Opportunities in the Meter-to-Cash BPO Market
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Meter-to-Cash (M2C) is a significant process for utility companies as it not only represents their revenue cycle but also touches the end customer directly. This webinar will discuss key findings from ...

Meter-to-Cash (M2C) is a significant process for utility companies as it not only represents their revenue cycle but also touches the end customer directly. This webinar will discuss key findings from Everest Group’s latest study around M2C BPO opportunity assessment and solution trends.

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Opportunities in the Meter-to-Cash BPO Market Opportunities in the Meter-to-Cash BPO Market Presentation Transcript

  • Today’s Webinar is brought to you by Everest GroupToday’s WebinarOpportunities in the Meter-to-Cash BPO MarketSynopsis: Meter-to-Cash (M2C) is a significant process for utility companies as it not onlyrepresents their revenue cycle but also touches the end customer directly. This webinarwill discuss key findings from Everest Group’s latest study around M2C BPO opportunityassessment and solution trends.About Everest GroupEverest Group is an advisor to business leaders on next generation global services with a worldwidereputation for helping Global 1000 firms dramatically improve their performance by optimizing their back- andmiddle-office business services. With a fact-based approach driving outcomes, Everest Group counselsorganizations with complex challenges related to the use and delivery of global services in their pursuits tobalance short-term needs with long-term goals. Through its practical consulting, original research and industryresource services, Everest Group helps clients maximize value from delivery strategies, talent and sourcingmodels, technologies and management approaches. Established in 1991, Everest Group serves users ofglobal services, providers of services, country organizations and private equity firms, in six continents acrossall industry categories. For more information, please visit www.everestgrp.com andwww.everestresearchinstitute.com.For more information, contact Mark Williamson at mark.williamson@everestgrp.com 1 Proprietary & Confidential. © 2011, Everest Global, Inc.
  • Q&ATo ask a question during the Q&A session Click the question mark (Q&A) button located on the floating tool bar in the bottom right of your screen – this will open the Q&A Panel Be sure to keep the default set to “send to a Panelist” Then, type your question in the rectangular field at the bottom of the Q&A box and click the send button to submit 2 Proprietary & Confidential. © 2011, Everest Global, Inc.
  • Opportunities in the Meter-to-CashBPO MarketWebinarMay 10, 2011
  • Introductions Saurabh Gupta Vice President Everest Group saurabh.gupta@everestgrp.com Kuldeep Lulla Senior Research Analyst Everest Group kuldeep.lulla@everestgrp.com 4 Proprietary & Confidential. © 2011, Everest Global, Inc.
  • In today’s session, we will cover four key aspects ofthe meter-to-cash BPO market Meter-to-Cash (M2C) definition and overview  Meter-to-cash functional definition and value chainSolution trends and service Demand potential andprovider landscape penetration analysis Leading service providers  Estimation of global potential for offering M2C BPO services M2C BPO meter-to-cash outsourcing and Evaluation of solution market current penetration levels requirements for M2C BPO Service provider go-to-market trends Drivers to outsource M2C scope  Assessment of business issues that drive utility companies to outsource meter-to-cash process scope 5 Proprietary & Confidential. © 2011, Everest Global, Inc.
  • The study is based on three key sources of informationEverest conducted 10+ executive level interviews across the following stakeholders in the market tocreate holistic perspectives on the M2C BPO market Buyers Service providers Subject matter experts Executive interviews with multiple market stakeholders Everest leveraged 20+ case 1  Everest leveraged a studies on outsourcing database of 80+ meter-to- relationships involving cash BPO contracts meter-to-cash scope to augment the analysis and 3 2  The details of the contracts insights were leveraged to understand the solution These cases represent characteristics of meter-to- Everest’s client advisory cash BPO experience in utilities, secondary research from public sources, and repository of service provider capability decks 6 Proprietary & Confidential. © 2011, Everest Global, Inc.
  • Meter-to-Cash (M2C) is an integral part of thedownstream utilities value chain. Companies focusingpurely on utility generation do not have a M2C process Meter-to-cash processes Upstream functions Downstream functions Functions Fuel Transmission Trading Sales Services sourcing/generation and distribution Mining Forecasting Targeting Maintenance Customer interaction Logistics Hedging Campaigns Operation Billing and payment processing Contract Derivatives trading Product management Capacity planning Customer administration management Processes Quality control and Pricing & Structuring Revenue management Field services Service request planning management Capacity planning Portfolio management Customer intelligence Metering Third-party settlement Construction Dealing & settlement Market intelligence Installation services Receivables management Operation and EDM Emergency response maintenance Bulk sales Finance, Accounting, and AdministrationHorizontalFunctions Human Resource Management Procurement services Knowledge services Regulator management, Environmental compliance 7 Proprietary & Confidential. © 2011, Everest Global, Inc.
  • M2C is a utility-industry version of the Order-to-CashcycleTypical meter-to-cash process Account Meter data Payment Credit and Field services Billing creation management processing collections  Verify customer  Order  Meter reading  Prepare bill  Receive  Process credit information Scheduling (automated/  Bill verification payment requests /  Credit analysis  Dispatch manual) (tariff applicable  Process adjust charges and risk  Routing  Upload to by “time of day” payment  Collections assessment  Meter Customer and “time of (including  Bankruptcy  Application installation information / use”) exceptions processing and processing and  Order tracking billing system  Generate and handling) settlement account set up (CIS) dispatch bill  Apply payment  Report charge-  Generate field  Data validation (e-bill, print and  Finalize off customers to service ticket and processing mail, etc.) accounts credit agencies  Update A/R Customer care operations In-Bound contact Out-Bound contact  Service order/service request  Balance and due date reminders  Billing and account enquiries,  Payment reminders dispute resolution  Customer promotion/campaign  Customer complaints management  Meter relocation/removal requests  General correspondenceNote: The traditional value chain for meter-to-cash is undergoing significant changes with the advent of advanced or smartmetering initiatives. Several processes like field services will get automated. At the same time, the analytics capabilities required tomanage the process will increaseSource: Everest Research Institute (2011) 8 Proprietary & Confidential. © 2011, Everest Global, Inc.
  • M2C process costs typically represent 1-2% of the totalrevenues for an electrical utilityElectrical utility costs as a % of revenues Typical break-up of electrical utility operating costs 100% 100% Cost of meter- to-cash 25-30% 10-15% 15-20% 30-40% 40-45% 5-10% 50-60% 10-15% Revenues Operating Fuel, energy Total non- Power Trans- Distribution Customer Administra Total non- costs purchases, fuel electric production mission expenses sales, -tive and fuel electric and utility costs expenses expenses accounting general utility costs transmission & service expenses interchange fees Typical O2C cost as a % of revenues is around 0.2% as compared to M2C costs that could be 1-2% of revenuesSources: FERC form 1 database; Everest experience; annual reports of utility companies 9 Proprietary & Confidential. © 2011, Everest Global, Inc.
  • Everest estimates that the total global potential forM2C outsourcing is around US$50-70 billionMeter-to-Cash outsourcing potential for utilities1US$ billion 600-900  Based on financial data of 16,392 utilities across the globe with a minimum revenue of US$5 million  Represents potential based on estimates of on-going annual spend. Does not 500-760 include capital expenditure or one-time spend on initiatives like smart-metering 50-70 50-70 100-140 Operating and Non-M2C related Cost of M2C In-house M2C Outsource-able maintenance costs function spend M2C spend3 costs2 (~85% of operating (~15% of operating (~50% of M2C (~50% of M2C (10-15% of and maintenance and maintenance spend) spend) revenue) costs) costs) 1 Excludes companies with revenue below US$5 million 2 Includes power production, transmission, distribution, and SG&A. Excludes fuel, energy purchases and transmission interchange fees 3 Includes both BPO and ITO spendSources: Everest Research (2011); OneSource 10 Proprietary & Confidential. © 2011, Everest Global, Inc.
  • Current level of penetration is low implying significantuntapped opportunity and value creation potentialPublicly announced third-party outsourcing contracts in utilitiesNumber of contracts 460 255  Overall meter-to-cash third-party outsourcing penetration is around ~3%  The penetration for meter-to-cash third- 205 party BPO is even 40 IT+BPO lower at ~1-2% 42 BPO  There is a high propensity to outsource IT with M2C 123 ITO BPO (~50%) Outsourcing Contracts with no Contracts with contracts by utilities M2C scope M2C scopeNotes Penetration = number of organizations with outsourcing contracts as a percentage of all organizations There are more than 16,500 utility companies across the globe1 (Source: OneSource Database) Everest Transaction Intelligence capture publically announced outsourcing contracts which represent rough 30-40% of all outsourcing contracts 1 Excludes companies with revenue below US$5 millionSource: Everest Research Institute (2011) 11 Proprietary & Confidential. © 2011, Everest Global, Inc.
  • There are three key drivers for outsourcingmeter-to-cashBusiness issues Drivers for M2C BPO M2C BPO value propositionInefficient processes  Modernize infrastructure with minimal upfrontDisparate and expenditureoutdated technology  Standardized processes to drive efficiency and improve Optimization key process metricsCash constraints  Cash flow optimization by improving revenue realization and reducing costsPricing/cost pressureRising customer  Reduced cost-to-serve to increase price competitivenessexpectations  Leverage third-party provider’s technology and process Competitiveness expertise to improve overall customer experienceDeregulation  Provide new platform (e.g., online portals) for customer interactionsRegulatory mandates  Support in managing impact of smart metering on meter- to-cash processes Smart metering  Provide new capabilities like analytics that becomeDemand-supply important post smart metering implementationmanagement 12 Proprietary & Confidential. © 2011, Everest Global, Inc.
  • Smart meteringImpact of smart metering on M2CDemands on a traditional M2C process during/post smart metering Account Meter data Payment Credit and Field services Billing creation management processing collections Managing the  New  MDMS  Variable and  Provision of web-  Revise debt cutover from technologies upgrades and complex rate based services for management traditional to (e.g., WiMAX) integration with structures online bill strategy using smart meter that utilities have smart metering (Winter/ pay/view, customer (smart meters can not dealt with infrastructure summer; time - customer self- analytics report 50% higher before of –use etc. service etc. consumption  Diminished role  Billing system because earlier of field services upgrade and estimates were integration wrong) Customer care operationsIn-Bound contact Out-Bound contact Less painful after smart metering – automated/self service  Change management during roll-out - Proactively call Reduction in call volumes as smart meters directly alert the customers to let them know about cutover from analog meter system for issues, however need real time identification of and potential issues and available options (amortize costs problems and responsiveness etc.) Analytics Explosion in meter-read data (half-hourly meter reads as opposed to once in 2 months in a traditional meter) Operational analytics (system performance, effectiveness, load trends and forecasts etc.) Customer analytics (demand profiles based on consumption patterns, demand response behavior, customer segmentation based on payment traits etc.)Source: Everest Research Institute (2011) 13 Proprietary & Confidential. © 2011, Everest Global, Inc.
  • Smart meteringOther offerings are also emerging due to smart metering initiatives Pre- Advisory support implementation  Conducting feasibility analysis  Business case creation and analysis  Help build vision and execution roadmap During Program management (including pilot roll-outs) implementation  Meter provisioning support – vendor management and procurement services  Case management – Case handling based on pre-defined business processes  Work order management - Creation, technical planning, allocation and assignment to resources and execution  Mobile applications – Personal Digital Assistants (PDA) applications for execution of work orders in field  Device & Meter Data Management - Collection and delivery of energy consumption, asset management and meter operation  Monitoring & Troubleshooting – Analysis of meter performance and communication status  Customer Management - Management of customer contact via multiple channels Post Smart grid/smart metering analytics support implementation  Network analytics – Operational and security monitoring of systems, applications, and devices  Technical analytics – Carbon impacts, technical losses, asset utilization  Engineering operational analytics – Operational effectiveness, system performance, asset health and stress indication, load trends and forecasts  Customer analytics – Demand profiles, consumption patterns, debt analytics, customer churn analysis, demand response behaviorSource: Everest Research Institute (2011) 14 Proprietary & Confidential. © 2011, Everest Global, Inc.
  • The solution requirements for M2C BPO can beconsidered across multiple dimensions  M2C BPO service offerings can vary from piecemeal to comprehensiveProcess coverage across meter-to-cash functionscope  Nearly 75% contracts in Everest database of M2C BPO contracts had piecemeal scopeTechnology  Role of technology in M2C BPO can vary from pure-play BPO solutions to fullscope scale integrated IT+BPO offerings. IT services in such cases can include systems modernization, maintenance, or even platform solutions  Everest database reflects an almost equal prevalence of both scenariosPricing  Beyond FTE-based pricing, instances of outcome-based or usage-basedstructures pricing models are also emerging in utilities BPOPerformance  Overall M2C business metrics of concern to utilities include cost-to-serve,metrics average days from meter-to-cash, and customer satisfaction ratings  M2C sub-function metrics of interest are timeliness and accuracy of billing and payment processing, % e-bill adoption, % bad debts etc.Solution  Offshore-ability for meter-to-cash is relatively high but factors such as onshorechallenges field services requirements, union issues, language barriers etc. impede the full realization of offshoring potential  Lack of standardization (given the myriad of regulations that vary from country to country) makes it difficult to design a common solution  Pro-outsourcing culture is often lacking in utilities, particularly for BPO services 15 Proprietary & Confidential. © 2011, Everest Global, Inc.
  • We classify meter-to-cash service providers into fourbroad categoriesDiversified IT/BPO global majors Voice-centric playersOffshore majors Technology-focused players 16 Proprietary & Confidential. © 2011, Everest Global, Inc.
  • Go-to-market varies by the type of players Diversified IT/BPO Voice-centric Technology-focused global majors Offshore majors players players  Focus on large-  Significant market  Highest market  Weak market shareDeal size and sized contracts share in contracts share in terms of overall butmarket share signed during overall contracts improvement in 2009-2010 contracts signed during 2009-2010  Coverage of end-  Focused around  Focused around  Focused aroundSolution to-end scope billing and payment billing and meter datacharacteristics across M2C value processing customer care management chain  Most contracts  Most contracts  Most contracts carry  Strong leverage carry piecemeal carry piecemeal piecemeal of technology M2Cscope M2Cscope M2Cscope capability in M2C  Mostly offer pure- offering play BPO solutionClient  Dominant focus on  Dominant focus on  Dominant focus on  Regional focus, noacquisition U.S utilities UK utilities both U.S. and UK particular dominanceapproach  Majority of contracts  Majority of  Majority contracts by geography/type with electrical utilities contracts with gas with gas and water of utility utilities utilitiesSample size: 82 Utility outsourcing contracts including M2C in scope Source: Everest Research Institute (2011) 17 Proprietary & Confidential. © 2011, Everest Global, Inc.
  • Key takeaways Meter-to-Cash (M2C) is an integral part of the downstream utilities value chain. Companies focusing exclusively on utility generation do not have a M2C process Essentially M2C is a utility-industry specific version of the Order-to-Cash (O2C) process. Key processes within M2C are customer account creation, field services, meter data management, billing, payment processing, credit & collections, and in-bound/out-bound customer care M2C process costs typically represent 1-2% of the total revenues for an electrical utility Everest estimates the global potential for M2C outsourcing to be around US$50-70 billion. The current level of penetration is low implying significant untapped opportunity and value creation potential Originating from a number of business issues, there are three key drivers for utilities outsourcing meter-to- cash scope – business optimization, staying competitive, and smart metering implementation Smart metering has a significant impact on meter-to-cash processes. Other offerings are also emerging due to smart metering initiatives The solution requirements for M2C BPO can be considered across dimensions such as process scope, technology scope, pricing structures, performance metrics, and typical challenges in serving this market Meter-to-cash service providers can be classified into four broad categories – Global majors, offshore majors, voice-centric players, and technology-focused players. Go-to-market varies across categories in terms of solution characteristics, target deal size, and client acquisition approach 18 Proprietary & Confidential. © 2011, Everest Global, Inc.
  • Q&A Click the question mark (Q&A) button located on the floating tool bar in the bottom right of your screen – this will open the Q&A Panel Be sure to keep the default set to “send to a Panelist” Then, type your question in the rectangular field at the bottom of the Q&A box and click the send button to submit Upcoming Webinar Q1-2011: Key Market Developments in Global SourcingDate: Thursday, May 12, 2011Time: 9:00 a.m. CDT; 10:00 a.m. EDT; 2:00 p.m. GMTPresenters: Eric Simonson, Managing Partner, Everest Group Amneet Singh, Vice President, Everest Group Salil Dani, Research Director, Everest GroupMore Information: Visit www.everestgrp.com/category/webinars 19 Proprietary & Confidential. © 2011, Everest Global, Inc.
  • For more information Attendees will receive an email with a link to download today’s webinar presentation. A recording of the webinar will be available within 24 hours on our website, www.everestgrp.com/category/webinars For more information related to today’s topic, please contact:  Saurabh Gupta, Vice President, saurabh.gupta@everestgrp.com  Kuldeep Lulla, Senior Research Analyst, kuldeep.lulla@everestgrp.com For background information on Everest Group, please visit:  www.everestgrp.com  www.everestresearchinstitute.com Thank you for attending today’s presentation 20 Proprietary & Confidential. © 2011, Everest Global, Inc.
  • Everest Group leads clients from insight to actionContact us for more information about our consulting, research, and industry resources. Dallas (Corporate Headquarters) Canada info@everestgrp.com canada@everestgrp.com info@everestresearchinstitute.com +1-416-865-2033 +1-214-451-3000 +1-214-451-3110New York India/Middle Eastinfo@everestgrp.com india@everestgrp.com+1-646-805-4000 +91-124-496-1000 +91-124-496-1100 UK Netherlands & Continental Europe unitedkingdom@everestgrp.com benelux@everestgrp.com +44-870-770-0270 +31-20-301-2138www.everestgrp.com | www.everestresearchinstitute.com | www.sherpasinblueshirts.com 21 Proprietary & Confidential. © 2011, Everest Global, Inc.