November has been a good month for Dallas, Texas-based
Alliance Data Systems: The company signed two major business
processing outsourcing deals.
On Nov. 8, 2004, the company signed a 10-year agreement
with Entergy Solutions to provide comprehensive billing
and customer care solutions, demonstrating an ability to
supplement a successful acquisition strategy with organic
sales growth. Shortly thereafter, on Nov. 15, the company
signed a 5-year agreement with Direct Energy to provide
customer information system services and customer care to
Direct Energy's Dallas and Houston residential and small
business customers.
Under the terms of the agreement with Entergy Solutions,
Alliance Data will be the exclusive provider of billing
and customer care services for the company's expanding footprint
of deregulated business and residential accounts in Texas.
ADS will also support all of Entergy Solution's future customers
on a consolidated billing platform. At Entergy, Alliance
Data displaced a number of other business process outsourcing
service providers competing aggressively for the business,
including Accenture.
For Alliance Data and Direct Energy, the new 5-year agreement
is a significant expansion of an existing relationship both
in time and scope. UtiliPoint® International views this
as being especially significant since Alliance Data now
joins the exclusive club of business process outsourcers
that have renewed an existing customer and at the same time
will migrate an existing customer to another common technology
platform. In fact, Direct Energy's CIS accounts will be
consolidated on a common Alliance Data Systems platform
by late 2005 and Direct Energy's customer care center operations
for Texas will be located in Alliance Data's facility in
Dallas.
UtiliPoint® sees these two significant business process
outsourcing deals as unequivocal proof that top tier retailers
are taking a hard look at business process outsourcing and
finding that with the right partner—an entity that
has made a commitment to the market and demonstrated scale
and staying power—outsourcing provides not only many
financial advantages, but also yields enterprise value in
the form of operational and business efficiency that can
catalyze and accelerate business opportunity.
This author has long asserted that at the end of the day,
the financial aspects of business process outsourcing are
only part of a total successful outsourcing equation. A
fairly negotiated, highly detailed and best practices-based
relationship approach makes up the other significant part
of outsourcing partnership mathematics, wherein one utility
plus one outsourcing partner ought to yield a third kind
of utility business that is operationally efficient, provides
top shelf customer service, and is capable of reaching its
own business development goals on an accelerated timeframe.
UtiliPoint® research shows that although there will
only likely be a few big CIS outsourcing or CIS replacement
deals over the next year, the pace of outsourcing is accelerating.
Additionally, outsourcing deals are for the first time truly
being contemplated on a different set of criteria than more
conventional software license deals.
For example, UtiliPoint® has found that utilities seeking
outsourcing partners are asking much more sophisticated
questions about conversion methodology, service level agreements,
and opt-out clauses than ever before. Moreover, from data
collected in a recent review of the North American CIS outsourcing
market, UtiliPoint® has concluded there is likely to
be continued shakeup and consolidation among independent
software vendors.
Despite this anticipated change on the software side of
the market, meter-to-cash business processing outsourcing
arrangements are one way in which utilities can share the
risks of advanced technology deployment with a partner and
further mitigate financial, technological and operational
risk by choosing a partner that has proven delivery capability.
