The Rollout is a Mess We Should Have Seen Coming



  • About 70 percent of IT projects fail to deliver stated objectives
  • Health exchanges involve complex systems like Medicare, Social Security, the IRS, and private insurance, which were not designed for interoperability
  • Many private-sector companies, including Nike and Kmart, have experienced costly IT meltdowns

The rollout is a mess. The administration is apologetic, while the opponents of Affordable Care Act are ecstatic. Frankly, anyone with any knowledge of information systems could have told you with near certainty that the rollout would be a disaster. It is not the first time such IT projects have gone bad, and it won’t be the last. However, most projects that experience initial glitches will eventually be fixed.

This reminds me of the famous quote by former Secretary of Defense Donald Rumsfeld, when the Iraq war was not going well: “There are known-knowns; these are things we know that we know. There are known-unknowns; that is to say, there are things that we know we don't know. But there are also unknown-unknowns; these are things we don't know we don't know.”

This project had numerous known-unknowns and unknown-unknowns, and anyone with reasonable understanding of information systems would have predicted this outcome.

It is a well-known truism that 70 percent of IT projects fail to deliver stated objectives, regardless of whether it is a government or private project. Most observers do not know that the online healthcare exchange was not built by government IT staff, but by private consulting firms. A plethora of contractors and subcontractors were hobbled together to build this system, driven by all types of perverse incentives and incoherent policies. Highly interconnected, complex work was fragmented between several groups, each trying to maximize its own benefits.

The private sector also has its fair share of similar disasters. For example, the breakdown of Nike’s $400 million global IT project in 2001 created such a mess that its stock dropped a whopping 20 percent in a day. Of course, this project was fixed and gains did accrue after a lot of mudslinging between Nike and its software vendors.

In the 1990s, problems with Denver International Airport’s IT project delayed the opening of the airport for years, costing hundreds of millions of dollars. FoxMeyer Drug declared bankruptcy after implementing an enterprise system. Likewise, Kmart’s infamous $1.4 billion IT project created to compete effectively against Walmart resulted in major chaos, causing Kmart to declare bankruptcy and write off $130 million. The list of failures goes on.

There are lessons to learn from these missteps that many people forget when venturing into new projects.

First, never try rolling out a complex system that requires interoperability or connectivity with dozens of other legacy complex systems like the IRS, Medicare, social security and insurance systems. These legacy systems were not designed for interoperability, so there will be brute force connectivity and massive patchwork for all possible scenarios. No one can predict all possible scenarios of potential exceptions for 50 million citizens.

Second, unrealistic expectation is among the top three reasons for IT project failure, according to many studies. For complex systems such as the health insurance exchange, organizations cannot artificially fix the deadline and still somehow expect the project to be completed meaningfully.

Third, no one in their right mind would go “live” with a complex system without an extensive beta test for both rules embedded within the software and for scalability as more people use the system. Even when Google introduced Gmail or other major systems, they rolled out for select consumers before opening them to the rest of the world. Simply because a system works for hundreds of customers does not mean that the system will scale for millions. This is almost elementary knowledge that appears to be have been ignored.

Everyone from radio talk show hosts to late night comedy hosts is blasting this implementation and unfavorably comparing it to Apple’s iPhone product release, which was presumably done with one-third the cost of the healthcare exchange. That comparison is meaningless. The healthcare exchange is a front-end to a complex network of legacy systems with an incredibly complex set of rules and scenarios. The system will have lots of problems and thousands of exceptions. It will be fixed, but that fix will take time.

While doing executive training for a company, I once came across an internal project training document admitting that no large project in the company was ever done on time or budget! So, it’s easy to pile criticism on the administration, but I suspect that a troubled start to such a complex implementation was not unexpected.

Of course, the administration could have taken a measured approach rather than announcing an unrealistic start date for political expediency.

The administration’s reputation is at stake, and it will throw any amount of money to make this system work, just like other private companies have done. Meanwhile, all the contractors will have a ball, and the country must have patience.

This experience should be a lesson for an administration that wants to invest billions of dollars in IT to make healthcare delivery more efficient, enabling patients to move between different doctors and hospitals without having to do a massive amount of paperwork.

If we have learned something from the healthcare exchange rollout, it is that big dreams come with big challenges.


The views expressed are those of the author and not necessarily The University of Texas at Austin.

About The Author

Prabhudev C. Konana

Professor, IROM,

Prabhudev Konana is the Chairman of the Department of Information, Risk, and Operations Management and is a University Distinguished Teaching...


#1 Professor- Many of us did see

Professor- Many of us did see the trainwreck coming. It was detailed and noted widely. Sadly the IT "rollout" failure is the tip of the iceberg of this multifacited disaster in the making. Fixing the portal to this mess will likely be accomplished at somepoint, but it is the impact on premiums, restrictions on health insurance policies that may be offered in the open market (and on the exchanges) and the job and employer impacts that are only slowly being recognized. Add to this mix the expansion of the IRS in enforcing the required purchase of a product and the collection and access to the most personal of information by government and private beauracrats and you see that the failure of the IT aspect of this is a minor aspect of this leviathon. I can't wait to hear the whining from the faculty and staff when UT starts rolling most of its employees off their current insurance into the exchange plans with much higher premiums and fewer options. Or will they flex their political muscle and get a waiver from the requirements of the "law of the land"?

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