Strategic CIO // IT Strategy
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2/23/2012
12:10 PM
Paul McDougall
Paul McDougall
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Chronology Of An Outsourcing Disaster

Austin Energy's deal with IBM for a new billing system has gone painfully awry, internal emails reveal, resulting in lost revenue for the utility and outraged customers.

IBM's contract to provide a Texas utility with state-of-the-art billing systems has sunk into such a quagmire of missed deadlines, buggy software, and costly errors that the utility's CIO said he's "gravely concerned" about whether IBM can fix the problems.

"We have yet to reach a stable system," said Austin Energy CIO Alan Claypool, in an email to an IBM exec dated Feb. 10. "We are extremely disappointed and continue to have serious concerns about the quality of service we have received from IBM to date."

Claypool's message followed months of correspondence between himself and his staff and IBM project managers on multiple problems. At one point, Austin Energy's general manager asked then IBM CEO Sam Palmisano to personally intervene, but Palmisano passed the request to a subordinate.

Austin Energy contracted IBM in 2009 to build a centralized billing system for the electricity, water, and waste disposal services it provides to more than 400,000 residents of the Texas capital. The contract called for Austin Energy to pay IBM a total of $55 million over eight years, but already the utility is holding back $3.8 million in scheduled payments for what it says is IBM's poor performance.

The billing system, built on IBM Websphere and Oracle database technologies, was supposed to go live in early 2011, but it's still not fully operational. Meantime, Austin Energy says it has lost significant revenue because its customers have been receiving erroneous bills or no bills at all. A business customer that should have been billed $3,000 got hit with a bill for $300,000, according to a company spokesman.

Problems date back more than a year, emails obtained by InformationWeek through an open records request show. In a Sept. 7, 2011 message to IBM VP Robert Hallman, Claypool complained that IBM was repeating mistakes as it tried to implement the system. "During the recent Dress Rehearsal 2, two separate errors by IBM cost the City project a combined total of 37 hours of delay," Claypool wrote. "One of the errors was the same type of error made by the same team in December 2010. The second was by an employee who was not available for executing a key task at the previously scheduled time."

Claypool added: "These types of issues continue to be a part of the ongoing concerns with IBM's quality of delivery."

Ten days later, things weren't getting any better. "Again, we continue to be severely disappointed by the implementation services from IBM," Claypool wrote to Hallman on Sept. 17. "As you are aware, we had an unscheduled outage while teams were preparing for our major testing this morning."

[ Implementation of complex software is often dificult. Read 18-Month Rollouts: Nothing To Brag About. ]

Claypool added: "As a result of the repeated errors and delays by IBM, we continue to be gravely concerned at IBM's ability to complete a successful system integration and go live."

On Sept. 27 of last year, Claypool told Hallman: "We continue to be gravely disappointed at the delays and seemingly ad hoc methods toward managing this project." That same day, Kerrica Laake, an Austin Energy division manager, informed Claypool that a portal IBM set up so customers could pay bills online wasn't working. "IBM has failed to properly set up and fully test their payment solutions for the Online Customer Care Portal," Laake wrote.

Frustrated with the mounting problems, Claypool wrote directly to Marc Lautenbach, who runs IBM's Global Business Services unit in North America, on Oct. 17. "As the City of Austin continues to face seemingly endless failures and crashes by our IBM 'partners' on the current and past implementation projects, I find myself writing you, in hopes that you will, at long last, be that person. Beyond that, I don't even know what to say at this point," Claypool wrote.

Lautenbach responded the same day: "Alan, I'm aware of the situation and I am disappointed we are not meeting your expectations ... We will get back to you with a plan."

Things apparently had not gotten any better 11 days later, when Claypool fired off the following missive to IBM managing partner Jay Bellissimo. "Jay, when we contracted with IBM for implementation services, we did not plan for, staff, or anticipate using our system and folks as the Alpha testers for the IBM code deliveries. Prior to delivery, we expect the code has been reviewed, validated, and will perform without software defects."

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Deregulate This
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Deregulate This,
User Rank: Apprentice
9/8/2012 | 12:44:06 AM
re: Chronology Of An Outsourcing Disaster
Good programming takes good planning, requirements gathering, and good programmers. If any of these are missing, the project is always a failure. Outsourcing is usually bad for the customer, because the managers who request the outsourcing have no understanding of the needs.
hubbert
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hubbert,
User Rank: Apprentice
7/11/2012 | 1:38:13 PM
re: Chronology Of An Outsourcing Disaster
GOOD PROGRAM MANAGERS ... good program managers from both IBM and Austin Energy could have avoided all these problems. It still puzzles me why businesses are willing to write $50M project checks but are unwilling to assign a good program manager (with both accountability and authority) to make sure the program executes.
phenry017
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phenry017,
User Rank: Apprentice
2/29/2012 | 1:50:04 AM
re: Chronology Of An Outsourcing Disaster
IBM probably should have checked the resumes of the cheap, foreign h-1b workers it hired instead of Americans.
Mentor
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Mentor,
User Rank: Apprentice
2/28/2012 | 5:10:49 AM
re: Chronology Of An Outsourcing Disaster
These are just excuses. If you fail, you should go out the door. The customer is always right.

Say hi to Benavides for me.
Mentor
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Mentor,
User Rank: Apprentice
2/28/2012 | 5:08:46 AM
re: Chronology Of An Outsourcing Disaster
and delivering on what you promise. This is a failure of management, enabled by lack of local, on the ground skills.
Mentor
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Mentor,
User Rank: Apprentice
2/28/2012 | 4:50:30 AM
re: Chronology Of An Outsourcing Disaster
IBM Communications corrected? Mon Dieu!

That's the uniqueness of the Public Sector. It's public and vendors can't hide behind a facade of NDAs.
Mentor
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Mentor,
User Rank: Apprentice
2/28/2012 | 4:50:05 AM
re: Chronology Of An Outsourcing Disaster
Two wrongs don't make a right, as the old saying goes. There is a trend detected here and IBM needs to fix it quickly.

This problem is not about CSC, which has its own problems. This is an IBM problem which is repeating itself in this industry.
Wakjob2
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Wakjob2,
User Rank: Apprentice
2/28/2012 | 2:34:04 AM
re: Chronology Of An Outsourcing Disaster
Hire more Indians! I am sure that will fix it!
Sam Iam
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Sam Iam,
User Rank: Apprentice
2/26/2012 | 9:26:51 PM
re: Chronology Of An Outsourcing Disaster
Good point, I stand corrected.
Sam Iam
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Sam Iam,
User Rank: Apprentice
2/26/2012 | 9:24:30 PM
re: Chronology Of An Outsourcing Disaster
It is no good. I am not going to say that it is acceptable, but do you do a lot of work on completely custom J2EE business logic with 73 unique interfaces and real time data feeds coming in from thousands of smart meters/end points? It seems as though the real problem is a lack of UAT, functional and data quality testing. This application should never have been released for go-live if it was that raw. It is difficult to determine who is at fault, who was ultimately responsible for testing and what decisions were made, based upon the information in the article.
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