IBM faces loss of $836M data center contract

Texas accuses Big Blue of 'contractual failures,' gives company 30 days to shape up

IBM Corp. has been warned by the state of Texas that it is in danger of losing a $863 million data center consolidation contract if it can’t show some improvement in the next 30 days.

The state sent IBM a detailed letter July 16, listing 15 areas where the state says the company has fallen short. The biggest issue is that IBM has not completed the consolidation of the states data centers from 27 to two. The seven-year contract was awarded in 2006 and the consolidation was to be completed by December 2009. To date, less than 12 percent has been consolidated, according to the state.

“IBM promised an investment in people, processes and technology to bring the benefits of data center consolidation to the state of Texas” said Karen Robinson, executive director of the Texas Department of Information Resources. “We have had continual problems with basic service delivery and IBM has failed to deliver on their promises.”

The Department of Information Resources issued the warning, known as a “notice to cure,” to pressure IBM to improve. The move “follows months of unsuccessful attempts to find a collaborative solution with IBM,” the state said.

IBM is defending itself. In a statement, the company said: "IBM has fulfilled its obligations under the contract and last week's action by DIR was unnecessary and unjustified. IBM has worked in cooperation and good faith with DIR to provide benefits and improvements to all citizens of Texas. IBM very much regrets the State's action and will aggressively protect its interests going forward."

According to the state, IBM and Texas negotiated a framework for improving work on the contract. The framework, called Agreements in Principle, was developed at the end of 2009, but by June 25 the state told IBM that the framework had failed.

In addition to the data center consolidation issue, IBM is accused of failing to perform backup and data recovery services, failure to deliver a disaster recovery plan, and not providing sufficient staffing.

These and other issues put IBM in material breach of its contract with Texas, the state said in its notice to IBM.


About the Author

Nick Wakeman is the editor-in-chief of Washington Technology. Follow him on Twitter: @nick_wakeman.

Reader Comments

Thu, Sep 16, 2010 TheDoctor

Typical IBM, hiring offshore CONsultants,can't speak the language, don't understand the solition, drag the project out and keep the bonuses flowing with incompetent work.In the CONsulting business you never deliver except for billable hours with below par talent. I have been around these types of projects for over 35 years and i bet if we drilled the team very few would have string detailed knowledge and outstanding skill sets.How stupid can one be when backups are not run and data is lost. These are supposed to be the experts, they lost a ton of data in TX. Kinda reminds me of the FEMA boss that was into horses and no clue about disasters.

Thu, Jul 22, 2010

In defense of IBM - most State of Texas agencies have strongly resisted moving their infrastructure and services over to DIR for management. Remember, these are government agencies and employees - so they spend most of their time building fiefdoms, fighting for more budget, and resisting any effort that might take something away from them. State of Texas technology leaders feel more powerful when they have more $$ to spend, more employees - not when they actually accomplish something worthwhile for their agency or for citizens. And I suspect Karen Robinson and her staff are no different. Granted, IBM has probably had some severe difficulties - and working with the State of Texas and numerous agencies that don't, or won't, cooperate with your efforts makes it easy for DIR to blame IBM and say "Hey, look, you are succeeding" Mark my word, IBM and the State of Texas will walk away from this partnership, DIR will fail to consolidate data centers in any meaningful capacity, and state agencies will continue to build, manage, and lead ineffective fiefdoms.

Tue, Jul 20, 2010

Buyers' Remorse. Texas probably feels as if it over-paid for the work and is now trying weasel out the agreement.

Tue, Jul 20, 2010 Ricahrd Austin, TX

They need to run them out of there and stop wasting tax payer dollars. IBM has an ego the size of Texas and need right the ship or move aside so someone else can do the job.

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