BPO Opportunities in

the Energy & Utilities

Sector
~~~

Market Assessment
May 2010
BPO OPPORTUNITIES IN THE ENERGY & UTILITIES SECTOR: 2010 NelsonHall

About NelsonHall

NelsonHall provides buy-side and sell-side organizations with deeper research and
analyses in front office, mid-office and back office BPO than any other research firm in
the world. The companys subscription-based model provides subscribers with robust
market analyses, case studies, vendor assessments, contract analyses, market
reports and access to a content-rich BPO contracts database. The firm covers a wide
range of industries including financial services, government and utilities sectors, and
tracks worldwide and regional BPO activity. NelsonHalls home page is www.nelson-
hall.com.
The company tracks business services activity. In particular, NelsonHall focuses on
the following business services and process areas:
Front-office customer management services
Middle office industry-specific processing services such as policy
administration, claims processing services, and payment processing
Back office support services such as HR services, finance &
accounting services, and procurement services
NelsonHall provides information to its clients in a variety of forms, including within:
NelsonHalls BPO subscription services, to assist organizations in
developing sourcing strategies and in supporting individual sourcing
projects including vendor short-list development
Workshops, to assist organizations in identifying the most
appropriate areas of BPO for their organization
Business case development, to assist organizations in deciding
whether BPO is appropriate for individual processes
For more details, contact:
U.S: France:
Riverside Center NelsonHall
275 Grove Street 4 place Louis Armand
Suite 2-400 Tour de l'Horloge
Newton MA 02466 75012 Paris
Phone: (617) 663 5737 France
Phone: +33 1 72 76 26 54
U.K.:
Atrium Court, The Ring Germany:
Bracknell
NelsonHall
RG12 1BW
lm Mediapark 8
Phone: +44 (0)1344 393036 50670 Kln
Germany
Phone: +49 (0)221 5540 545

2010 by NelsonHall. May 2010

BPO OPPORTUNITIES IN THE ENERGY & UTILITIES SECTOR: 2010 NelsonHall

Abstract
The purpose of this study is to assist sourcing managers in
understanding sourcing developments within the energy & utilities sector
and to recommend options for vendors in addressing the business
process outsourcing market in the energy & utilities sector. In particular
the study uses senior executive interviewing to establish:
Client requirements, in support of business initiatives

Market drivers and inhibitors

Planned BPO purchasing intentions.
The study complements NelsonHalls earlier market assessments of
Business Process Outsourcing in the energy & utilities sector by including
an updated analysis of user expectations and attitudes towards use of
business process outsourcing.
NelsonHalls BPO Opportunities in the Energy & Utilities Sector market
assessment report is designed for:
Sourcing managers investigating sourcing developments within the
energy & utilities sector
Marketing, sales and business managers developing strategies to
target service opportunities within the BPO market
Financial analysts specializing in the support services sector.
The term business process outsourcing (BPO) is defined as the
outsourcing of business functions or processes. In order to qualify under
this definition BPO contracts must involve the vendor taking responsibility
for operational management of the business activity.
Potential BPO activities include:
Front-office services, including customer management services &
billing services, and document management services
Middle-office administration services
Industry-specific processing services e.g. mortgage processing services and card
processing services
Back-office support services
Finance and accounting services
HR Services including payroll services, HR administration services, managed
recruitment services and training provision and administration
Services for procurement of indirect goods and services
Copyright 2010 by NelsonHall. All rights reserved. Printed in the United Kingdom. No part of the publication may be reproduced or distributed in
any form, or by any means, or stored in a database or retrieval system, without the prior written permission of the publisher.
The information provided in this report shall be used only by the employees of and within the current corporate structure of NelsonHalls clients,
and will not be disclosed to any other organization or person including parent, subsidiary, or affiliated organization without prior written consent of
NelsonHall.
NelsonHall exercises its best efforts in preparation of the information provided in this report and believe the information contained herein to be
accurate. However, NelsonHall shall have no liability for any loss or expense that may result from incompleteness or inaccuracy of the information
provided.

2010 by NelsonHall. May 2010

BPO OPPORTUNITIES IN THE ENERGY & UTILITIES SECTOR 2010 NelsonHall

Table of Contents

Chapter 1: Introduction 1
A. Objectives and Scope 1
B. Methodology 2
C. Structure of the Report 3

Chapter 2: Executive Summary 4

A. Energy Companies Aiming to Use BPO to Support New Market Entry While
Utilities Require Support in Cross-Selling to Existing Customers 4
B. Improving Service Quality is Key for Utility Shared Service Centers 7
C. Energy & Utility Companies Expect to Increase Their BPO Spend by 7% in
2010 9
D. Utilities Increasingly Receptive to New Approaches to BPO 11

Chapter 3: Market Size & Growth 14

A. Market Forecast: Energy 14
B. Market Forecast: Utilities 16
C. Contract Activity in Energy and Utilities 18

Chapter 4: Key Business Issues & Initiatives 23

Chapter 5: Impact on Shared Service Centers 34

Chapter 6: Impact of Recession on Use of BPO 47

2010 by NelsonHall. -i- May 2010

BPO OPPORTUNITIES IN THE ENERGY & UTILITIES SECTOR 2010 NelsonHall

Chapter 7: Planned Use of Third-Party Services 62

Chapter 8: Business Metrics 75

2010 by NelsonHall. - ii - May 2010

BPO OPPORTUNITIES IN THE ENERGY & UTILITIES SECTOR 2010 NelsonHall

List of Exhibits

Additional Utilization of BPO: Energy...................................................................................................5

Additional Utilization of BPO: Utilities ..................................................................................................6
Shared Service Centers: Energy .........................................................................................................7
Shared Service Centers: Utilities .........................................................................................................8
Response to Credit Crunch: Energy ....................................................................................................9
Response to Credit Crunch: Utilities ..................................................................................................10
BPO Purchasing Intentions: Energy ..................................................................................................10
BPO Purchasing Intentions: Utilities ..................................................................................................11
Change in Offshoring: Energy ...........................................................................................................11
Change in Offshoring: Utilities ...........................................................................................................11
Attitudes to BPO Standardization: Energy .........................................................................................12
Attitudes to BPO Standardization: Utilities .........................................................................................12
Purchasing Intentions for Supplier-Hosted BPO: Energy ...................................................................13
Purchasing Intentions for Supplier-Hosted BPO: Utilities ...................................................................13
BPO in Energy Sector Market Forecast: 2009 - 2013 ........................................................................14
BPO in Energy Sector Market Forecast by Service Type: 2009 2013 ..............................................15
BPO in Utilities Sector Market Forecast: 2009 - 2013 ........................................................................16
BPO in Utilities Sector Market Forecast by Service Type: 2009 2013 .............................................17
BPO Contract Value in the Energy Sector by Country........................................................................18
BPO Contract Value in the Utilities Sector by Country .......................................................................18
BPO Contract Value in Energy and Utilities Sector by Service Type ..................................................19
BPO Contract Value in Energy and Utilities Sector by Service Type: North America ..........................19
BPO Contract Value in Energy and Utilities Sector by Service Type: Europe .....................................20
Leading Vendors: BPO Contract Value in Energy and Utilities Sector ................................................20
Leading Vendors: BPO Contract Value in Utilities Sector: North America...........................................21
Leading Vendors: BPO Contract Value in Energy and Utilities Sector: Europe ...................................22
Business Issues Faced .....................................................................................................................24
Business Issues Faced: Energy ........................................................................................................25
Business Issues Faced: Utilities ........................................................................................................25
Business Issues Faced: Continental Europe......................................................................................25
Business Issues Faced: U.K..............................................................................................................26

2010 by NelsonHall. - iii - May 2010

BPO OPPORTUNITIES IN THE ENERGY & UTILITIES SECTOR 2010 NelsonHall

Business Issues Faced: U.S..............................................................................................................26

Business Issues Faced: Asia Pacific .................................................................................................26
Cost Savings Sought.........................................................................................................................31
Cost Savings Sought: Energy............................................................................................................31
Cost Savings Sought: Utilities ...........................................................................................................32
Cost Savings Sought: Continental Europe .........................................................................................32
Cost Savings Sought: U.K. ................................................................................................................32
Cost Savings Sought: U.S. ................................................................................................................33
Cost Savings Sought: Asia Pacific.....................................................................................................33
Use of Shared Service Centers .........................................................................................................34
Use of Shared Service Centers: Energy ............................................................................................35
Use of Shared Service Centers: Utilities ............................................................................................35
Use of Shared Service Centers: Continental Europe .........................................................................36
Use of Shared Service Centers: U.K. ................................................................................................36
Use of Shared Service Centers: U.S. ................................................................................................36
Use of Shared Service Centers: Asia Pacific .....................................................................................37
Satisfaction with Shared Service Centers ..........................................................................................37
Satisfaction with Shared Service Centers: Energy .............................................................................38
Satisfaction with Shared Service Centers: Utilities .............................................................................38
Satisfaction with Shared Service Centers: Continental Europe ..........................................................39
Satisfaction with Shared Service Centers: U.K. .................................................................................39
Satisfaction with Shared Service Centers: U.S. .................................................................................39
Satisfaction with Shared Service Centers: Asia Pacific ......................................................................40
Shared Service Center Issues ...........................................................................................................42
Shared Service Center Issues: Energy ..............................................................................................42
Shared Service Center Issues: Utilities..............................................................................................42
Shared Service Center Issues: Continental Europe ...........................................................................43
Shared Service Center Issues: U.K. ..................................................................................................43
Shared Service Center Issues: U.S. ..................................................................................................43
Shared Service Center Issues: Asia Pacific .......................................................................................44
Shared Service Center Initiatives ......................................................................................................44
Shared Service Center Initiatives: Energy .........................................................................................44
Shared Service Center Initiatives: Utilities .........................................................................................45
Shared Service Center Initiatives: Continental Europe .......................................................................45
Shared Service Center Initiatives: U.K...............................................................................................45
Shared Service Center Initiatives: U.S...............................................................................................46

2010 by NelsonHall. - iv - May 2010

BPO OPPORTUNITIES IN THE ENERGY & UTILITIES SECTOR 2010 NelsonHall

Shared Service Center Initiatives: Asia Pacific...................................................................................46

Response to Credit Crunch ...............................................................................................................47
Response to Credit Crunch: Energy ..................................................................................................48
Response to Credit Crunch: Utilities ..................................................................................................48
Response to Credit Crunch: Continental Europe ...............................................................................49
Response to Credit Crunch: U.K. ......................................................................................................49
Response to Credit Crunch: U.S. ......................................................................................................50
Response to Credit Crunch: Asia Pacific ...........................................................................................50
BPO Cost Reduction .........................................................................................................................51
BPO Cost Reduction: Energy ............................................................................................................51
BPO Cost Reduction: Utilities ............................................................................................................51
BPO Cost Reduction: Continental Europe .........................................................................................51
BPO Cost Reduction: U.K. ................................................................................................................51
BPO Cost Reduction: U.S. ................................................................................................................52
BPO Cost Reduction: Asia Pacific .....................................................................................................52
BPO Break-Even Timescale ..............................................................................................................52
BPO Break-Even Timescale: Energy .................................................................................................52
BPO Break-Even Timescale: Utilities.................................................................................................52
BPO Break-Even Timescale: Continental Europe ..............................................................................53
BPO Break-Even Timescale: U.K. .....................................................................................................53
BPO Break-Even Timescale: U.S. .....................................................................................................53
BPO Break-Even Timescale: Asia Pacific ..........................................................................................53
Change in Attitude to Service Bundling..............................................................................................53
Change in Attitude to Service Bundling: Energy.................................................................................54
Change in Attitude to Service Bundling: Utilities ................................................................................54
Change in Attitude to Service Bundling: Continental Europe ..............................................................54
Change in Attitude to Service Bundling: U.K. .....................................................................................54
Change in Attitude to Service Bundling: U.S. .....................................................................................55
Change in Attitude to Service Bundling: Asia Pacific..........................................................................55
Sourcing Approaches to BPO............................................................................................................56
Sourcing Approaches to BPO: Energy...............................................................................................56
Sourcing Approaches to BPO: Utilities ..............................................................................................56
Sourcing Approaches to BPO: Continental Europe ............................................................................57
Sourcing Approaches to BPO: U.K. ...................................................................................................57
Sourcing Approaches to BPO: U.S. ...................................................................................................57
Sourcing Approaches to BPO: Asia Pacific........................................................................................58

2010 by NelsonHall. -v- May 2010

BPO OPPORTUNITIES IN THE ENERGY & UTILITIES SECTOR 2010 NelsonHall

Change in Offshoring ........................................................................................................................58

Change in Offshoring: Energy ...........................................................................................................58
Change in Offshoring: Utilities ...........................................................................................................58
Change in Offshoring: Continental Europe ........................................................................................59
Change in Offshoring: U.K. ...............................................................................................................59
Change in Offshoring: U.S. ...............................................................................................................59
Change in Offshoring: Asia Pacific ....................................................................................................59
Consolidation of BPO Suppliers ........................................................................................................60
Consolidation of BPO Suppliers: Energy ...........................................................................................60
Consolidation of BPO Suppliers: Utilities ...........................................................................................60
Consolidation of BPO Suppliers: Continental Europe.........................................................................60
Consolidation of BPO Suppliers: U.K.................................................................................................61
Consolidation of BPO Suppliers: U.S.................................................................................................61
Consolidation of BPO Suppliers: Asia Pacific ....................................................................................61
Additional Utilization of BPO..............................................................................................................63
Additional Utilization of BPO: Energy.................................................................................................63
Additional Utilization of BPO: Utilities ................................................................................................64
Additional Utilization of BPO: Continental Europe ..............................................................................64
Additional Utilization of BPO: U.K. .....................................................................................................65
Additional Utilization of BPO: U.S. .....................................................................................................65
Additional Utilization of BPO: Asia Pacific..........................................................................................65
BPO Purchasing Intentions by Function ............................................................................................66
BPO Purchasing Intentions: Energy ..................................................................................................66
BPO Purchasing Intentions: Utilities ..................................................................................................67
BPO Purchasing Intentions: Continental Europe................................................................................67
BPO Purchasing Intentions: U.K........................................................................................................67
BPO Purchasing Intentions: U.S........................................................................................................68
BPO Purchasing Intentions: Asia Pacific ...........................................................................................68
Attitudes to BPO Standardization ......................................................................................................68
Attitudes to BPO Standardization: Energy .........................................................................................68
Attitudes to BPO Standardization: Utilities .........................................................................................69
Attitudes to BPO Standardization: Continental Europe.......................................................................69
Attitudes to BPO Standardization: U.K...............................................................................................69
Attitudes to BPO Standardization: U.S...............................................................................................69
Attitudes to BPO Standardization: Asia Pacific ..................................................................................69
Purchasing Intentions for Supplier-Hosted BPO ................................................................................70

2010 by NelsonHall. - vi - May 2010

BPO OPPORTUNITIES IN THE ENERGY & UTILITIES SECTOR 2010 NelsonHall

Purchasing Intentions for Supplier-Hosted BPO: Energy ...................................................................71

Purchasing Intentions for Supplier-Hosted BPO: Utilities ...................................................................71
Purchasing Intentions for Supplier-Hosted BPO: Continental Europe .................................................72
Purchasing Intentions for Supplier-Hosted BPO: U.K.........................................................................72
Purchasing Intentions for Supplier-Hosted BPO: U.S.........................................................................73
Purchasing Intentions for Supplier-Hosted BPO: Asia Pacific.............................................................73
Business Metrics...............................................................................................................................75
Business Metrics: Energy ..................................................................................................................76
Business Metrics: Utilities..................................................................................................................76
Business Metrics: Continental Europe ...............................................................................................77
Business Metrics: U.K. ......................................................................................................................77
Business Metrics: U.S. ......................................................................................................................77
Business Metrics: Asia Pacific ...........................................................................................................78

2010 by NelsonHall. - vii - May 2010

BPO OPPORTUNITIES IN THE ENERGY & UTILITIES SECTOR 2010 NelsonHall

Chapter

1
Introduction

A
Objectives and Scope
The purpose of this study is to assist sourcing managers in
understanding sourcing developments within the energy &
utilities sector and to recommend options for vendors in
addressing the business process outsourcing market in the
energy & utilities sector. In particular the study uses senior
executive interviewing to establish:
Client BPO requirements, in support of 2010 business
initiatives
Market drivers and inhibitors
Planned BPO purchasing intentions.
The study complements NelsonHalls earlier market
assessments of Business Process Outsourcing in the energy &
utilities sector by including an updated analysis of user
expectations and attitudes towards use of business process
outsourcing.
NelsonHalls BPO Opportunities in the Energy & Utilities Sector
market assessment report is designed for:
Sourcing managers investigating sourcing developments
within the energy & utilities sector
Marketing, sales and business managers developing
strategies to target service opportunities within the BPO
market
Financial analysts specializing in the support services sector.
The term business process outsourcing (BPO) is defined as the
outsourcing of business functions or processes. In order to
qualify under this definition BPO contracts must involve the
vendor taking responsibility for operational management of the
business activity. For the purposes of this definition, IT services
do not count as a business function.

2010 by NelsonHall. -1- May 2010

BPO OPPORTUNITIES IN THE ENERGY & UTILITIES SECTOR 2010 NelsonHall

Potential BPO activities include:

Front-office services

Customer management services including billing services

Document management services
Middle-office administration services
Industry-specific processing services e.g. environmental compliance
administration
Back-office support services
Accounting services
HR Services including payroll services, HR administration services,
managed recruitment services and training provision and administration
Services for procurement of indirect goods and services

Standalone IT outsourcing contracts, including application process

outsourcing contracts, do not qualify as BPO regardless of the length of the
contract or the degree of business process change involved.

B
Methodology
The approach taken to analyze this market is targeted user research to
identify organizations business process outsourcing buying intentions.
The user research of 80 interviews was carried out by interviewing senior
executives in the energy & utilities sector to ascertain their attitudes towards:
Key business issues and initiatives
Shared service center issues and initiatives
Stage reached in response to the recession
Impact of the slowdown on approaches to BPO
Attitudes toward use of offshore services
Planned use of third-party BPO services.

The breakdown of number of senior executives interviewed by geography

was:
U.S. (20)
U.K. (20)
Continental Europe (20)
Asia Pacific (20).

The breakdown of number of senior executives interviewed by industry sector

was:
Energy (40)
Utilities (40).

2010 by NelsonHall. -2- May 2010

BPO OPPORTUNITIES IN THE ENERGY & UTILITIES SECTOR 2010 NelsonHall

C
Structure of the Report
The report is structured into the following chapters:
Chapter I: Introduction
Chapter II: Executive Summary
Chapter III: Market Size and Growth, including an analysis of current patterns
of BPO contract activity within the energy and utilities sector by geography
and service type
Chapter IV: Key Business Issues & Initiatives, including:
Business issues faced
Business initiatives planned for 2010
Chapter V: Impact on Shared Services Centers, covering:
Satisfaction with shared service centers
Shared service center initiatives planned for 2010
Chapter VI: Impact of Recession on Use of BPO, covering:
Stage reached in amending sourcing strategies and
preparation of RFPs
Stage reached in award of BPO contracts
Chapter VII: Planned Use of Third-Party Services, including
Role of BPO services
Attitudes towards use of pre-standardized BPO services
2010 purchasing intentions by function
Chapter VIII: Business Metrics

2010 by NelsonHall. -3- May 2010