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TNT NV is a global leader in express delivery, logistics services and mail. Based in the Netherlands, it employs over 160,000 people in 63 countries. Its in-country subsidiaries are given the commercial freedom to address local market conditions, while operating under the brand values and business processes of the parent company.
TNT Express Italy is the Italian market leader for domestic and international parcel and package shipments with revenues of €550 million in 2005. It carries around 35 million consignments a year using 135 depots and 19 distribution hubs and employs 3,500 people (not including around 3,000 drivers and delivery staff belonging to outsourcing subcontractors).
The express delivery market globally is very competitive and price driven. Meeting the market price is simply a condition of doing business: the only real opportunity for differentiation is customer service.
Until the late-nineties, in the domestic Italian express delivery market, customer contact centres were unheard of. The only way for customers to get, say, price information and tracking data was to ring their local depot. Whereas large depots might have dedicated customer service staff, in smaller depots the first person available answered the phone. That took people away from their normal jobs, affecting service delivery. Customers could wait a very long time for a response, as depots tried to juggle answering queries with managing business as usual.
Although a call centre already existed for its international business, TNT Express Italy was the first company to recognise the need to adopt a more customer-centric business model for the domestic market.
Riccardo Bergerone, CIO at TNT Express Italy, explains: “We have always been the domestic market leader and, to maintain that position in the face of increasingly aggressive competition, we took the decision to supercharge our customer service capabilities. In 1998, we started the creation of a network of contact centres. This was a huge investment. There were no manpower savings to counterbalance the costs of premises, people and systems.”
By 2001, the new contact centres were fully established and customers had been successfully persuaded to switch to the new streamlined facilities. TNT Express Italy then went looking for an outsourcing partner.
Riccardo Bergerone again: “The reasoning was simple. Our core business is shifting physical things around, not running telecommunications. Furthermore, by outsourcing the different components of our contact centre infrastructure, we would have a single interface, instead of different suppliers blaming each other for service problems. We wanted to rationalise our customer interface with a single freephone number, and enter into a full outsourcing contract for the network and hardware platform.”
Under the terms of the outsourcing contract the successful supplier would be required to manage:
- TNT Express Italy’s existing call centre technology platform – including Avaya ACD hardware and Didata contact centre software
- TNT Express Italy’s dedicated network infrastructure – including provision of the 803XXX freephone number
- TNT Express Italy’s population of PABXs – some 94 switches from various suppliers
Full maintenance and support – including hardware and software enhancement and upgrade – would be required throughout the life of the five-year contract backed up by clear service level agreements (SLAs).
Explaining the eventual choice of BT as an outsourcing partner, Riccardo Bergerone says: “BT was proactive and customer-focused. Its people listened carefully to our needs and explained how they would actually design and build the service that we required. They took the trouble to get close to us and did not adopt a complacent take-it-or-leave-it attitude.”
The value of the contract was €5 million over five years and – within that financial envelope – BT purchased from TNT Express Italy all of the relevant hardware and software for a consideration of €1.15 million. These assets would therefore not appear on TNT Express Italy’s balance sheet in future, saving depreciation charges and conferring upgrade and replacement costs to BT.
Riccardo Bergerone continues: “The importance of personal relationships should never be underestimated: it is probably one of the most important success factors in an outsourcing partnership.”
TNT Express Italy is quite candid about its view of BT at the time. It knew that the service provider did not necessarily have all the skills and resources from Day One. But BT passionately shared TNT Express Italy’s vision for differentiation through customer service. It was believed that, together, the two companies could grow the necessary skills.
Riccardo Bergerone explains: “Both sides have made gains from this outsourcing contract. I would argue that through our partnership, BT has developed the right skills to handle such contracts for a wide variety of companies here in Italy. For our part TNT Express Italy has learned to be very clear about its business needs and requirements from the outset. We have had to develop our ideas – such as the need for intelligent network services – as the relationship has matured. But that is the advantage of having a shared vision and staying close to each other.”
The outsourcing contract with BT is but a small part of the massive culture change that TNT Express Italy has gone through over the past seven years. The move away from an operation-centred to a customer-centred ethos – most visibly evidenced by the customer service contact centres – goes hand-in-hand with a ruthless focus on core business.
The change management process involved was for BT to identify and audit the assets that it was buying and then put in place the back-to-back contracts it needed with third parties such as Avaya, Didata and Comtel for ongoing supply and support. The company also chose to rationalise the original thirteen TNT Express Italy contact centres down to just six: three major centres in Turin (the international hub), Padova and Naples; and three smaller centres in Milan, Florence and Rome.
The outsourcing agreement between TNT Express Italy and BT involved the transfer of assets and third party support arrangements rather than transitioning people working in contact centres. The contract released people in TNT Express Italy’s IT function to concentrate upon value added tasks, rather than waste time managing multiple suppliers.
TNT Express Italy’s approach to risk management is typically robust and straightforward. Riccardo Bergerone explains: “We are a very demanding customer and we simply put pressure on our suppliers to deliver. But BT is a commercially astute company. It recognised the nature of the opportunity, and the downside of getting it wrong. Yes, TNT Express Italy was taking a small gamble in placing the contract with BT, but the potential benefits for both partners made sure that we got the right result.”
The implementation of the freephone number was a real step forward in TNT Express Italy’s management of its customer relationships. It provided a single point of contact for customer service and shifted the responsibility for paying for calls from the customer to the supplier. However, with up to 35,000 phone calls per day – peaking at 55,000 per day during the pre-Christmas period – TNT Express Italy quickly found itself with load balancing problems between the contact centres.
The decision on which contact centre to route a call to was based upon the area code from which the call originated, meaning that one contact centre could be very busy while another would be relatively quiet. This had a marked effect on the speed and quality of the local response, and the productivity of the individual contact centres.
What TNT Italy needed was a network service that could route calls to a contact centre based upon not only a customer’s needs but also the availability of the right agent to answer the query – wherever they might be in Italy. The problem was that, at the time, BT did not have such an “intelligent” network architecture.
Working together, TNT Express Italy and BT specified the required network facilities. BT then built the required intelligence into its infrastructure. First, it implemented interactive voice response (IVR) enabling callers to choose the service they required e.g. domestic or international shipment. Second, it provided the means to move calls around the system so that, for example, a free agent in Turin could answer a call originated in Rome. Together these initiatives enabled TNT Express Italy to convert the six individual contact centres into one large “virtual” contact centre.
Riccardo Bergerone says: “This is an example of how the outsourcing relationship works. We wanted these changes made very quickly and BT told us what it thought was achievable. We then negotiated a compromise timescale that was actually a lot faster than BT’s original estimate.”
It is not possible for TNT Express Italy to establish the customer service benchmark that existed before the outsourcing agreement was entered into, because there was no way of centrally measuring, say, call answering times across its contact centres.
Riccardo Bergerone comments: “Now that we have a single supplier with overall responsibility we can centrally measure total calls, lost calls, time to answer, call holding time, and so on.” The virtual call centre is now handling as many as 6,600,000 calls per annum. The percentage of calls handled within 10 seconds has improved from 69 per cent to 84 per cent.
Service outages are classified according to their severity. For example: a Level 1 customer service fault would see 30 per cent of users or lines out of service; a Level 4 fault would be a system performance problem with no immediate operational effect. The SLA states that BT will fix Level 1 faults within four working hours and provide an update every hour. A dedicated BT service manager is available to TNT Express Italy and, as well as handling problems and queries, he provides a quarterly traffic report for forward planning.
The creation of the virtual call centre has enabled TNT Express Italy to significantly improve productivity across its call centres. The efficiency ratio of the agents, measured as percentage utilisation of productive time, has improved from 70 per cent to 80 per cent. TNT Express Italy estimates that that productivity improvement is saving around 30 people or the equivalent of €1 million per annum.
Riccardo Bergerone concludes: “Cost savings were not the primary objective of the exercise. This was all about TNT Express Italy being able to differentiate its customer service and maintain its market leadership. In both of those areas we have more than exceeded our aims. We are very pleased with the service that we are receiving from BT. The process and cultural changes that we have made together have been entirely achieved without affecting customers – other than to improve their experience of working with TNT Express Italy.”
Outsourcing to BT of the TNT Express Italy contact centre and PBX infrastructure including full asset transfer