Chapter 14 Managing Projects 561 INTERACTIVE SESSION: MANAGEMENT AUSTIN ENERGY'S BILLING SYSTEM CAN'T LIGHT UP Austin Energy handles electrical, water, and waste to bill for utilities properly, the City of Austin was disposal for the City of Austin, Texas, and surround- losing revenue. ing counties, serving more than 1 million residents. Officials with Austin Energy put the blame for the It is a publicly owned company and an arm of city project's woes squarely on IBM. Austin Energy's CIO government, and returns its profits to the commu- Alan Claypool stated in an interview that we have yet nity each year. The company has provided $1.5 bil- to reach a stable system (and) we are extremely disap- lion in dividends back to Austin since 1976, which pointed and continue to have serious concerns about help fund city services such as fire, police, emer- the quality of service we have received from IBM to gency medical services, parks, and libraries. date." He noted in a September 2011 message that IBM Austin Energy has one of the largest renewable was repeating mistakes as it tried to implement the energy programs in the country, but its legacy system. Two separate errors by IBM cost the project billing systems did not integrate with smart meters 37 hours of delay, and one of the errors was the same and other newer technologies. It also lacked newer type of error made by the same team in December customer assistance options, like the ability to 2010. "We continue to be gravely disappointed in the choose the time of the month that a customer pre- delays and seemingly ad hoc methods toward manag- fers to pay bills. To modernize the billing system ing this project," Claypool stated. and to bring its information systems up to date with The company now plans to include provisions newer energy conservation methods, Austin Energy in future contracts with IBM that guard against contracted with IBM in 2009 to create a central- similar mishaps, with a particular focus on system ized billing system and to run the system for five availability, and Austin is withholding $3.8 million years, Austin agreed to pay IBM $55 million, with in payments currently owed to IBM until the system $38 million allocated for building and installing the meets baseline performance benchmarks. new billing system, and $17 million for operating Claypool and other Austin Energy executives have the system for five years after its completion. The made numerous direct appeals to IBM officials, rang- new billing system was slated to handle electricity, ing from the managers of the billing system project water, trash, and recycling. Austin was optimistic all the way up to then IBM CEO Sam Palmisano. that a successful installation would eventually pay Claypool first wrote directly to Marc Lautenbach, for itself in savings. the head of IBM's Global Business Services unit in To date, the project has been a disappointment North America, which was responsible for the billing at best. The system was supposed to go live in early system project. He explained that thousands of 2011, but is still not fully operational. Software bugs customers required one-on-one assistance to access have led to errors in thousands of bills. Over 65,000 their accounts or correct billing errors. Lautenbach customers never received a bill, and another 35,000 was then replaced as Global Business head by Frank have received inaccurate bills. For example, one busi- Kern, who wrote back to Austin and described a five- ness that owed Austin Energy $3,000 was instead step plan to fix the problems with the billing system. charged $300,000. Although Austin Energy was able Kern's plan was to improve communications to identify affected accounts and work with custom- on business impacts caused by known defects, to ers individually to correct the problems, the com- ensure that problems with the system are delegated pany was ill-prepared to handle the outpouring of to the correct people, to implement best-practice customer dissatisfaction with the new system, and processes to ensure repeatable success, to work more their customer service department was in danger of closely with third-party vendors like Oracle, and to being overrun. identify gaps outside the project's scope and recom- According to Austin Energy manager Larry Weiss, mend solutions. Since that time, Kern has retired, "Instability issues ... continue to have serious and and Claypool wrote back to IBM yet again to report costly impacts on our business and our customers." that no progress had been made since the five-step Persistent system errors prevented the company plan was first developed for Austin Energy's billing from billing apartment residents for water, balancing system. Austin Energy officials also objected to IBM's its books, and filing audit reports. Without the ability suggestion to add more powerful servers to help fix 562 Part Four Building and Managing Systems the problem because that would force the utility to pay more than originally planned on the project. Despite all of the blunders, Austin Energy continues to hold out hope for a successful and amicable solution to the problem. Austin Energy has a relationship with IBM dating back several years, when the companies contracted together to develop an inventory manage- ment system for the city. Though that system also expe- rienced problems, they pale in comparison to the billing system fiasco Austin Energy also claims that IBM's errors have cost the company $8 million since the proj- ect's outset, so switching vendors might simply make matters worse for Austin Energy with so much invested in IBM's project development already. When asked for comment, IBM has only said that it is working with Austin Energy to resolve the billing system issues. IBM has successfully managed other projects like this one in the past. The IBM billing system consists of Oracle databases running atop IBM's WebSphere middleware and Tivoli management tools. The problems with the system have not stemmed from one root cause. The new billing system is complex, with 73 different interfaces, and getting them all to work seamlessly with one another has been an arduous process. Customers have been unable to access the system's online portal, and Austin Energy employees have described their experience with the system as if they are "alpha testers," meaning they have encountered bugs and issues that should never have made it to a live version. Roughly one in four Austin customers has had problems with IBM's system. Some customers had their accounts canceled and could only correct the errors after several phone calls. The billing system woes have come at a bad time for Austin Energy, which was preparing to institute its first rate increase in 17 years. In the wake of the public relations disaster brought about by the botched billing system, the company has had to rethink those plans. As of February 2012, most-but not all of the billing system errors had been fixed. Claypool remained hopeful that Austin Energy would be able to maintain an amicable relationship with IBM and finish the work successfully. IBM has been respon- sive, Claypool noted, but Claypool felt its response was too incremental.... We would like to see a faster response." Going forward, Austin Energy's out- sourcing contracts will include stronger penalties for vendor nonperformance, including the question of system availability. Sources: Paul McDougall, "chronology of an Outsourcing Disaster," Information Week, February 23, 2012, Austin Energy Fixes Billing System Bug." MyFox Austin.com, February 22, 2012; and www. austinenergy.com, accessed March 22, 2012. CASE STUDY QUESTIONS 1. Is the Austin Energy project a failure? Explain your answer 2. Describe the business impact of the faltering Austin Energy project 3. To what degree was IBM responsible for the prob- lems countered by the Austin Energy billing project? Was Austin Energy at fault for the prob- lems? Explain your answer. 4. What were the specific organizational or technical factors as well as management factors involved in this project failure? 5. Describe the steps Austin Energy and IBM should have taken to better manage this project