IBM lands Texas data center pact

IBM Corp. won a data center outsourcing deal in Texas worth an estimated $863 million.

Under the contract, which could stretch out for 10 years, IBM will build a new data center in the state capital of Austin as well as upgrade facilities in San Angelo, the state announced today.

Texas employees who work on data center services will be offered jobs with IBM or its teammates, Unisys Corp., Xerox Corp. and Pitney Bowes Inc. All state employees who take the offer will receive a 5 percent increase in pay.

To win the contract, IBM bested Northrop Grumman Corp., which had been providing data center services in Texas since 1994. The company declined to comment on IBM's win.

Under the new contract, IBM must funnel 20 percent of the work to historically underutilized businesses. Twenty-seven state agencies also are participating in the project.

Texas officials said the state should save $25 million in 2008-09. Savings over the seven-year period should reach $159 million. The contract also has a three-year option.

"We designed this process to be highly inclusive. Hundreds of employees at all levels of government worked together on the scope, the request for offer and the evaluation on this contract to ensure it meets the needs of each agency," said Larry Olson, Texas chief technology officer.

The loss for Northrop Grumman ends an impressive win streak for the company, which in the past two years has won major outsourcing contracts in San Diego County, Virginia and Indianapolis.