Texas Considers Terminating IBM Deal

• By Justin Lee, November 07, 2008

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(WEB HOST INDUSTRY REVIEW) -- The Texas government has ordered IBM (www.ibm.com) to resolve key service issues regarding a state data center in the next month or it will terminate the $863 million contract.

Two weeks ago, Governor Rick Perry stopped the transfer of state data to IBM's IT systems until the company implemented a plan to fix the problems, which is expected to be completed by November 17. The state also fined IBM almost $902,000 for data lost through failed back-up attempts.

In 2005, the state hired IBM in a seven-year outsourcing contract to manage the data of various government agencies. Currently, 27 agencies are being managed by IBM or transitioning to the company's control.

The company was consolidating the 27 agencies' data centers into its Austin and San Angelo facilities in a cost-effective effort to streamline and update the agencies' operations.

In July, a server crash at the state Attorney General's Tyler Medicaid fraud division initially wiped out half the data compiled in an eight-month investigation, placing many of the prosecutions in jeopardy.

The Texas government says that IBM had not properly backed up the data. The division has since then been able to recover 90 percent of the data, though it is unclear whether all of this information can be used.

Additionally, more than ten other agencies have reported that IBM has failed to properly back up data, according to local reports.

The state says it has repeatedly warned IBM about these critical issues, penalizing the company $5.2 million. IBM has already been paid $175 million under the deal.

This week, the state took the first step to end the contract by notifying the company it has "breached its contractual duties and obligations to the state of Texas" by failing to effectively back up data at more than 20 agencies.

An IBM spokesman said the company has been working to resolve the issues, assuring that the "state's data center infrastructure is more stable and secure now" and that the company plans to work with the Department of Information Resources "to continue to improve the system to better serve the state's citizens."

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