Kay FuhrmanDirector, Business Development

Alliance Data Systems

 

The Benefits of Business Process Outsourcing

                                                               

Reasons Utilities Outsource

2%

2%

5%

5%

6%

13%

32%

35%

0% 5% 10% 15% 20% 25% 30% 35% 40%

Foster Innovation

Grow Revenue

Improve Quality

Conserve Capital

Increase Speed to Market

Create a Viable Cost Structure

Focus on Core of the Business

Reduce Operating Costs

Source: Navigant Consulting, “How to Outsource Business Process for Competitive Advantage,” April 2003

Partnership Service OfferingsOutsourced Billing and Customer CareOutsourced Billing and Customer Care

Infrastructure Hosting Services

Application Hosting Disaster Recovery &

Mirroring, High Availability Network Connectivity Network Monitoring &

Management System Monitoring &

Management

Application Management Services

Implementation Services Administration and Support Functional & Technical

Upgrades

Business Process Management Services

Bill Processing Bill Print/Mail Call Center/Customer Care Remittance Processing Credit & Collections Electronic Business Transactions Online Customer Care Electronic Bill Presentment &

Payment Event-Based Notification

CIS Implementation Risk Exposure

High

Implementation Risk

Implementation forlicense acceptanceversus implement tooperate solution. Total cost of ownership assumptions likely erode.

High

Organizational Risk

Organizationalbiases result inaccommodation ofexisting businessprocesses. This often leads to stranded licenseversioning.

High

Operational Risk

CIS operations are notutility core competence.Internal staff drive tofunctional solutionsversus re-engineering.Staff is typically not rewarded based on performance or cost savings.

Extremely High

Financial Risk

If implementation,organizational andoperational risks are high, capital expense risk increases.

In-house Implementation: Utility Shoulders 100% of CIS Risk

Outsource Provider Shoulders 100% of Implementation Risk

Moderate

Implementation Risk

Implement to optimize versus license acceptanceonly. Financial rewardsand penalties guaranteeperformance.

Moderate

Organizational Risk

Standardization ofbusiness processesmanages conflictingobjectives andcustomization risk.

Low

Operational Risk

Business continuityensured throughstandard releases,disaster recovery,little customization,new versioning, andon-going support.

Low

Financial Risk

By having apredictable andsustainable CIS,financial riskis reduced.

Outsourcing Transfers CIS Risk

Improving Value By Reducing Risk

Reduce Business Risk

Outsourcing performance is measured by delivering business results – not just software

Contract SLAs mandate quality & reliability in the operating environment

The right partner supports time sensitive changes to the billing & customer care environment in response to business and market events

Real-world examples

A Southeast utility reduced billing errors – 92% decline in 4 months

In August 2003 North American blackout, clients of a leading outsourcer did not experience any downtime

Major deregulated energy providers leverage a uniform billing environment achieved through outsourcing as crucial to M&A activities

Improving Value By Reducing Cost

Decrease operating costs

Technology refresh and built-in CIS upgrades offer savings and budget predictability

Service delivery across a

broad client base yields best practices and economies of scale

Robust business continuity (DR, mirroring) at a level that few utilities could independently afford

Real-world examples

A major Northwest utility states that they continue to save millions in annual CIS operating costs

A reputable Midwest utility saved $700,000 in service order costs in a single year

A stable water utility estimates savings of million of dollars over contract life for outsourced meter-to-cash services as compared to insourcing

Improving Value Through Higher Customer

Satisfaction Improve Customer

Satisfaction

Improved processes reduce call center demand

Consistent best practices, backed by SLAs, reduce variances in service delivery

Automated processes promote immediate corrective action in response to critical situations

Real-world examples

More accurate bills have allowed a major deregulated energy provider to reduce PSC complaints by 72%

Service order accuracy is 100% for a reputable Midwest utility through automated processes

A stable water utility reduced billing errors and eliminated a potential call center demand spike

Improving Value Through Increased Agility

Gain competitive agility

Harness partnership programs crafted to produce specific business results

Gain access to strategic technologies

Respond quickly to market changes and requirements

Real-world examples

Gainsharing helped a reputable Midwest utility exceed its Debt Recovery goals by 50%

Deregulated transaction management services ensure fast, accurate enrollments for a major Texas energy provider

A large Northeast utility affiliate capitalized on a changing market requirement and launched new enrollment capabilities within one week

Managing the Revenue Lifecycle

Revenue Lifecycle:

Each function that touches the customer from meter to cash.

Revenue Lifecycle Management:

Streamlining and automating the business processes throughout the revenue lifecycle to reduce cost-producing work.

Each revenue lifecycle component is interdependent and many are human

capital intensive.

Optimizing Operational Performance

Performance Optimization:

A “Best Practices” Toolset for ever-improving business performance that includes:

• Quality Methodologies that ensure consistent performance

• Demand & Variance techniques that manage work volume and variation

• Continuous Improvement tools that enhance the effectiveness and efficiency of business processes

Driving Additional Value through Customer Insight

Customer Relationship Management:

Improve customer satisfaction and loyalty through:

• Enhance Customer Data Management through real-time access and tools

• Provide Customer Analytics to validate business intelligence and improve decision making

• Leverage appropriate Loyalty Marketing tools to reward customer behavior with compelling incentives