What you can do with the help of big friends

The wind whips off the Rocky Mountains and through the canyons of downtown Denver, bringing a sharp hint of impending winter.

It doesn't keep people off the street, though. A group of young people sit around the chess tables in the 16th St mall and homeless men look for warm steam grates on the fringes.

The steam comes from power company Xcel Energy. By pumping the byproduct of its Denver generation plant under the streets, it raises the ambient temperature of the downtown area and lowers demand for electricity.

Xcel is the fourth largest power utility in the United States, operating in 11 states. It has five million electricity and gas customers from Texas to Minnesota.

At the heart of its operations is a new billing system built in Auckland by Peace Software. It is one of the largest implementations of package software ever done in the utility billing or CIS (customer information system) market - and a project that has put Peace on the map.

Peace Software, named after founder Brian Peace, started by building systems for municipal power, water and gas companies in New Zealand. Peace saw deregulation in the power industry was part of a worldwide trend and he set out to create a product to meet the needs of the new environment.

As the home market consolidated, Peace opted not to fight for deals here, setting his sights instead on Australia and North America.

He and wife Sherin moved to Miami, leaving 170 software developers back in Auckland. With a US head office address, Peace secured funding from well-connected venture capital funds and started knocking on doors, communicating his passion for his product and his vision for the industry.

Chief executive Sebastian Gunningham, a former top Oracle and Apple executive, recruited this year to head the company's next phase of development, said one reason Peace Software was successful in the US was that Brian Peace had a laser focus in going after the one or two deals he wanted.

"He didn't take everything that came his way because in a market that consumes a lot of IT like the utility industry, every day you get, `will you do this for me?', `will you build this module?', `can you do sewage?"'

Xcel was one of those deals that could make or break a technology vendor.

The company was formed in 2000 by the merger of Denver-based New Century Energies and Northern States Power in Minneapolis, creating a combined entity with US$7.9 billion in revenues.

To achieve a projected US$1.4 billion in cost savings over the next decade, Xcel needed to replace a lot of its systems, including two mainframe-based billing systems.

It also wanted to be ready for deregulation, if and when it happened.

To win the deal, Peace first had to convince IBM, which manages all of Xcel's information technology, that it was up to the job.

Peace had already worked closely with IBM, rolling out systems for Country Energy in Australia.

Dave Marley, the senior IBM executive in charge of the Xcel project, said based on its past experience, IBM was prepared to vouchsafe Peace. He said that meant the probability of success for the project went up dramatically.

It is a matter of scale. Peace has some good expertise but it is a small company, so it is a great model to team up with a large integration and service provider.

Peace also benefited from a drive by Xcel chief information officer Ray Gogel, himself a former IBM executive, to develop a new sort of outsourcing that allowed IBM, Xcel and Peace staff to work far more closely than traditional implementations.

Gunningham said the project was complicated.

A power bill issued by a regulated American power company is computationally challenging. Utilities are required to pay local taxes. There may be multiple properties on a single bill. Customers can choose to smooth out seasonal fluctuations by paying a set amount each month, with any undercharge or overcharge put on to the next year's bills.

The result is a bill with dozens of line items.

Gunningham said: "To install our product in Xcel, there needed to be 130 connection points into multiple systems in the enterprise, so it is the heart transplant."

IBM's role was to make the product fit in with different types of technology going back decades.

"This is stuff we don't know, like connections into the different regulatory bodies in each state, industry specific products, enterprise resource planning systems, customer management systems, outage management, demand management and on and on," Gunningham said.

Most importantly for any large project was the change management.

"Xcel has to get all its people - guys in the business who have done the same thing for 20 years - and say `we are changing your life tomorrow'," Gunningham said.

The southern part of the system is now live. The 2.4 million or so customers from Minneapolis and other cities in the northern states will be added in February.

Xcel is producing more than 400 bills a minute on the system. When all five million customers are on board, it will need to run at 550 bills a minute. Tests show it is more than capable of that and can, in fact, cope with more than 10 million customers.

"Few billing systems in the world can bill this volume - SPL WorldGroup, SAP and now Peace. They call it the club of three," Gunningham said.

Joining that club is a significant achievement for Peace.

So how much is the Xcel deal worth?

Utility billing software licences typically cost about US$4 a customer. Implementation costs can be 10 times that, but one of Peace's selling points is faster implementation.

Gogel would not give a cost for the job, but said Xcel would have the lowest benchmarked price per meter for an energy utility.

Peace's policy is to report revenue when a job is complete.

Accounts made available at the Companies Office this week show the Peace Software International group made a US$3.7 million after-tax loss last year on revenue of US$26.5 million, compared with a US$3.2 million profit in 2002 on revenue of US$41.4 million. At the end of the year, it had US$14.1 million in cash.

Gunningham said the parent company made a small profit and the group loss was no cause for alarm.

"The cash position, and the fact we have no debt, shows we are very strong," he said.

"There are thousands of utilities around the world who will need to replace their CIS within the next decade. It is a real big opportunity."

Gogel said by aligning with companies such as Xcel and IBM, Peace had created the foundation for growth. "The fact Peace can play such an integral part in such a large company in the US, the fact IBM has taken them seriously, the fact they have come with a unique view of the marketplace and have evolved from a quiet role to a loud role, those are things that all resonate."

Adam Gifford travelled to Denver as a guest of Peace.