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18 | 24TH - 30TH APRIL 2015 | UTILITY WEEK Sponsored Report: contact centres O utsourcing is big business. According to the latest Arvato UK Outsourcing Index, the UK's utilities collectively signed up to outsourcing deals worth £1.1 bil- lion 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 activ- ity 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 cut- ting costs for consumers and improving cus- tomer service," says Bryan Mouat, UK and Ireland chief executive of Arvato Financial Solutions. "Our research suggests that out- sourcing 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 relation- ships, 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 ser- vice metrics, customer contact centre out- sourcing, at a stroke, offers a way to swap a high in-house fixed cost for a lower out- sourced 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 cen- tre 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 inter- national 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 out- sourced 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 Aus- tralia 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 rela- tionship 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 com- pelling 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 outsourc- ing provider WNS Global Services. Switch call-handling capacity to an outsourcing pro- vider 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 Thinking outside the box Reducing contact centre costs doesn't have to mean compromising on customer service. Utility Week presents a special report in association with WNS Global Services. TOP 10 COUNTRIES WITH LEAST TAX AND REGULATORY COSTS UAE UK Canada Singapore Mauritius Chile Israel Germany Uruguay Poland TOP 20 COUNTRIES BY FINANCIAL ATTRACTIVENESS Vietnam Indonesia Pakistan Senegal Ghana Sri Lanka Philippines India Egypt Tunisia Thailand Jordan Ukraine Costa Rica Morocco Bulgaria Jamaica Malaysia Panama Mexico TOP 10 COUNTRIES BY LANGUAGE CAPABILITY US UK Canada Australia Ireland Jamaica Singapore South Africa Germany Portugal TOP 10 COUNTRIES WITH LOWEST INFRASTRUCTURE COSTS Tunisia Ireland Egypt Australia South Africa Canada Senegal Indonesia US France Produced in association with: Source: AT Kearney