Outsourcing Excellence Award – Best First Steps – SW Water and Accenture
South West Water (SWW) provides water and sewerage services to 1.6 million customers in the southwest region of the UK. In 2003 it formed a joint venture with an outsourcing service provider to handle billing, collections, and contact management.
However, when it came to regulatory measures, customer service, and cost-to-serve, the utility ranked low mid-pack of the 10 UK water and sewerage companies. That ranking was unacceptable to SWW’s customer service leaders. “We set out on a five-year journey of transformation to be one of the top three companies in all aspects, in particular customer service,” says Monica Read, customer service director.
It was time for a second-generation outsourcing agreement. So the utility went to the marketplace with an RFP containing “ambitious performance targets for billings and collections,” noted Read. The utility hired Secor Consulting to help it structure the new outsourcing relationship, draft the invitation to tender, and assess the tender returns.
“We knew we had to move far, and we wanted to move fast. It was obvious we would not be able to implement the scale of change as quickly as an outsourcer could,” says Read.
SWW short-listed the respondents to three and then spent 30 days with each one. During that time Read and the head of procurement joined the suppliers’ subject matter experts in workshops detailing the suppliers’ solutions for important areas like call center, written correspondence, offshoring, and billing and collections.
“We wanted to understand their standards and philosophy so there would be no hidden surprises,” explains Ned Colman, Contract Manager for SWW. Read says this was “an extremely useful process in really understanding what they were proposing.”
SWW’s other selection criteria included:
- The supplier’s maturity
- The supplier’s performance management system
- A demand that the systems were operational at other clients
- The willingness to gain-share to achieve a price dependent on performance
The SWW executives were adamant that business-as-usual service was the starting point and anything else was completely unacceptable. Read was particularly concerned about the call center, which historically had a high level of attrition. “Accenture planned for the proper level of recruitment,” she notes. As it turned out, Accenture didn’t have the same level of churn, which meant customer service levels quickly felt the benefit.
Another crucial concern was regulatory measures around complaint management. The outsourcing contract had a target of 100 percent resolution with penalties for non-performance. “Accenture was very aware of the regulatory environment. That drove the right level of focus and behavior,” says Read.
Kemp says Accenture advised SWW that the best way to “keep costs down and customer satisfaction high” was to use Accenture’s proven processes and not create a bespoke solution. “We didn’t want to over-customize a solution, which sometimes brings with it a higher level of risk. In many cases, there is no need to recreate the wheel,” Kemp says. The partners tweaked the processes and tools for SWW, but both parties were very strict on scope changes and managed the danger of overcomplicating the early transformation.
Today Accenture has 250 FTEs processing two million bills annually. The supplier’s call center answers 1.3 million telephone calls and responds to over 200,000 written billing contracts every year. SWW’s customer base includes five of the top 10 lower-economic communities within the U.K., which increases the use of the customer contact center. SWW receives $800 million in annual billed revenue.
Another challenge was managing the three-way relationship between SWW, Accenture, and the incumbent service provider during transition. “The incumbent didn’t see the contract change coming,” says Colman. Yet SWW was totally dependent on it because it had all SWW’s operational knowledge.
Read says from the time frame of announcing that the incumbent did not receive the contract, all three parties had to maintain existing service levels while performing the potentially disruptive technology and process due diligence as well as transition activities. “All three showed true commitment by meeting weekly to plan transition activities, govern the process, address issues, and jointly resolve challenges,” reports Read.
Read reports in the last few months of the previous provider’s contract, collection performance began to wane. After they discovered this, the partners met to discuss whether they needed to change the mandated collections targets for the first year since Accenture “was starting further back than originally planned,” according to Read.
It took a few months but “hard work” and “creative thinking” resolved the problem, according to Read. “We asked Accenture, ‘What can you give us that doesn’t cost us or give us a problem? Or, what costs us equally?'” she says. They selected the equal pain proposition. “The answer was not ideal for either partner. We added a couple of other things to the mix to find a compromise both parties can live with,” says Read.
Adds Colman, “Touch wood. We have always come to an agreement.”
Most important, Read reports SWW is on track “to be in the top quartile of UK water and sewage companies in terms of cost to serve.”
With all the changes, business-as-usual performance has “not only stayed stable but has actually improved.” She reports call center performance is better than it was the year before and complaints about billing are down by 20 percent. “If we were doing nothing else, that would be a reasonable performance. But they did that at the same time as implementing all those changes, losing staff, and shipping work across the globe. To me that’s absolutely amazing. It shows we picked a good partner,” says Read.
Outsourcing has helped with government auditors. Kemp says one month into the engagement SWW had an audit. “They received some of the best scores in the last 10 years because of the new reporting transparency and access to key operational data,” she reports.
The customer service executive estimates it would have taken SWW 12 to 18 months to recruit people and get the program started if the utility had to transform on its own. “Accenture already had the tools and processes to help us transform,” she says.
Accenture implemented six different operational systems in the first six months of the relationship, “which enabled our staff to do their jobs better.” Accenture leveraged its delivery center in Manila for “some non-customer-facing work,” in order to achieve productivity and quality benefits from its utility-focused delivery center there.
Accenture is ready to go the extra mile. Early in the contract, SWW experienced a pipe burst incident over a weekend. Accenture stepped up to jointly handle the issue. “The way in which SWW and Accenture worked together to manage these incredibly challenging circumstances illustrates how an optimal outsourcing relationship should work. The relationship has laid a foundation for further improvements and more value generation for all stakeholders,” says Kemp.
The Accenture executive says the transformation program has saved 25 percent of the former cost “by sending work to Manila, tightening screws at home, and eliminating unnecessary work.” Also, “we now have the right people doing the right work so passion for our mission now comes through.”
Risks and rewards
At the outset the partners established four key performance indicators (KPIs); below that is a balanced scorecard. “We want consistently good service month on month,” says Read.
Accenture has to pay a service penalty if it misses any KPI during the month. “We have penalties to concentrate the mind and cause some financial pain because those KPIs are important to us,” says Read.
The balanced scorecard has 20 items that measure the customer and employee experience. They include things like failures, complaints Accenture could have prevented, employee turnover, and customer satisfaction. Read says if Accenture achieves 80 percent of the scorecard measures at the end of a year, the supplier has the ability to earn “significant incentives.”
Why this relationship works
Read says Accenture acted like a partner “even before the contract started.” For example, she scheduled a staff presentation discussing the new contract. “We spoke with one voice. I couldn’t have been more comfortable with how they presented themselves,” says Read.
Kemp says the partners were able “to create magic” because Read and the SWW CEO were “clearly able to express their vision.” They summed it up in a simple vision: Pure water. Pure service. Pure environment. “It was our job to tune into what they meant by pure service and help them get there,” the Accenture executive explains. She adds, “I took this mission personally.”
Colman says Accenture brought in troubleshooters and top managers when needed. “They have been willing to invest money,” he notes.
Read says Accenture is always accommodating. “When I need to understand something, I’ll ask for an analysis. And they’ll say, ‘Yes, fine.’ They go away and come back with not just what I’ve asked but with some really important or interesting interpretations along with the implications. They do that quickly and effectively. It’s better than my expectations,” she explains.
Sums up Colman, “Accenture delivered business as usual while rearranging everything around them. SWW wanted to achieve high performance. That’s what they gave us.”
Lessons from the Outsourcing Journal:
- Buyers receive consistency when they insist executives who will deliver the solution are on the pursuit team, too. The same applies to the buyer side. This insistence also gives both parties a chance to begin to develop working relationships.
- Suppliers have a tougher time transforming processes when there can be no degradation in service to customers.
- Buyers that can clearly articulate their vision can inspire their suppliers and get the best from the supplier organization and offerings.
- The optimal outsourcing relationship is typically characterized by a high degree of collaboration and communication between all stakeholders (particularly in times of crisis), intimate knowledge of the business and social context, a strong sense of partnership, absolute trust between the parties, performance delivery, and maximum transparency. Buyers can discern all of these characteristics up front in the due-diligence phase.
Best First Steps Criteria: A young relationship still in the transition/migration phase or the parties have not yet worked together for a full year.