Teaching case

Fixing the payment system at Alvalade XXI:

a case on IT project risk management Ramon O’Callaghan

Tilburg University, The Netherlands

Correspondence: RO’Callaghan, School of Economics and Business Administration, Warandelaan 2, Tilburg University, PO Box 90153, 5000 LE, Tilburg, The Netherlands. E-mail: [email protected]

Abstract This case describes the implementation and subsequent failure of an innovative system installed in the bars of Alvalade XXI, the recently built football stadium in Lisbon, Portugal. Casa XXI, the company running the bars, had entrusted the project to an IT supplier who had limited experience with large systems. During the inauguration, the system failed spectacularly creating a chaotic situation. The fiasco meant not only a financial loss, but also a blow to the reputation of the company. The management blamed the supplier for the failure. The supplier, however, claimed that the problem was not technical but organizational, that is, poor planning of operations. Subsequent tests were inconclusive and failed to restore trust. At the end of the case, the CEO is considering the possibility to switch to an alternative supplier. He also wonders what they could have done to manage the project and the associated risks more effectively. The case highlights risk and project management issues in large systems implementations. The discussion can be structured around cost/benefit analysis, risk assessment, and project management. Relevant dimensions include: company operations, project scope, degree of innovation, technology used, system architecture, supplier selection, and project organization. In addition, the case raises governance questions: Who is responsible for the project? Even if the project is outsourced, how should the roles and responsibilities be apportioned between the company and the IT supplier(s)? What mechanisms should be used to plan and execute IT projects, and control their risks? Journal of Information Technology (2007) 22, 399–409. doi:10.1057/palgrave.jit.2000116 Keywords: risk management; project management; innovation adoption; systems implementation; governance; outsourcing

Introduction

I n August 2003, while many Europeans were heading to the beaches to mitigate the effects of the worst heat wave on record, José Eduardo Sampaio, the CEO of Casa XXI,

was faced with another kind of heat.1 Cartão 21, the innovative payment system of Casa XXI that he had personally conceived and subcontracted, had dramatically failed on 6 August during the high-visibility inauguration of Alvalade XXI, the newly built football stadium of the Sporting Club of Portugal.

Casa XXI had been granted the rights to exploit all the bars and restaurants in the stadium. Based on pre-paid cards, the new payment system was supposed to make bar operations more efficient by eliminating the use of cash. In addition, the system was supposed to give Casa XXI an

image of innovation and modernity enhanced also by all the free publicity it received in recent newspapers articles covering the inauguration.

The failure of the system represented not only a significant financial loss for Casa XXI but also an embarrassment for the Sporting Football Club as well as a major blow to the reputation of Casa XXI and to the credibility of José Eduardo, himself a former football player.

José Eduardo was quick to point the finger at Meag, the company with whom he had contracted to design and implement the system. But José Almeida, Meag’s manager, claimed that the system worked fine. In his opinion, the nature of the problem was organizational.

Journal of Information Technology (2007) 22, 399–409 & 2007 JIT Palgrave Macmillan Ltd. All rights reserved 0268-3962/07 $30.00

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He believed the mishap had to with the late activation and distribution of the cards, as well as the lack of training of the bar staff; and these were responsibilities of Casa XXI, not his.

But it was difficult to know what went wrong and whom to blame. In reality, the system had never been fully deployed and tested before the event. The construction of the stadium had been completed just a few days before the inauguration, and neither Casa XXI nor Meag had prior access to the stadium. Thus, nobody knew whether the installed configuration actually worked. With such uncer- tainty and the next match just days away, José Eduardo demanded a comprehensive system test. By the end of August, Meag conducted such a test in the presence of Casa XXI’s management team. The results were discouraging: the system failed to operate properly. Casa XXI lost faith in both the system and the supplier.

Then José Eduardo began considering the possibility of switching to another IT supplier. But, he was also pondering whether a new supplier and a new system would not bring new problems, and additional delays. Should he give Meag another chance or should he drop them? He knew he would have to weigh the risk of litigation by Meag against the relative advantage and costs of a potential new supplier. He then approached other suppliers and requested new proposals. Three suppliers were selected and invited to present their solution to Casa XXI’s management team.

By 2 September José Eduardo was reviewing these new proposals and trying to understand the costs, benefits, and risks associated with each alternative. He had to make a decision and wondered what criteria he had to use. He could not afford to make another mistake. He was also reflecting on the factors that led to the present situation. He wondered if there was something that Casa XXI should have done differently to identify and manage the risks in a more effective manner. José Eduardo knew that he was running out of time: the date of the next match was fast approaching.

Background In 2003 Portugal had been frantically building 10 new football stadiums for Euro 2004, the European football championship organized by UEFA.2 The Portuguese Foot- ball Federation had to ensure that 10 football stadiums would be available to host the final round matches of Euro 2004. The renovation of five existing arenas and the building of five new stadiums were being carried out with the support of the government. In total, the overall cost was estimated to be 500 million euros. The government and the football federation had formed a joint venture to oversee the preparations. Along with the stadiums, the projects included motorways, revamping airports, new urban and regional railways and upgrading ports. The airports authority spent 350 million euros upgrading terminals at Lisbon, second city Porto and Faro in the Algarve area. Hosting of Euro 2004 was bringing many other benefits to the country. New investments were being attracted to Portugal, many monuments were being restored, and new hotels were being constructed.

One of the new arenas was the new José Alvalade stadium in Lisbon, also known as Alvalade XXI. Home of the

Sporting Club de Portugal, Alvalade XXI was a first-class stadium that would host five matches of the Euro 2004 championship. It was designed by architect Tomás Taveira who also worked on other Euro 2004 stadiums in Portugal. The vibrant colors (mainly green and yellow) and wave-like roof are features of the new stadium (as seen in Figure 1).

The stadium seated 52,000 spectators. Its modern design included full covering for all seats. The stadium was part of a larger complex, which included restaurants and bars, a cinema multiplex and bowling alley, as well as a medical center and a health club. Located in an urban zone adjacent to the current stadium, the new project was integrated within a larger complex with sports and residential components, the latter including housing, shops and services.

Casa Vinte e Um (Casa XXI) The restaurants and bars of the new Alvalade stadium were run by Casa XXI, a company of the group Casa do Marquês S.A., the largest catering company in Portugal specialized in banquets for corporations, governments, or large private parties (Figures 1 and 2).

Casa do Marquês was founded in 1989 by José Eduardo Sampaio, Fernanda Seijo and Florbela Bem. José Eduardo was a well-known former player of Sporting and had many contacts in the sports world. Fernanda Seijo had been associated with the restaurant business all her life. She came from a family of caterers. Her father had the largest catering company in Portugal during the 1980s. The three knew each other from the time they worked together in the business of Fernanda’s father.

Casa do Marquês was run by three of them. Fernanda oversaw the production, decoration and logistics of the events; Florbela was responsible for sales; and José Eduardo was the general director (CEO) of the group.

The company reached a partnership agreement with the Sporting Club to become the exclusive operator of catering services and special events at the Alvalade stadium for a period of 15 years. The result was the creation of a new company, Casa XXI, which was established for the exploitation of the business at the Alvalade complex. The agreement with the Sporting Club granted Casa XXI the rights to exploit the following areas:

Figure 1 José Alvalade stadium, Lisbon.

Fixing the payment system at Alvalade XXI R O’Callaghan

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� Prestige – 1000m2 space that includes a restaurant for 800 persons

� Corporate Club – 400m2 space for 126 persons � Sport 21 – 500m2 space, split into two floors, includes a

restaurant for 400 persons � Restaurant Casa XXI – 250m2 space with capacity for 150

persons, open daily, an upscale alternative for employees of companies in the area

� Cafeteria – located at the entrance of the stadium � Refeitório – canteen for the employees of Sporting � Camarotes – loges for Sporting group companies and

other partner companies � Kiosks – 15 kiosks associated with brands � Bars – 26 bars scattered all over the stadium in different

sectors � Venta ambulante (‘moving’ sales) – 50 waking sales-

persons

Cartão 21: an innovative payment system An important aspect of the operations at the bars and other points of sale was the use of an innovative payment system based on pre-paid cards (‘Cartão 21’). Each card was worth a given cash value (i.e. 20h, 15h, 10h, 5h or 2.5h) and had a unique serial number (the bar code) that identified it. A scanner was used to read the code, check the money left on the card, and debit the value of the card according to cost of the sale. The cards were sold at special kiosks inside the stadium and by special sales staff walking about the bars. The cards could be used during several matches, and their validity was 2 years.

The system was meant to avoid the use of cash thereby shortening the time it took to execute payment transac- tions. For clients, this meant shorter queues at the bars. For Casa XXI, it meant more productivity of their bar personnel, faster turnaround, and more sales at peak times. In addition, it reduced the need for controlling cash registers and bartenders (Figure 3).

The cards had pictures of famous sportsmen (e.g. legends of Sporting’s history). Many people would want to buy and collect them because of their historic value. In fact, the publicity and the articles in the press referred to the cards as items to ‘collect history’ (‘Cartôes para coleccionar historia’).

The payment transaction was executed through a real- time connection to a central database that kept track of the

value of all the cards. The communications between the point-of-sale terminals (POSs) and the central server (the card database) used a fiber-optic network. This network had been installed by IBM as part of the stadium’s infrastructure and was being used by other applications, for example sales of tickets for football matches. When a client made a payment with a given card, the POS scanned the code of the card, the system then checked the ‘amount of cash’ left in the card, and debited the card according to cost of the item ordered.

The overall system architecture comprised two modules: the front office and the back office. The front office supported the sales process and client interaction including the Cartão 21 payment system. The back office supported food and beverage operations (inventory management and purchasing). The data corresponding to all the transactions (sales, purchases, inventory) were recorded and sent to an external accounting application.

The software was a standard application provided by Wintouch, that is, wSIR (Sistema Integrado de Restau- raçao), which had been installed in many other companies in the restaurant business. It ran in a decentralized way, that is, every bar had two or more POSs connected to a local server with the software running on it in order to manage and record all the transactions.

The front office software supported the work of the sales staff in the restaurants and bars (Figure 4). A client wanting to buy an item at a bar, had to go firstly to the bartender at a POS, tell what he/she wanted to order and give his/her Cartão 21. The bartender then clicked the order on the tactile screen and would slide the card through the bar code reader for the payment. Then the POS printed a ticket (receipt/order confirmation) that the client subsequently had to show to collect the ordered item from another staff member (normally in the central section of the bar). Thus, in busy moments, customers had to queue a second time to get the items they had ordered (see Figure 5).

The front office also supported the ‘vendedores ambu- lantes’ (walking salespeople) in the spectator areas of the

Figure 2 Examples of banquets provided by Casa do Marquês.

Figure 3 Example of the early card design.

Figure 4 Point-of-sale (POS) terminal.

Fixing the payment system at Alvalade XXI R O’Callaghan

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stadium (terraces, stands) (Figure 6). These walking sellers carried a transparent plastic tray with a limited assortment of products. They used hand-held wireless terminals running a customized version of the software to record sales and accept Cartão 21 payments ‘on the move’.

The Cartão 21 system had been conceived by Casa XXI, but the design and implementation had been subcon- tracted. Several international IT services companies re- sponded to the call for tender, but the project was awarded to Meag, a Portuguese firm. Meag was a wholesaler of office and computer supplies that had extended its business into computer system installations. Their experience with large systems implementation was, however, limited.

Meag was in partnership with another IT supplier, Wintouch, which provided the software. Meag brought in all the hardware and did the overall installation and configuration. Meag acted as the prime contractor and had overall responsibility for the project. Table 1 provides the breakdown of the system elements and the costs according to Meag’s offer to Casa XXI at the time when the system was being considered.

The inauguration The inauguration of the stadium on the 6th of August 2003 was an important event not only for the Sporting Football Club, but also for Portugal. The spectacle included a laser show, the Sporting anthem sung by the popular Portuguese singer Dulce Pontes and the official opening by the President of the Republic, Jorge Sampaio. The jubilation was taken down a notch with a minute’s silence before the kick-off, in remembrance of those who had lost their lives in the recent spate of forest fires in the country. A friendly match between Sporting and Manchester United followed the official inauguration.

But it was not all jubilation at the stadium that day. Casa XXI was ‘inaugurating’ Cartão 21, its innovative payment system, and the experience turned out to be a nightmare. A couple of football fans recalled the incidents:

We were not allowed to enter the stadium until 30 minutes before the match. We had been waiting outside the stadium for hours in the scorching heat. When we finally got in, the first thing we wanted to do is to go to the bar and drink a cold beverage. But of course, we were not alone. We had to fight our way through the crowd to reach the bar area. There, we learned that we had to have one of those cards (Cartão 21) to be able to order and pay. To acquire it, we had to go to a kiosk some 50 meters away. But the staff there had no cards. They told us to wait because the cards ‘were on their way’. After a few minutes, we could finally buy one of these cards. We then returned to the line for the bar. When we finally reached the bar, the bartender told us that my card was not

Figure 6 ‘vendedor ambulante’ or walking seller.

Figure 5 Bars

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