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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

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