002
According to Dun & Bradstreet's Barometer of Global Outsourcing, worldwide outsourcing expenditures escalated from $116 billion in 1999 to more than a trillion dollars in 2001.

By Joe Tirreno and Marie Fortier

According to Dun & Bradstreet's Barometer of Global Outsourcing, worldwide outsourcing expenditures escalated from $116 billion in 1999 to more than a trillion dollars in 2001. Evidently, the outsourcing wave is on the rise.

Businesses are always looking for new venues to improve shareholder value; outsourcing may be one way to achieve that goal. Outsourcing allows for select business activities to be managed by an external resource with specific expertise, thus allowing a company to better focus on its core business. This resource can help improve efficiencies, reduce operational costs, and better manage risk, while offering service guarantees. In these cash constrained times, the same outside resource can also be responsible for the capital expenditure.

The decision to outsource is strategic. Ultimately, a company must decide if outsourcing fits into their culture, and then assess which areas can be outsourced. Categorizing activities, systems or processes as core or non-core to the business should assist in the decision making. Generally, non-core activities are more readily outsourced. The challenge is identifying those activities in need of change or improvement, as well as those that have the greatest probability of being successfully implemented.

How does industrial water management fit into this overall outsourcing picture? Water and wastewater treatment systems typically are non-revenue generating, non-core assets for most companies. Personnel layoffs over the last several years typically have left only a skeletal staff to manage water and wastewater systems, usually resulting in less efficiency. Without adequate resources, the job of collecting and managing data has also become secondary. Unfortunately, investment is often routed to more revenue generating activities leaving little remaining for equipment upgrades and enhanced operations. Operations suffer and costs can soar over time. Sound familiar? These can be compelling reasons when considering outsourcing as a business option.

In essence, when water systems are not operating properly, there is a definite opportunity to turn water management into a clear business advantage. Outsourcing can provide this venue, which is why more industries are moving in this direction.

Municipalities and government agencies have been outsourcing water treatment systems worldwide for decades. In the industrial market, outsourcing has progressed from facilities management and maintenance to more complex utilities' management. The market opportunity for outsourcing the management of industrial water systems in North America may reach $6 billion by 2010. Outsourcing of water and wastewater systems is definitely on the rise.

When outsourcing of water systems becomes an option, companies should consider design and construction, plant upgrades, operations and maintenance, and equipment and technical support services. Further considerations include the process water supply, water treatment reuse and recycling, process chemicals, waste management and project financing. The final decision is ultimately dependent on the site's specific needs and on the water systems under consideration.

If true benefits can be quantified and achieved, what can one expect? Companies should see a lower total cost of operation and maintenance resulting in improved profitability, better overall water management, greater reliability of quality supply, and more effective management of environmental risks. Other significant benefits include a more productive use of capital, additional people available for core business functions, and a better business focus. If the reward outweighs the risk, outsourcing can be a viable option and a definite business advantage.

Authors: Joe Tirreno is Vice President, Business Development, for Ondeo Industrial Solutions. Marie Fortier is the company's Strategic Market Manager. For more information, contact Marie Fortier at [email protected]; Tel: (630) 305-2098.

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