Energized by open source: Ditching closed apps spurred growth, utility says

Six-year-old BlueStar Energy Services doesn't have the kind of systems-baggage that saddles many older organizations. Still, the company found itself hindered by the rigidity of its core systems, which constrained its efforts to expand its customer base and offer new services.

Those barriers to growth led the company to embark on a bold effort to replace the bulk of its IT infrastructure -- including voice, e-mail and financial systems -- with open-source software. The initiative has been so successful that CEO Guy Morgan attributes much of the company's recent growth to it.

BlueStar's open-source push has been driven by Tom Keen, the company's chief technology officer since June 2006. While evaluating BlueStar's IT architecture and business systems as a consultant, Keen had seen an opportunity for open-source systems to provide the company's operations with greater flexibility and scalability while strengthening its ability to expand into new markets.

For example, the ERP system, which was written in Macromedia's ColdFusion, suffered from scalability constraints. BlueStar supplies electricity to customers in several US states and needs to gather heaps of customer meter data for billing.

The company was paying third parties for electronic data interchange (EDI) data feeds, and batch-processing billing runs often kept BlueStar workers on the job late into the night. The system, which operated on a Dell server running Windows 2003, was "pushed out to the edge," says Keen, and that restricted the company's ability to expand its customer base.

"The most pressing concern for me was the rigidity of the ColdFusion system," says Morgan. "Our business is in a very fluid regulatory environment. Things change all the time, and our infrastructure has to adapt to those changes. I felt like we were constantly putting a Band-Aid on the problem."

The Open-Source Pitch

Even though Morgan recognized the shortcomings of his ERP system, Keen still had to sell him on the merits of shifting the IT architecture to an open-source approach. "Guy couldn't understand why, if open-source technologies are so good, you could just give it away," says Keen. "He just didn't get it."

To help convince Morgan, Keen had him visit a Web site for SugarCRM, an open-source CRM system that boasts a number of Fortune 2,000 customers.

"The thing that convinced me is that a number of well-established companies were adopting [open-source] technologies early on," says Morgan, noting that open source "started to make sense to me."

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Still, Morgan's confidence had its limits. "He trusted what we were doing, but his trust had a rope with a noose on the end of it," says Keen.

In November 2006, Keen and his team began developing a prototype for a new e-commerce and billing engine that would be part of an open-source initiative called NextStar. The system would support BlueStar's customer enrollment, billing, e-commerce, accounting, cash management and other financial operations.

But BlueStar executives wanted more, says Keen. They ordered up a comprehensive system that would enable the company to offer unique services to its customers, such as the ability to analyze their own energy consumption.

Such services are important to smaller retail electricity suppliers, says Zarko Sumic, an analyst at Gartner. "[They] need to develop a portfolio that's equivalent to what the large players have," he explains.

The project team initially focused on identifying and streamlining each of the core business processes that would be handled by the NextStar system, including integration with third-party payment providers, such as PayPal and Bank of America, and receipt of metered data from Commonwealth Edison and other utilities, says enterprise architect Guillermo Tantachuco. "The key was to think big, start small and show early value," he says.

For Tantachuco, those efforts began on the day he joined the company in July 2006. On that day, Morgan informed Tantachuco and other project team members that they needed to develop a customer enrollment system that would go live by October. The group developed a click-through prototype by mid-September and had the production-ready version completed by the end of the month, Tantachuco says.

Keen, Tantachuco and other members of the initial four-person project team used a variety of open-source and commercial technologies to build out the functionality and support in the NextStar system. Among them were Project Open's project management tools.

But the framework for BlueStar's IT architecture was developed using open-source Java software from SpringSource. The company selected SpringSource's offering based on its cost, platform independence and breadth of enterprise-class features, Tantachuco says. Moreover, the Java vendor had "a road map of where they'd be in three years, and that mapped with our plans."

Most of the Java frameworks that BlueStar evaluated didn't meet its selection criteria, which included consistent architecture and design across different layers of systems, flexible and extensible APIs and security across all architecture layers, says Tantachuco.

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SpringSource's modular architecture and design has enabled BlueStar's IT staffers to develop systems throughout the company's enterprise architecture, including Web, database, messaging, business process management and supply chain integration systems, says Tantachuco.

To aid in the software development, Morgan authorized the creation of an application development center in Lima, Peru, in January 2007. BlueStar settled on Lima because there's only a one-hour time difference between it and Chicago, the city has a sizable population of IT professionals, and its infrastructure has improved dramatically in recent years, says Selyn Chavez, a systems architect who works in the development center there.

Keen set an aggressive timeline for the 25-person project team (including the first set of Lima-based developers) to build a new IT infrastructure for the company within a year. The use of the SpringSource framework kept the project moving briskly, since the design of the software enabled the project team members to view each of the system components that their colleagues were working on, says Keen.

But there were difficulties. "Open source always has some thorns in it, but so does commercial software," says Keen. One of the biggest challenges, he says, was simultaneously "rowing, bailing and building the new boat."

The IT organization was faced not only with building a new enterprise platform, but also with maintaining the existing platforms while building a strategic plan to seamlessly migrate to the new system and replace third-party vendors, Keen explains. "Not only did we have to revamp the entire infrastructure, but also revamp all best practices and standard operating procedures," he says. "This required extensive planning, coordination and collaboration with our business team members."

It also required "many early mornings, late evenings, and long weekends, but the results were well worth the time investment," Keen adds.

And that investment ended up being far less than it might have been. Keen says that the aggregate code count for the NextStar system is about 40,000 lines -- a fraction of the 5 million to 6 million lines that one consultant estimated it would take to support BlueStar's business requirements.

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Delivering the Goods

BlueStar's investment in open source cost US$2.5 million to $3 million, including new Dell servers and the Lima development center, says Keen.

Pinpointing the return on investment is difficult, because there are many intangibles, says Morgan, but the numbers are overwhelmingly positive. For example, he says, "if you look at our revenue growth from 2002 to 2007 [from US$2.4 million to $171.1 million], you see a big jump toward the end of that, and a lot of that is attributable to the development of these new systems."

Since Keen and his team delivered the initial version of the NextStar system in February 2007, operators in BlueStar's bill-processing center have been able to obtain customer meter data and generate electronic bills within seven minutes instead of the eight hours it used to take under the batch-processing system, says Keen. Those processes have been streamlined, in part, by eliminating the use of two third-party EDI vendors. By handling those functions in-house, says Keen, the company is saving US$100,000 to $150,000 per year.

And by replacing the ERP system and a host of others, Keen expects to save US$25 million in software license and maintenance fees over the next five years based on current production loads.

Keen says that though the exact ROI numbers are illusive, the payback from open source is undeniable. "I tried sitting down and putting together an ROI analysis," he says, "and it was surreal."