Case February 11, 2016

Outsourcing releases energy for core processes

As the entire sector is undergoing a profound change, with pressures for change coming from both within and outside the sector, the company has to re-think its strategy. Finnish energy company Loiste Oy has decided to seek cost efficiency and improved competitiveness by a bold reform of its methods of operation. One of the biggest changes was implemented when Loiste outsourced its financial and invoicing functions and transferred the associated applications and employees to Enfo.

From Loiste’s perspective, two issues have become the biggest problems in the energy sector – albeit they are also driving change. The first of them is global climate change, which has also affected Finland: for example in Kainuu where Loiste is based, the temperature has now been 12% higher than normal for three years in a row. In turn, the changes in temperature affect the demand for energy, i.e. the volume of sales directly, and therefore also the net sales and financial results of energy companies. Another significant change has taken place in the production of energy, where both negative and positive effects can be seen, depending on the region and technology.

“The price has been really low at the Electricity Exchange, which has a positive effect on sales but a negative effect on production. The low price does not cover the production costs, which is why a few condensing power plants have been shut down. This has resulted in a lot of debate regarding security of supply in Finland, because we have to rely on imported electricity when the temperature drops well below the freezing point — the capacity of Finnish power plants is insufficient as a result of running down these power plants,” says CEO Markku Ryymin of Loiste.

“When the price of electricity decreases, price competition naturally intensifies. Furthermore, all energy companies must exercise strict cost control in the distribution of electricity. Together, these factors resulted in our starting to actively seek a change in our methods of operation in order to improve our competitiveness and cost efficiency.”

Concentration on core processes increases productivity

Strong partnerships are not a new thing to Loiste, because the company’s strategy is based on the aim to concentrate on the company’s core activities, i.e. the production, distribution and sales of energy. The company is prepared give up certain support functions when it finds a suitable partner. In November 2015, the service processes of Loiste’s financial and invoicing functions were transferred to Loiste with their associated applications. At the same time, Enfo establishes a new service branch in Kajaani where 10 Loiste employees moved as existing employees. The transfer of functions and personnel to the new employer went smoothly, and the CEO is pleased with the fact that the new partner is also capable of handling HR matters with style.

“I am glad that our employees can now have more varied and challenging duties at Enfo where these services related to financial administration constitute part of the core business. We are keeping the CFO and the controller function, which can now fully concentrate on monitoring the finances and related decisions. In other words, we set our sights forward, not back,”, Ryymin says.

Financial administration services become increasingly digital

Detailed calculations were made at Loiste before the outsourcing decision. The company estimated that outsourcing will bring savings of EUR 1.5 million in five years, a significant enhancement of operations for Loiste. The savings are achieved because Loiste and Enfo’s other financial services customers share a common service centre and common advanced data systems which means that the service can be produced for all customers more efficiently and at a lower cost.

Enfo is also assuming the responsibility for more efficient production of services for Loiste. With the service, Enfo will enhance the customer’s invoicing, flow of information and debt collection and will produce better reports in support of the management. Enfo will also be responsible for developing personnel, processes and concepts. The aim is to reform Loiste’s financial management into an efficient service utilising digital possibilities e.g. for e-invoicing, automatic connection services and analytics in support of management. In the future, productivity of the service centre will also be enhanced with means of software robotics.

About Loiste

Loiste is a Finnish energy company whose core operations include the production, distribution and sales of energy (electricity and district heating). Loiste is renowned for its good service, and it has almost 200,000 satisfied customers around Finland. Loiste has offices in Helsinki and Kajaani.

Net sales in 2015: EUR 149 million
Personnel: 62 employees