This IDC study discusses TXU Corp.'s 10-year partnership with Capgemini (announced May 18, 2004), through which the IT and business services vendor was contracted to provide business process outsourcing (BPO) services for TXU's customer care, human resources, finance and accounting, revenue management, technology, and supply chain functions. The deal, valued at $3.5 billion, culminated in the formation of Capgemini Energy LP, a limited partnership formed by Capgemini and TXU, designed to cater to the business and IT outsourcing needs of TXU, as well as other utilities companies in the future. This document discusses TXU's decision to outsource, the vendor selection process, key elements of the engagement, and an update on the early execution phase of the project.

The study is based on two phone interviews ? one interview conducted in January 2005 with Bob Pryor, CEO of Capgemini Energy, and a second interview conducted in February 2005 with Dan Farell, senior vice president and principal financial officer for TXU Electric Delivery Co. It provides valuable insight to companies evaluating BPO on what some of the challenges and best practices are to source a BPO provider. Specifically, it delves into important issues such as getting senior leadership endorsement, working through the decision-making process, evaluating vendors, implementing appropriate governance mechanisms, and putting in place appropriate pricing mechanisms for different types of work.

"Seeking to address recent competitive pressures, many utilities companies are increasingly embracing a BPO strategy," said Shruti Yadav, research analyst, BPO Services. "Capgemini Energy's BPO deal with TXU is a landmark engagement of unprecedented scope and scale, indicating the growing relevance of the BPO model to companies in utilities and other key industries faced with similar business challenges."