Outsourcing is big business. According to the latest Arvato UK Outsourcing Index, the UK’s utilities collectively signed up to outsourcing deals worth £1.1 billion during 2014 – some 15 per cent of the total outsourcing activity in the UK.
What is more, as utilities get to grips with the demands of a changing regulatory and competitive environment, outsourcing activity is significantly picking up. According to Arvato, 2014 saw a 122 per cent year-on-year increase in the number of outsourcing deals in the sector, and a year-on-year rise of 32 per cent in the average deal value of each new contract.
“The utilities sector is under immense pressure to transform, in terms of both cutting costs for consumers and improving customer service,” says Bryan Mouat, UK and Ireland chief executive of Arvato Financial Solutions. “Our research suggests that outsourcing continues to be seen as a viable strategy for the sector to deliver flexibility and enable transformation.”
In any discussion of cost-cutting and improving customer service, the question of customer contact centre outsourcing can’t be far away. In short, however much utilities might want to “own” their customer relationships, the siren song of customer contact centre outsourcing will not go away.
Why? Because with regulators taking a keen interest in both cost and customer service metrics, customer contact centre outsourcing, at a stroke, offers a way to swap a high in-house fixed cost for a lower outsourced variable cost.
It also offers a means of doing so that can be leveraged alongside contractual arrangements that incentivise outsourcing providers to improve customer contact centre agent productivity, or boost collections performance.
Utilities lagging behind
Customer contact centre outsourcing is not necessarily a bold leap into the unknown. Centrica went to India in the mid-2000s, for instance, closely followed by Scottish Power, Npower and EDF.
Moreover, say industry insiders, the UK utility sector is arguably lagging its international peers in using outsourcing for customer contact centres. Within the water sector, for instance, experts point out that only the very largest operators – around 20 per cent of the total – make any use of outsourced customer contact centres. Among the big six energy companies, take-up is much higher but is still behind international best practice.
“Energy companies in the US and Australia are much more aggressive in terms of using outsourcing to reduce headcount, and also much more ambitious in their timescales for achieving reductions,” is how one source sums it up. “They’re also way ahead of the UK in terms of adopting best-in-class billing, customer contact centre, and customer relationship management technology.”
So what can UK utilities do to close the gap? Talk to those close to the issue, and one thing quickly becomes clear: despite the close-to-home comfort offered by a UK-only outsourcing model, outsourced UK customer contact centres offer only limited gains when compared with the offshore option.
Accordingly, while a utility might not want to make a move to an entirely offshore outsourced customer contact centre model, UK-only outsourcing should comprise only a part of an effective customer contact centre outsourcing strategy. Put another way, the size of the cost gap between UK operations and offshore operations is simply too compelling to ignore.
Just look at the facts. A utility might, on average, expect an “all in” customer contact centre agent cost of around £26-£27 per hour – more if a customer contact centre were to be located in the prosperous South East, or in another expensive local labour market – points out Chris Lloyd, senior vice-president at global customer contact centre outsourcing provider WNS Global Services. Switch call-handling capacity to an outsourcing provider located in one of the UK’s lower-cost regional labour markets and that cost might reduce by 25 per cent.
Consider switching that call-handling capacity overseas, though, and a whole new vista of savings open up. In India, for instance, savings of 60 per cent can be expected. And in other Asian countries, even greater savings can be achieved: the average total remuneration for a outsourced call agent employee in the Philippines is around $7,000 per year.
Local specialities
According to data from business advisers AT Kearney, seven of the world’s top ten countries to outsource to, ranked by comparative cost advantage, are in Asia. Countries such as China and Malaysia are seeing strong growth, and even the much smaller economies of Sri Lanka and Vietnam are putting up a good showing.
However, Asia does not have the market to itself. South Africa is another possibility, with customer contact centre agent costs that are about 50 per cent of those incurred in the UK, but with the advantages of strong English language skills.
Eastern Europe is yet another option, with Poland, Romania, and the Czech Republic all very much open for business and offering a variety of tax perks to increase their attractiveness as an outsourcing destination.
“We continue to see strong growth in developing countries like Turkey, Poland, the Philippines and more broadly across North Africa, Latin America, and India,” says Jeremy Payne, international group marketing director at Enghouse Interactive, a developer of customer contact centre call-handling and optimisation technology.
“In general terms, organisations will look to develop outsourced capability where they can cost-effectively deploy agents with excellent language skills, strong IT knowledge and a good understanding of the business issues in play in that specific market.”
With so many options available, which country is best? This question is especially pertinent for utilities, with their complex mix of inbound and outbound customer interactions, and their broad range of call-handling tasks stretching from billing queries to debt collection, and account switching to complaint handling?
This, it transpires, is a question with no simple answer. Instead, say experts, utilities must think through what they are trying to achieve, and be prepared to construct a balance of cost and country characteristics that best meets their own requirements.
“There certainly isn’t a ‘one size fits all’ country that’s right for every utility,” says Mike Hughes, managing director of PeopleTECH, a customer management consultancy that advises organisations – including Npower – on customer contact centre strategy in order to deliver an optimised customer experience.
“That said, certain countries bring certain advantages when choosing location: eastern Europe offers a good skill set with cost advantages; South Africa is in virtually the same time zone and also is competitively costed; and the Philippines has US accented agents with a high level of skills – all three are currently popular choices.”
Put another way, a decision that in a UK-only context might be predicated solely on “hard” factors such as labour rates and property costs instead turns out, in an international context, to revolve just as much around “soft” factors: language skills, general education levels, and perhaps above all, “cultural fit”.
“The utility’s ‘service personality’ and the profile of its average customer are very important parameters,” says Hughes. “Subservience can be an issue with Indian customer contact centres, abruptness occasionally in eastern Europe. And as ‘voice only’ gives way to ‘voice plus web chat’, the gaming and keyboard skills of a good ‘chat agent’ in any geography are probably more relevant.
“Key to this is ensuring that agents have access to the right customer, tariff, and services information and that the commercial policies are consumer friendly. The best agent in the world can’t deliver high net promoter scores against complex tariffs with ‘gotcha’ clauses and commercial policies that are misaligned.”
A strategic approach
WNS’s Lloyd insists it’s possible for utilities to use a blend of offshore customer contact centre outsourcing options in order to intelligently exploit these soft cultural issues.
Take a three-way split between UK, Indian and South African operations, for example. India offers a lower cost than either the UK or South Africa, but agents there have a lower cultural “fit” with UK-based consumers, and calls might need to be more carefully scripted. Meanwhile, South African agents are more expensive than Indian agents, though their all-in cost is still only half that of the UK, and their greater level of cultural fit means that calls do not require the same level of scripting. They can be much more “free format” in nature.
Roll it all together, says Lloyd, and it is possible to play some interesting – and potentially very profitable – tunes.
“There’s obvious merit in using India to deal with routine e-mails, billing queries, general correspondence, or basic customer service issues,” he points out.
“South Africa, though, is a more logical place to put rather more of the customer contact centre voice activity, both inbound and outbound. So you’d locate more complex customer service queries there, and things like altering payment plans. And experience shows that outbound calling in connection with debt collection and late payments also works well in South Africa. A core UK operation can be reserved for the most complex situations, such as complaint handling, customer retention and similar issues.”
That said, stresses Lloyd, the size of a core UK operation can be relatively compact. South Africa, he maintains, is very much an up and coming destination for UK businesses wanting to explore alternatives to a domestic customer contact centre. In short, he says, it is not just about lowering costs.
“When clients meet our South African people, they find a genuine customer service ethic: people want to help, and want to please,” he observes. “That’s not to say that you can’t get those qualities in India, but the South African dimension certainly provides businesses with additional options, especially in terms of instances where customer satisfaction metrics are important.”
One such area is collections and debt recovery. South African agents have proved adept at outbound debt recovery calls, says Lloyd. They also have a good track record in constructing consumer payment schedules in respect of inbound calls that leave both the utility and its customer satisfied.
Moreover, he adds, South African customer contact centre agents are genuinely proud of the work they do and have no difficulty identifying with the UK-based businesses they are working on behalf of. That is in sharp contrast to the situation with some UK-based contact centres, where low job satisfaction and low agent self-esteem can lead to poor performance and high labour turnover.
In March, a survey published by print specialist Solopress found “call centre operator” to be the UK’s second-most hated job title, second only to “traffic warden”, and only marginally ahead of “sales person”.
A keen and enthusiastic workforce, emphasises Lloyd, makes it easy for customer contact centre outsourcing providers such as WNS to offer the “outcome-based” pricing and performance contracts that today’s outsourced contact centre marketplace increasingly requires.
“The market has moved on from customer contact centre providers simply offering to guarantee a certain level of contact agent availability, along with specified service level agreement targets in terms of call resolution and waiting times,” he explains. “Today, the dialogue with clients is more about business process transformation, in order to improve efficiencies, and about the outcomes that we are delivering.”
For “outcomes”, he says, WNS finds itself routinely engaging with customers on outcomes such as cash collection, customer retention, and customer satisfaction scores.
“We’re not just selling time, and agents sitting at desks. We’re committing ourselves – and our people – to delivering on hard, measurable targets. There’s an upside for us, and an upside for our utility customers, who can see a clear link between what they pay, and the results they get.”
That said, the dialogue with some parts of the utility market is only in its early stages. Most of the UK’s water utilities, for instance, do not outsource their customer contact centre activity at all, and may require convincing that a third party using offshore contact centre agents can deliver better results.
Mark Wilkinson, collections manager at Northumbrian Water, for instance – which does not use an outsourced customer contact centre – worries about the potential impact of outsourcing on customer relationships.
“In our view, collections performance is really about your approach to collections, rather than contact centre location and culture,” he explains. “Take too hard-nosed an approach and you run the risk of breaking the relationship, swapping a short-term improvement in cash flow for a longer-term impact on marketplace perception and customer satisfaction.”
Even so, WNS’s Lloyd is up for the challenge.
“Utilities’ core competence is operating a utility: ours is operating contact centres. We have the technology, the skills, the people, and the presence in international locations – and we think that utilities’ regulatory environment is increasingly moving the argument in our direction.”
Case studies
Experience goes a long way when it comes to implementing offshore customer care solutions, and WNS has established a client list that includes utilities from Europe and the US.
Reducing debt among
European SME base
A supplier of gas and electricity to homes and businesses wanted to explore outsourcing as a way to improve debt collection from its small and medium-sized enterprise (SME) customer base.
The outsourced operation needed to have highly skilled agents up and running within a few weeks. Some work processes also needed mapping to support training and the management information and reporting measures needed to meet high compliance standards.
Scope of Work
• Make outbound calls and receive inbound calls to collect debt from the SME customer base.
• Back office functions to support the debt collection process, including multi-channel operations.
Solution
• A new delivery centre set up in Cape Town, South Africa, specifically for the debt collection activity.
• A recruitment strategy was designed and implemented to attract the best talent with the required skill sets. A high calibre of experienced management was also put in place.
• The transition project team travelled to the client location to conduct due diligence and understand the requirements for transition.
• Stringent assessments were carried out at numerous stages of the training phase to ensure the level of competency was high.
• Ongoing assessments are carried out with the operation to reinforce the high level of operations required. This ensures compliance according to Ofgem standards.
Benefits
• Labour arbitrage benefit of the offshore location, making a positive impact on the cost to serve.
• A quick and seamless transition of services from the client location to South Africa allowed for minimal disruption to the clients end customers.
• The implementation of a dialler solution increased the number of calls made per agent per day, positively affecting the cost to serve and cash collected.
• Debt collected for the operation has averaged at 18 per cent above target so far.
• The additional money collected has allowed further cost to serve savings to be made as it results in less reliance on the use of costly external debt collection agencies for early arrears. An average saving per month of £70,000 has been achieved.
• Knowledge capture has been another advantage of the transition, as processes have been documented.
• An incentive based cost structure has been created to reward a high performing operation. This has also allowed high performing agents to be rewarded individually.
Raising customer satisfaction across two continents
A dual fuel provider with a presence in Europe and North America was seeking to nurture growth by significantly increasing customer satisfaction and reducing operational costs.
Solution
Building on an existing relationship with the client, WNS tailored a flexible customer care offering including multichannel customer communications using voice, email and white mail . The solution also included management of critical back office processes.
Key features of the WNS solution include:
• Strong partnership with the client. WNS has worked with this client for over seven years, from the time it implemented its first SAP platform. WNS is able to leverage its expertise on all client and industry systems to help improve consumer experience.
• Flexibility. The customer care team is easily scalable and can respond to rapid increases in customer interaction volumes, for instance as a result of changing systems or pricing announcements. The team quickly and successfully scaled from 26 to over 1,500 people in India, in eight months, including a broad range of skill sets.
• Robust training platform. While scaling the team quickly, training materials were revamped to better balance theory and hands-on practice. A training-to-operations handover manual was created alongside a comprehensive training and operations support system for new team members.
• Focus on quality. Six Sigma and analytics projects were introduced to the customer care operation, aligning with wider continuous improvement activity
• Innovative commercial models. WNS has actively proposed and changed commercial models such as transaction pricing and account-based pricing to reduce the client’s operational costs, commit upfront benefit and drive customer centric behaviour.
Benefits
• 40 per cent lower operational costs by offshoring to India and South Africa.
• Further 15 per cent reduction in costs by moving to innovative commercial models in few businesses.
• Improvement in customer satisfaction measures using a variety of operational and process improvement initiatives.
• Improving consumer-facing programmes to reduce repeat contact rates, in turn impacting consumer satisfaction.
• Improving debt recovery by identifying reasons for debt accrual, and recommending a new tariff and measurement system. This project delivered a multimillion pound benefit and was awarded the Chairman’s Club Award by the client.
• Rapid learning curve, reducing the time for a team member to reach optimum productivity, and increasing productivity.
• Digitising of key tasks by eliminating non-value-added steps and standardising best practices.