marketing buzz: outsourcing the customer experience

Meg Matt, contributing editor

At a “Voice of the Customer” conference I attended in September, the presentations ranged from market research, customer segmentation and brand strategy to improving call center performance. One of the presentations that really got me thinking was a case study of TXU’s outsourcing collaboration with Capgemini.

While many utilities may never consider outsourcing their back-office operations, TXU Corp. jumped in with both feet when it announced its joint venture with Capgemini in May 2004. Called Capgemini Energy, the limited partnership provides business process services and information technology solutions to TXU, with a plan to offer similar services to other energy companies in the future. Two months after the announcement, approximately 2,700 TXU employees officially became employees of Capgemini Energy to provide information technology, call center, billing, human resources, supply chain and accounts payable, and finance and accounting services to TXU.

Outsourcing back-office processes has been successful in other markets, but it’s a relatively new concept for utilities. In the last 10 years or so, a handful of U.S. utilities have taken the outsourcing path, including Entergy, which partners with SAIC, and PSEG and PPL Corp., which partner with Electronic Data Systems Corp. (EDS).

Capgemini cites the following issues as driving customer care transformations:
“- cost reductions;
“- needed investments in technology;
“- increased expectations by customers;
“- a desire for flexibility and scalability;
“- a renewed focus on optimizing core assets;
“- competitive pressures;
“- competition for investments in customer care improvements with needed investments in core business functions;
“- current processes and procedures lagging behind best-in-class call center practices; and
“- a lack of quantitative analysis to understand the total financial impact of customer care

TXU takes the leap

Customer-facing employees have always been the voice of the company, and few utilities are eager to give up that control. So why did TXU take the leap?

According to Ellen Krohne, director of outsourcing services for Capgemini, TXU had an imperative to improve its business support functions in both cost and service. “TXU faced some distinct challenges,” Krohne said. “They wanted to achieve the advantages of scale, they needed to continually refresh their technology applications, and they wanted to focus more on their core businesses.”

In an interview in the May/June 2005 issue of Electric Light & Power, TXU Corp’s president and CEO C. John Wilder cited improved customer services and deregulation as the primary drivers for change. “I came here with specific goals and, in 12 short months, we have improved our customer service-cutting the average speed to answer from upwards of 300 seconds to below 15 seconds-sold non-core business assets, internally restructured the company and restored shareholder value.”

Wilder also pointed out that running a retail business requires slimmer margins and leaner competition. It means reducing costs while improving customer service.

According to Krohne, the transition worked remarkably well. “Both parties were committed to making this work,” she said. “We established clearly defined service level agreements that stipulated performance standards and benchmarking guidelines. TXU customer service employees had always operated as a cost center; we changed the culture to one of operating as a revenue center. This proved to be an energizer for the staff.”

a win-win strategy

With about 15 months of operating history under its belt, TXU Energy continues to improve the customer experience. In the second quarter of 2005, the average speed to answer customer calls dropped to 12 seconds as compared to 27 seconds in the prior-year period. Customer time in the integrated voice recognition system (IVR) averaged 78 seconds, down 21 percent from the prior-year period, and the number of Public Utility Commission of Texas complaints fell by 5 percent from the prior-year period. The advantages of TXU’s outsourcing are clearly demonstrated in these figures.

Will more utilities follow in TXU’s footsteps? As the country continues to move toward deregulation, outsourcing could be an innovative way to increase a utility’s competitiveness while improving customer satisfaction.

Summing up the experience, Wilder noted, “It was a no-brainer for us, and I think we will continue to see strong results from this deal.”

Meg Matt is founder and principal of The Matt Group, an integrated marketing communications firm specializing in the energy industry. She can be reached at 480-704-0897 or at

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