IBM pact with state on verge of crum­bling

com­pany is given 30 days to fix prob­lems in data cen­ter project

Austin American-Statesman - - FRONT PAGE - By Kate Alexan­der

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 per­sist. 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 peo­ple 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.

The com­pany has been paid al­most $487 mil­lion so far un­der the con­tract, which was signed in 2006, and has ac­cu­mu­lated penal­ties to­tal­ing

Con­tin­ued from A $7.3 mil­lion for ser­vice fail­ures. Dur­ing the ne­go­ti­a­tions, IBM had asked for at least an ad­di­tional $500 mil­lion to com­plete the project.

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.

He would not com­ment be­yond the terse state­ment.

If IBM fails to meet the state’s de­mands, the seven-year con­tract could be ter­mi­nated. No de­ci­sion has been made to do so, and the aim is for IBM to im­prove its per­for­mance, said Depart­ment of In­for­ma­tion Re­sources spokesman Thomas John­son.

The five biggest agen­cies that are part of the project all backed the move by the depart­ment, said Ann Hatchitt, a spokes­woman for the Texas Work­force Com­mis­sion, whose deputy di­rec­tor sits on the project’s lead­er­ship com­mit­tee.

IBM re­ceived a sim­i­lar 30-day warn­ing in 2008 af­ter a server crash at the state at­tor­ney gen­eral’s of­fice re­vealed the project’s spotty data backup sys­tems. The ini­tial loss of data, which was mostly re­cov­ered, threat­ened some Med­i­caid fraud in­ves­ti­ga­tions, and Gov. Rick Perry sus­pended op­er­a­tions un­til the se­cu­rity of state data could be en­sured.

But that no­tice was more of a fin­ger-wag to IBM. Fri­day’s let­ter was a clear poke in the eye.

“The ac­cu­mu­lated ef­fect of un­der-in­vest­ment by IBM, poor per­for­mance, and con­tin­ual dis­re­gard for the pro­tec­tive obli­ga­tions of the (con- tract), has re­sulted in harm to state agen­cies, ex­po­sure to un­nec­es­sary risks, and fail­ure to achieve the ob­jec­tives set and agreed to by IBM,” Robin­son wrote.

It is un­clear what awaits the agen­cies that have been stuck in the mid­dle of this con­flict.

Leg­is­la­tion passed in 2005 man­dated that they par­tic­i­pate in the project. The ob­jec­tive was to save money and im­prove op­er­a­tions and se­cu­rity by con­sol­i­dat­ing the agen­cies’ main­frame and server op­er­a­tions.

The agen­cies turned over peo­ple and con­trol to IBM and its part­ners, col­lec­tively known as the Team for Texas.

The Texas State Li­brary and Archives Com­mis­sion was the first agency to move its data cen­ter op­er­a­tions, and it was a very bumpy ride, said Peggy Rudd, di­rec­tor and li­brar­ian of the archives.

The agency paid sig­nif­i­cantly more un­der the con­tract and got sub­stan­dard ser­vice, Rudd said.

But there is no turn­ing back now, she said. Her agency has no choice but to stay in the new fa­cil­ity, whether it is run by IBM or some other en­tity.

The In­for­ma­tion Re­sources Depart­ment has dis­cussed break­ing up the con­tract into pieces and seek­ing bids for those jobs. John­son said that it is pre­ma­ture to spec­u­late on what will hap­pen if the con­tract is killed and that such spec­u­la­tion is “not in the spirit of our cur­rent ef­forts.”

Rudd, who has been crit­i­cal of IBM’s han­dling of the project, said the com­pany can turn the sit­u­a­tion around. “The game is theirs to lose,” she said. “If they want to make it hap­pen, they’ll make it hap­pen.”

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