[News Item from Business Wire] Cayenta, Inc. recently announced the award of a contract with the City of Portland, Oregon. The contract encompasses all software, implementation services and support for Cayenta Utilities.

While the North American CIS Market is not sizzling, many of the significant agreements continue to come from municipal utilities as witnessed by recent deals at the Orlando Utilities Commission and the Metropolitan Sewer District of St. Louis. This agreement between the city of Portland and Cayenta continues this trend.

Portland's purchase of a new customer information system (CIS) is particularly interesting on a number of fronts. It demonstrates that despite a slow fall and winter, utilities are still looking for technologies that can deliver value. More importantly, it also demonstrates how important the relationship is between a CIS vendor and a utility.

That Was Then
Seven years ago, Portland contracted with a CIS vendor for a new billing system. After the signing of the contract, the relationship between the vendor and the city became quite tumultuous and adversarial. According to the city, the new system's activation in February 2000 resulted in thousands of unbilled accounts, lost collections, far higher staffing, higher water and sewer rates, an estimated $20 million to $30 million in city losses, and three consecutive years of problems reported by the city's outside auditor.

The vendor agreed in January to pay $7 million as part of a settlement agreement with Portland, far short of the city's alleged losses. Under the agreement, the city will pay the vendor $385,000 a year, for up to three years, for systems maintenance.

While accounts are billing properly now according to Water Bureau officials, the city is afraid to add new functions to the current system for fear of developing new problems. A staff of more than 100 is required to run and maintain the billing system, double what the city expects once Cayenta's system is in place. As an additional concern, the city felt that the vendor is unlikely to continue supporting its current billing software.

For its part, the vendor claims the city made changes to the computer project that added to its complexity, such as implementing rate reform for low water users. The company also claims that the city made mistakes managing the project and communicating with the vendor. The company claims that the city's own technical team warned bureau managers days before the system was switched on that it was not ready. The vendor's initial contract called for the company to be paid $3.5 million. It collected $2.1 million before the city stopped making payments.

This Is Now
In the spring of 2002, the city began the search for a replacement system. Having gone through such a negative experience, the city began one of the country's most high profile and meticulous searches for a CIS to serve its approximately 180,000 accounts.

In the end the city of Portland selected two finalists: SAP and Cayenta (a UtiliPoint client). According to Tim Grewe, Chief Administrative Officer for the city of Portland, Cayenta and SAP were both strong candidates, but Cayenta's bid was lower and presented less risk of cost or schedule overruns. Cayenta's bid was $3.5 million, and SAP's was $8.8 million. Given the incredible level of due diligence conducted in the search and the exhaustive process, the selection of Cayenta should be a proud feather in the cap of the company.

Over the last six weeks the city of Portland has conducted additional due diligence, including visits to Cayenta customers and more analysis of gaps between the city's requirements and Cayenta's application, in an effort designed to ensure the city is not getting an unrealistically low bid.

Portland will implement Cayenta Utilities to support sewer, water, and storm water billing and customer service to the city's residents. “After completing an extensive and comprehensive evaluation process of the products available in the marketplace, we confirmed that Cayenta Utilities provided the highest degree of fit to match the city's business processes. It was the best solution to meet our current and future needs as a provider of municipal water and environmental services,” stated Grewe. “Cayenta's implementation and project management strategy gives the city confidence that we will have a successful and timely project that will minimize the risks associated with CIS projects.”

According to the city of Portland, unlike the previous implementation, this time the new system won't be turned on until all its functions have been thoroughly tested. An outside quality assurance consultant will also monitor the system's progress. Additionally, Cayenta and the city of Portland have pinned down a detailed work schedule, and the system will be largely "out of the box," requiring far fewer tweaks than the previous system. The city hopes to begin installing the new system this fall, with the goal of getting it ready to produce bills by July 2005.

I recently had the opportunity to talk to Paul Wyman, Vice President of Sales & Marketing for Cayenta, about the recent agreement with the city of Portland. According to Wyman, the accounting requirements between the water and sewer funds were a major concern of the city. “Thanks to Cayenta's 20 years of experience in municipal finance as well as utilities, fund accounting is one of the areas where Cayenta Utilities excels,” said Wyman. “The extensive due diligence performed by the city demonstrated that Cayenta Utilities and Cayenta's services staff can meet both the city's accounting and billing requirements.”

The premise-based licensing agreement between the two companies is for the Cayenta Utilities application. Cayenta Utilities is a customer relationship-based CIS software application designed specifically to support all municipality utility services, including but not limited to water, wastewater, sewer, storm water, electric, gas, solid waste, and miscellaneous services. Cayenta Utilities is part of a suite of municipality and utility solutions from Cayenta that includes complete financial and asset lifecycle management systems.

Given the difficulties that the city of Portland has had with the previous CIS vendor, Cayenta must be entering a highly charged political environment with a great deal of sensitivity to achieving a successful implementation. I recently asked Michael Gardner, President of Cayenta, how one prepares for entering such an environment, and managing the sensitivity? “We've been aware of the sensitivity from all of the parties from the beginning,” said Gardner. “We spent a lot of time to understand the organization, and to learn the challenges that the city of Portland has faced in the past. Understanding what the challenges have been will help us to not make those same mistakes. We have also worked closely with the city to make expectations clear and the communications process open. The city of Portland, in turn, has done a wonderful job of preparing its employees for the upcoming changes by deeply involving them in the evaluation process. As a result, both Cayenta and the city of Portland are in a strong position going forward.”

As the case of the city of Portland demonstrates, an unsuccessful CIS implementation can have severe repercussions. How does a utility avoid these risks? Unfortunately, there is no one way to remove all of these risk, but the aggressive due diligence completed by the city of Portland in the selection of their newest CIS serves as a good example as to how to lower these risks. Steps such as ensuring proper functionality, reference checking, verifying technical architecture, and ensuring project management expertise all serve to help with this endeavor.

CIS software selection is an incredibly time consuming and arduous task, but with a detailed and well thought out process, a utility can be rewarded with a properly selected system that can meet their needs for years to come at an affordable price. It certainly appears that this message has been received and implemented in Portland.