Texas Seeks Cure for Ills With IBM Outsourcing Gig

It appears there’s another battle brewing in the Texas and IBM outsourcing war. Ongoing since 2008—when the Lone Star state first suspended the $863 million, seven-year outsourcing contract—Texas has just told IBM it still isn’t happy with IBM’s services and that IBM is in breach of its contract.

Earlier this month, the Texas Department of Information Resources sent a seven-page letter detailing what it calls “chronic failures” of agreed service levels. Texas first awarded the outsourcing contract to IBM in 2006. By 2008, there were problems that prompted a suspension; IBM promised to fix the problems and the contract was re-started. Troubles resurfaced again in the fall of 2009, and the contract was renegotiated.

So much for that, apparently. 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 it stands now, 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’s more. Texas alleges IBM isn’t performing required, nightly backups on all the systems under IBM’s management. In the letter, written by Texas Department of Information Resources executive director Karen Robinson, “IBM also fails to provide verification for all managed systems whether backups are in fact performed as scheduled and completed successfully. IBM is required to verify that backups are completed without error within 24 hours of the scheduled backup. However, adherence to this obligation is inconsistent. IBM has failed to respond in a timely manner to backup failures despite urgent requests from agency staff.”

There’s still more. 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.

According to Texas, each of these sustained SLA failures gives it the right to terminate the contract. That said, Texas isn’t opting yet to call it quits. Instead, it expects all activities and efforts to continue as scheduled “while IBM dedicates resources to correct the deficiencies,” identified in the letter. More specifically, Texas has told IBM it has 10 days to complete a plan that is acceptable to Texas for “curing the material breaches and correcting the other deficiencies,” and that IBM must “cure the contract breaches” within 30 days.

In this article in the Dallas Morning News, it was reported that IBM believes Texas is the cause of the problems. IBM spokesman Jeff Tieszen is quoted as saying: "We are looking at each of [the department's] numerous shortcomings since the very beginning of the contract."

The newspaper also reported that through May, about halfway through the contract's seven years, the state has paid IBM $486.7 million. The department has levied $7.3 million in penalties against IBM for poor service.

Stay tuned…