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The State of Texas versus IBM

It’s never a pretty sight when an outsourcing relationship goes bad.

IBM Corp.’s $863 million data center consolidation contract with Texas is teetering on collapse.

Seven months of negotiations aimed at righting the troubled project and salvaging the partnership fell apart at the end of June.

On Friday, the state gave IBM 30 days to fix the myriad problems that have plagued the effort to merge the data centers of 28 state agencies into two upgraded and secure facilities.

Turning around the mammoth project in a month will be a formidable task for IBM because some of the problems have been known for years and still persisted. Many industry insiders expect IBM and the state to part ways.

Karen Robinson , executive director of the state’s Department of Information Resources, provided IBM a seven-page litany of alleged contractual violations and “chronic failures.”

For example, Robinson said IBM had abandoned its obligation to provide enough people to do the work outlined in the contract.

IBM had reduced the personnel in one key project area from 124 in October to 40 in June. That pullback, in part, has brought the merger process to a virtual standstill.

The original contract set December 2009 as the completion date for the transition. So far, less than 12 percent of that work has been completed.

[…]

Jeff Tieszen , a spokesman for IBM, said the company “has fulfilled its obligations under the contract and today’s action by DIR was unnecessary and unjustified.”

“IBM very much regrets the state’s action and will aggressively protect its interest going forward,” Tieszen added.

Tieszen would not comment beyond the terse statement.

I don’t know about you, but I smell a lawsuit coming. As noted these problems are not new, though as recently as six months ago it looked like IBM was going to get another chance. So much for that. Just remember, when all is said and done, the point of this exercise was to save the state money. Unlike some other privatization fiascoes I could mention *cough* *cough* Accenture HHSC TIERS *cough* *cough*, this project needn’t have been controversial or on the fast track to Failsville. There’s nothing particularly unusual about data center consolidations. I don’t know enough to be able to say how or why it all went wrong – this would make a great topic for one of those sweeping Texas Monthly investigative stories, Jake; I’ll bet the Trib could do a bang-up job, too, not that I’m hinting or anything – but from what I can see it looks like individual departments had no choice but to participate, and if the state is to be believed, IBM didn’t have enough employees working on it. There’s nothing unusual about the former, though that doesn’t make it a good idea, but the latter sure is curious. Anyway, as I said before, never underestimate the potential for a Rick Perry-initiated privatization process to get screwed up. The DMN has more.

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3 Comments

  1. […] here for the previous entry. Did I mention that this has “lawsuit” written all over […]

  2. […] In July, the state gave IBM thirty days to respond to various charges relating to its ability to fulfill outsourcing contract obligations. IBM has now given its response. In a letter released [last] Friday, IBM executive Cynthia McLean defended the company’s performance and said it will continue to meet with the agency to resolve issues in the 7 ½ -year, $863 million contract with the Texas Department of Information Resources. […]

  3. […] leadership, of course) and because private companies can be far more wasteful and incompetent (IBM anyone?). These contracts, in most cases, forbid any improvements to alternate roads and forbid the state […]