[News Item from Business Wire] Southern Company GAS, a subsidiary
of Southern Company (NYSE: SO), and Accenture (NYSE: ACN) have
signed a seven-year business process outsourcing agreement under
which Accenture will provide customer-care and revenue-cycle
activities to Southern Company GAS. The agreement, which could
be valued as much as $80 million, is designed to improve the
quality and lower the cost of the customer care and billing
services that Southern Company GAS provides to its more than
200,000 natural gas customers. The services covered under the
agreement include call center, billing, correspondence management,
transaction management, revenue management, collections and
exception processing operations.
Analysis
The agreement between Accenture and Southern Company GAS is
the latest sign that the outsourcing trend has begun to take
hold and gain some momentum in the utility industry. So what
are some of the drivers that are emerging with regards to the
outsourcing of customer care services of utilities? For answers,
UtiliPoint asked some of the leading outsourcers in the sector.
UtiliPoint asked providers of outsourced customer care what
trends they have seen and what the future holds with regards
to the outsourcing of services. Respondents had a wide-range
of views. Dwight Willet, President and Chief Executive Officer
of Accenture replied, “There are two primary trends shaping
the utility outsourcing industry today. The first trend is the
need for all companies to find innovative ways to reduce costs,
and to refocus on their “core” product offering.
More and more companies are discovering the once sacrosanct
area of customer care really can be done better and less expensively
by an outsourcer. The second trend is closely related. While
higher quality and lower cost can be achieved through outsourcing,
the decision of which provider to choose must be based on overall
value, and corporate objectives—not price alone. We are
finding more and more companies, which made early outsourcing
arrangements, based only on absolute cost, only to find their
quality expectations were not met.” Accenture is a business
process outsourcer performing services for several Canadian
utilities, including BC Gas, BC Hydro and Enmax. Southern Company
GAS is the company's first major outsourcing client in the U.S.
“The driver for considering an outsource offering is
usually the overall reduction of the cost of providing customer
care for the utility,” noted Douglas Thompson, CEO of
Open-c Solutions. “However, these same utilities are demanding
that the outsource solution must also provide the functionality
and flexibility to address the specific customer care needs
of each utility. This has forced many of the outsource providers
to simply 'reuse' whatever customized technology is already
in house at the utility and build the offering around a specific
level of service agreement. If this trend continues we will
replace expensive and customized in house systems, with expensive
and customized outsourced systems. In the end, the cost will
always be passed on to the utility. In other industries where
outsourcing is more prevalent, successful outsource providers
achieve economies of scale (increased functionality and flexibility
at a significantly reduced price) by leveraging a common technology
platform across multiple customers. I believe that once the
utility industry can choose a vendor that has built its solution
through this leveraged model, more utilities will choose to
outsource part or all of their CIS. Why not? The utility will
be getting fully functional, flexible, specific solutions at
a significantly reduced price." Open-c Solutions provides
both in-house and outsourced CIS solutions based on its Open-cIS
platform.
“As the regulated utilities look to drive cost out of
their operations, this presents Alliance Data Systems with an
opportunity to help unlock their distressed assets through creative
deal structures and front-end monetization of assets in exchange
for a long-term billing and customer care outsource contract”,
said Michael Juliano, Senior Vice President of Technology &
Professional Services for Alliance Data Systems (NYSE: ADS).
“We're excited about this market—we've had some
early success and we fully expect this to continue.” Alliance
Data Systems is a single source provider of outsourced billing
and customer care solutions to the regulated, transitioning
and deregulated energy industry, serving millions of utility
customers. Alliance manages outsourced billing and customer
care business processes for utilities. Alliance recently renewed
a business process outsourcing agreement with Georgia Natural
Gas.
“The momentum toward outsourcing is building as utilities
gain a better understanding of the benefits of this model and
see their peers experiencing success with outsourced services,”
said Jamie Biddle, CEO of Orcom. “There are several trends
driving this change. First, the cost and effort of continually
upgrading a technology infrastructure is a drain on corporate
resources. Utilities are realizing that an outsourcer can significantly
reduce the capital expense required to establish and maintain
an in-house customer care and billing infrastructure. For example,
one of our clients recently conducted a detailed analysis of
developing its own customer care infrastructure versus their
existing ORCOM solution. Their objective research led them to
conclude that the outsourcing approach was significantly less
expensive. Second, many companies are coming to terms with the
reality that their in-house resources are already stretched
thin and cannot support vital new services such as web-based
customer care. Third, the economy is contributing to a rising
demand for revenue management services. With a toolkit of best
practices honed over years of experience, outsourcers bring
a fresh approach to back office processes such as billing and
collections.” Orcom provides outsourced customer care
to utilities in North America.
“Outsourcing customer care is powerful way for utilities
to provide best in class customer service and manage costs,”
said Kobus Van Der Westhuizen, Vice President at PRC Energy.
“Outsourcing reduces or eliminates the need for capital
expenditure. What was once a capital expenditure and ongoing
fixed expense becomes a variable expense when outsourcing. With
PRC, a utility company can easily adjust their expenses as their
business needs fluctuate. Outsourcing reduces or eliminates
the need for the capital expenditure associated with constructing
and managing an in-house customer service center. Ongoing fixed
expenses become a variable expense and you can easily adjust
these expenses as business needs fluctuate. Outsourcing also
provides a company with the latest and greatest customer service
technology, at a fraction of what it would cost to purchase.
Additionally, by partnering with an outsource provider, a company
can leverage the best practices of an expert, who has designed,
developed and fine-tuned the management practices to provide
the most effect and efficient service to customers.” PRC
Energy provides outsourced services that include credit &
collections and IVR service offerings.
While each executive had a different take on the subject of
outsourcing, there was one theme that each one highlighted.
That was the issue of cost reductions. This is not entirely
surprising given the fact that many investor-owned utilities
in North America currently have credit worthiness issues. As
a result, I expect outsourcing firms to increasingly be given
the opportunity to demonstrate that they can indeed lower customer
care costs without lowering the level of customer service.
