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Client success stories

Vision for a better future

One of 2004’s most exciting developments was the visionary, collaborative partnership between TXU, the leading Texas based energy company, and Capgemini. The creation of Capgemini Energy to deliver a range of shared services has helped TXU refocus on its core business, and will help others do the same.

When John Wilder became CEO of TXU in February 2004, the company had been through a difficult few years. TXU needed to rethink its strategy and move ahead at high speed. Says Mr. Wilder: “We had to move from being a highly regulated utility to being an effective competitor in an open market, where customers choose on service quality. We needed transformation, not just change.”

Action was needed to improve customer service quality and drive efficiency gains in other core processes. During an intense 90-day period, TXU management concluded that traditional technology outsourcing could not deliver the scale and breadth of benefits required. Something much more ambitious was required.

John Wilder’s vision was to move TXU away from the utility model and become, instead, a genuine industrial company. That meant developing processes, skills, service levels and, above all, an ability to innovate and evolve with the market on a much higher level than before.

A fresh start

That is the basis for the ground breaking partnership between TXU and Capgemini announced in mid-May 2004, leading to the launch, just six weeks later, of Capgemini Energy, in which TXU has a small stake. Capgemini Energy now has responsibility for six core processes, ranging from customer service to financial management.

Capgemini Energy uses distributed delivery techniques, combining resources in Texas with others in Poland, India and China. Utility companies across the U.S. now have the opportunity to use this advanced capability for their own processes, with TXU benefiting from Capgemini Energy’s continuous innovation, cost leadership and service level improvements.

The sheer speed of change was unprecedented within the utilities industry. As Bob Pryor, CEO of Capgemini Energy tells us: “We had to transfer almost 2700 staff on one day. We needed to show immediate service improvements while cutting 30 percent of the operating costs, roughly $150 million (█110 million) annually, out of the business, even as the new approach was taking shape.”

Performance breakthrough

Has it worked so far? Dan Farell, TXU’s senior executive for the project, says that: “Transferring all those people was like swallowing an elephant! And we were going through constant evolution of our own business model even as the change was taking place. Yet Capgemini is delivering on its promises, despite the incredible speed of execution and magnitude of changes they are implementing.”

During 2004, TXU underwent a major overhaul that resulted in an increase in market capitalization of $6 billion (€4.4 billion); put $3 billion (€2.2 billion) of cash back into the business and achieved a 175 percent stock price appreciation. That’s a pretty strong illustration of a winning strategy, one where the Capgemini Energy partnership is a significant driver of future growth.

The last word belongs to John Wilder, whose bold vision has driven the entire partnership. He says: “Competitive advantage will be driven through innovation: ideas we cannot even guess at today. Now we have an innovation partner that can bring us the new ideas we can adapt to make us long-term winners.” No wonder the entire industry is watching this partnership with such intense interest.

Written in collaboration with:

John Wilder

Dan Farell
Former CEO TXU

Bob Pryor
CEO Capgemini Energy LP

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