State agencies say $863M IBM deal not paying off
© 2008 The Associated Press
Nov. 16, 2008, 1:01PM
AUSTIN — Many of the state agencies involved in a $863 million IBM Corp. contract to consolidate data centers say they are actually paying more to get less.
Consolidating data operations of 27 state agencies was supposed to streamline storing and protection while saving the state $178 million over seven years. But since the contract began in April 2007, the project has saved far less than anticipated and repeatedly failed in backing up information.
At the Texas Department of Transportation, the agency contends IBM employees have no urgency about or ownership of department business. Problems that used to take state employees less than an hour to fix now take as long as a week.
"We didn't gain anything ... that we didn't have," said Ed Serna, the Transportation Department's assistant executive director for support operations.
The agencies have gained an ally in Gov. Rick Perry, who called for work to stop after IBM's failure to back up some critical data came to light. IBM now faces the possibility of losing the contract if the company does not fix the backup problems that have plagued the multimillion dollar project, the Austin American-Statesman reported.
In a Nov. 3 letter to the governor's office, IBM acknowledges the company overreached by assuming responsibility for existing technological conditions that are inadequate, inconsistent and not sustainable.
"The state and IBM will have to evaluate the investments required to remediate the current deficiencies, develop a funding model, and prioritize accordingly," wrote two IBM officials.
IBM spokesman Jeff Tieszen said he could not comment on the letter.
One critic says state officials were unrealistically ambitious by requiring the contractor to move quickly to centralize all the functions of the data centers. The centers all had different equipment and applications, said Jim Moreno, who retired as a system administrator in May after 17 years with the Texas State Library and Archives Commission.
IBM also overreached with an aggressive plan that did not reflect the true cost of the work, critics say.
The consolidation effort was prompted by problems at the agencies' existing data centers. In 2005, those issues led the Legislature to mandate consolidating the data of the 27 agencies.
At the time the contract was signed, the state and IBM said taxpayers would save $25 million over the first two years. An early cost analysis by the accounting firm Grant Thornton showed the project had saved the state about $500,000 overall through February.
But many agencies say cost savings have not materialized for them. Half of the agencies have requested additional money for the 2010-11 budget on top of their current allocations to pay for rising costs under the data center contract.
On Nov. 4, Information Resources gave IBM an official 30-day warning that could lead to termination for cause if the team's persistent failure to back up the agencies' data is not remedied. The department is also developing a contingency plan for ensuring data center services for the agencies without IBM.