As traditional utilities embrace decentralization, the journey requires more than just adopting new field technologies. According to McKinsey’s Global Energy Perspective 2024 report, the global energy transition is entering a new phase of rising costs, complexity, and increased technology challenges. This transition requires not only technological solutions, but also a comprehensive strategy. McKinsey notes that significant grid infrastructure limitations exist, with transmission and distribution investments needing to grow approximately threefold by 2050 to accommodate renewables integration and meet growing energy demand. Having guided utilities through financial and operational transformations for the past 15 years, I’ve observed that successful implementation requires a plan focused on processes, the workforce, and systems.

As companies embark on their path to transformation, it must be driven by a value case, with business strategies and transformation objectives aligned with the utility’s pursuit of decentralization. The first step is defining business objectives and connecting them to operational strategies. While operational optimization is often viewed as decentralization’s primary goal, underlying back-office processes provide the essential foundation for successful initiatives. Deloitte’s 2025 Power and Utilities Industry Outlook confirms this insight, highlighting that electric power utilities are responding with record capital expenditures reaching $174 billion by the end of 2024, with 42% allocated specifically to transmission and distribution systems.

Redefining financial processes comes next, as many existing ones were designed for centralized models and supported by increasingly outdated legacy systems. Simply digitizing these processes often means digitizing inefficiency. Instead, utilities must reimagine financial management in a decentralized environment, asking fundamental questions about which financial decisions should be made where and what information is needed to support them.

Within these financial processes, advanced analytics capabilities are essential for successful decentralization. The transformations that deliver the greatest value leverage financial analytics to make more insightful decisions about capital allocation and operational expenditures. This requires evolving beyond siloed financial reporting toward integrated business intelligence solutions. By seamlessly connecting operational metrics with financial outcomes, a unified view that supports decentralized decision-making is created.

The fundamental approach to solving these challenges relies on establishing the source for enterprise truth. Many companies struggle with stating the answer simply. They build data models and architecture based on convenience, creating multiple versions of the truth, which are just-in-time solutions. I help the organizations see this discrepancy by bringing their field operations and corporate organizations to terms with accepting this misaligned strategy. I do this by showing the real data defined by the value drivers.

In one case, the organization decided to move away from centralized warehousing and established more focused “higher-turnaround” warehouses for executing maintenance work. However, to offset the cost associated with the real-estate expenses, they adopted a modern inventory solution to help them transfer inventory for only what was needed in each site.

The financial complexity extends to workforce considerations. The skills needed for modern back-office operations differ significantly from traditional utility accounting and financial management. Financial analysts who once focused on basic cost tracking must now become proficient with advanced analytics and predictive modeling. Finance teams trained in traditional capital planning must adapt to more dynamic, data-driven approaches to investment prioritization.

A sustainable decentralization strategy begins with reassessing financial goals. Many utilities I work with discover they’ve been overinvesting in certain highly visible operational areas while underestimating the financial value of back-office optimization. These financial goals must translate into departmental objectives with measurable targets that balance short-term returns with long-term sustainability.

Operationalizing key financial metrics into back-office systems enables spend reduction. Metrics like average cost per job type, average cost of inventory by item, turnaround time on purchase orders, and supplier qualifications enable visibility into common tasks. These incremental 1% to 2% improvements quarterly drive significant increases over a five-year period.

Operations look at decentralization to reduce their carbon footprint and enhance longevity of their services. Corporate looks at reducing unanticipated cost overruns, which rely heavily on periodic financial analysis. Marrying these two is the underlying back-office operations system, which translates the meter readings into account and entity-level insights through a scalable model. This enables decarbonization through optimized operations, reduced cost for network hardware and information technology (IT) systems, and reduced spend on overhead within the organization.

Grid modernization requires modern back-office systems to handle not just data volume, but also maintain data quality and integrity. In modern utilities powered by analytics, complex tasks like rate negotiations with generation companies can be completed in minutes through adaptive models that align consumption parameters with market needs.

With several aspects of operations and processes impacted to achieve efficient decentralization, this makes for a long journey for any enterprise. While utilities lag behind other industries in adopting modern enterprise solutions, this delayed transformation offers a distinct advantage: today’s back-office systems have evolved significantly over the past decade, delivering unprecedented scalability and reliability. Utilities can now leapfrog legacy challenges by implementing more mature technologies that have been refined through real-world application. The systems have matured through lessons learned over time. Advancements in chips and network infrastructure further reduces the carbon footprint of these systems, and the capabilities offered are scaling and adapting to the innovations in technology.

The greatest challenge utilities face isn’t technological but rather taking decisive action to initiate this necessary disruption. When value drivers are clearly defined and aligned across the organization, what once seemed like an insurmountable transformation becomes a structured path to modernization that delivers measurable returns at every milestone.

—Kunal Saxena is a senior management professional with more than 14 years of experience in the energy, power, and utilities industry, specializing in optimizing business processes to reduce operational costs. As an advisor to C-suite executives on technology innovation and industry trends, he provides leading design and process recommendations to drive true operational transformation that prepares companies for future technologies like generative artificial intelligence (AI). He is particularly focused on helping organizations address key industry challenges, including decarbonization, utility decentralization, and creating efficient service delivery models that enable companies to scale through merger and acquisition (M&A) activities.