IBM and Texas – Outsourcing Troubles Part Two

Several threats and a long letter detailing what it calls “chronic failures” of agreed service levels, Texas has made another move in its efforts to fix a seven-year, $863 million outsourcing contract with IBM that’s gone bad. The Texas Department of Information Resources is now saying it will rebid – four years early – all work now performed by IBM.

In a letter sent to IBM earlier this month, Karen Robinson, the department’s executive director said failure to correct alleged deficiencies leaves her “no course but to pursue procurement,” according to this article in the Dallas Morning News. In the letter, Robinson said the agency won’t terminate the IBM contract because it “has determined that it is not in the best interests of the state to exercise that right at this time,” the article reported.

IBM maintains it has done nothing wrong, and in the article IBM spokesman Jeff Tieszen said the company disagrees with the department’s accusations, adding that “IBM has worked in cooperation and good faith” with the department and hopes “to move the data center services project forward for the benefit of the state.”

You all may recall that the contract was first awarded to IBM in 2006, and by 2008, problems surfaced. There was a suspension and IBM promised to fix the problems. The contract was re-started, but things got bad again in the fall of 2009, and the contract was renegotiated.

IBM was contracted to migrate data center operations for 27 agencies into two consolidated data centers. The consolidation, per IBM’s bid, was to be done within 24 months. As I wrote back in July, in this blog, only five agencies have been completely transformed, according to Texas. Moreover, Texas claims, IBM is only working on the transformation of five of the remaining 22 agencies, and that these five are “only partial” transformations.

There are also allegations that IBM isn’t performing required, nightly backups on all the systems under IBM’s management, and that Texas has issues with IBM regarding disaster recovery, staffing, security, service level failures, asset management, system management and monitoring, efficient use of resources, procurement, capacity planning, project analysis and reporting, technology refreshes, and reports and forecasts.

I’ll keep watching as this unfolds. And I’ll share with you what I see and hear. I bet there is a lot to learn about what not to do from this gig gone bad.