Tech does much to boost our nation. But when it goes wrong … oh, boy. In part one of a two-part series, the Herald is recapping some of NZ’s biggest misfires (read Part 2 here).
Incis
The granddaddy of all New Zealand tech project meltdowns began in 1994,when police commissioned IBM to build a replacement for the Whanganui Computer Centre – aka a mainframe that took care of all the thin blue line’s data needs at the time.
The American tech giant had a plan for the Integrated National Crime Information System or Incis. But things went off the rails amid a furious debate over whether the new system should run on IBM’s OS/2 (seen at the time as a challenger to Microsoft Windows) or Windows NT. IT Minister Maurice Williamson was with Camp Microsoft.
The $110 million project was abandoned in October 2000, two years over deadline and more than $20m over budget when the Crown and IBM reached an out-of-court settlement to end a row triggered when IBM decided it could not complete the system.
The police were left nothing for their $110m. The Whanganui Computer Centre would limp on until its closure in 2005.
IBM paid the Crown $25m in a settlement.
An inquiry found “almost everyone to blame”, the Herald reported in the aftermath, with police overly ambitious in what they thought they could achieve, with little monitoring amid “variations” in 1997 that essentially rescoped the whole project, and Big Blue working with unproven technology.
In short, it was a blueprint for so many Crown agency upgrades involving Big Tech firms.
Eric Watson (second from left), pictured in 1999 during the build-up to Flying Pig's launch. At the time, he said he planned to float the e-tail operation. Photo / Supplied
Flying Pig
When it launched in 2000, Flying Pig was billed as New Zealand’s answer to Amazon.
It was backed by three firms in which Eric Watson had a stake, including Pacific Retail, then-owner of the Noel Leeming and Bond & Bond chains, and had something of a first-mover advantage.
Nearly a quarter of a century later, the real Amazon has still got no closer than Australia, but Flying Pig is long gone.
Investor impatience and the Year 2000 tech wreck meant its wings were clipped just months after launch, with half its 40 staff culled. It was slaughtered the following year.
Telecom’s Yahoo!Xtra Bubble
In 2007, there was chaos and confusion as Telecom migrated some 800,000 customers from its in-house email system to Yahoo servers in Sydney.
Many could register for the brave new world of Yahoo!Xtra Bubble, suffered outages or got deluged in spam.
Telecom paid the equivalent of $6m in make-goods. Yahoo!Xtra Bubble was a joint venture between Telecom and Yahoo!Seven, in turn a joint venture between Yahoo and Australian TV network 7 – designed to capture riches in online advertising through email and the likes of online photo storage.
After years of hacks and spam, Spark (as Telecom has rebranded) finally cut its remaining ties with the by-then imploding Yahoo in 2016. Yahoo is now under new management after being bought by a private equity firm in 2017.
At least it’s Canadians rather than Kiwis who have to wear this one.
In 2007, Telecom sold its directories business (the Yellow and White Pages) to a consortium including the Ontario Teachers’ Pension Plan for $2.2 billion.
That price looked pretty robust at the time because, well, Google, but as it took three long years for an upgrade to Yellow’s website to be launched, it looked even headier.
And when the new-look Yellow Pages site finally launched in 2010, it barely worked.
A Yellow marketing exec, appearing on TVNZ’s The Ad Show for a mea culpa, said: “People actually race up to me on the street and say, ‘Do you know your product doesn’t work'? It’s like stating the obvious, really.”
Lenders to Yellow’s buyers wrote off most of their money and Yellow repositioned as a Google Ad Words reseller with a government-mandated mission to also print directories that most no longer wanted.
Localist
While the Yellow debacle would put off many, it didn’t stop NZ Post from launching its own directory business, Localist, in 2011.
The spin-out had a start-up culture and all-cloud software, but also tried to go head to head with Yellow in print, with new “hyperlocal” directories.
A bad-tempered fight went to court after Yellow cheekily registered localists.co.nz.
Who was the winner? Both lost buckets of money because (drumroll) Google. A curious coda involved NZ Post parachuting in controversial American consultant Christina Domecq (an heiress to the Domecq liquor empire) to take over the operation in 2013.
At the time, NZ Post had already written off most of its $26.5m investment. The following year, it wrote off the rest as it folded Localist.
Chris Keall is an Auckland-based member of the Herald’s business team. He joined the Herald in 2018 and is the technology editor and a senior business writer.
