TEXAS

Consultant calls $863 million state contract with IBM defective

Data center deal unsustainable, examiner says.

A consultant hired to diagnose the ills that have plagued Texas' $863 million data center consolidation project with IBM Corp. said Friday that the current deal is dysfunctional and unsustainable.

But the landmark project can — and should — be salvaged because the idea of streamlining the data center operations still makes sense, said Karen Robinson, the newly appointed head of the Texas Department of Information Resources. To make this project work, however, the terms of the contract will have to be changed, she said.

"If IBM isn't making money and (the Department of Information Resources) and the state agencies aren't getting good service, it is not going to be successful," said Glenn Davidson of the consulting firm EquaTerra.

The developments Friday come three years after the state awarded the massive contract to IBM to modernize and consolidate state data centers that house servers and mainframe computers. The objective was to reduce costs and safeguard data during disasters or terrorist attacks. State agencies quickly began complaining of problems, including poor service, data losses and additional expenses.

IBM spokesman Jeff Tieszen said Friday that substantial progress has been made in some areas and reiterated that the company is committed to the success of the project.

While the price tag of the project won't change, the responsibilities of IBM and its deadlines will, Robinson said. The specifics will be negotiated in a new agreement with IBM that is expected to be worked out by February.

The original seven-year contract, which began in 2007, was sold as a way to save the state $176 million by merging the data center operations of 27 state agencies into two upgraded and streamlined facilities.

While that concept is still sound, EquaTerra found that the contract and its implementation were fundamentally flawed, and both the state and IBM share the blame.

First, everyone underestimated how old and obsolete the state's existing technology was.

Next, the contract was based on a "one-size-fits-all" approach that ignored the particular needs of individual agencies.

That led to frustration, with almost all the agencies' information technology directors saying this past spring that they were dissatisfied with IBM's service.

Under the revised contract, the state agencies involved will be given more control over the process to ensure that their needs are met and that they are more invested in the project's success, Robinson said.

"The agencies should be helping to drive this initiative, not just be customers of (the Department of Information Resources)," Davidson said.

John Cox, chief information officer for the Texas Education Agency, said the consultant's independent assessment has been "sorely needed."

Cox said he is optimistic that "all of the players are on board moving to get this turned around."

In addition to the agency's complaints, IBM has endured a public flogging for many problems it attributes to poor conditions inherited from the state.

Morale is low. Turnover is high. And the relationship was dysfunctional from the start, the consultant found.

"State agencies, DIR and IBM team members involved in using, managing and delivering the services are exhausted and highly stressed," according to the consultant's report.

"This combination of low morale and intractable issues ... has resulted in the emergence of hostile and sometime aggressive behaviors by team members from all sides."

IBM has been under the gun for over a year to fix the problems.

Last year, Gov. Rick Perry temporarily halted work on the project after a significant loss of data at the attorney general's office. IBM was warned at the time that its contract could be in jeopardy if the problems were not remedied.

The problems persisted and a 13-day server outage at the secretary of state's office in August prompted officials to pull the elections system out of the consolidation because of fears that a similar outage could compromise an election.

Robinson, who worked for Perry until taking the interim director position in September, said she would not lay the blame for the problems solely at the feet of IBM or any other participant.

"I'm not going to fingerpoint," she said.

These kinds of problems are not uncommon for big information technology projects. About two-thirds of such projects fail to meet the stated objectives, bust the budget or miss the deadline, according to oft-cited industry research by the Standish Group called the Chaos Report.

That is true for public and private projects alike, but public sector stumbles tend to happen in the glare of the spotlight.

John Miri, a technology consultant who was previously an executive at the Department of Information Resources, said state technology officials across the country are watching Texas right now.

None of the facts or conclusions in the EquaTerra report is particularly new to anyone who has been working on this problem, and the report acknowledges as much, Miri said.

"What is bold about this report is that DIR is speaking so directly and candidly with the public," Miri said. "Sharing this type of information with the wider community is going to get people engaged, and that's a big part of solving this problem."

What is next for Texas' $863 million contract with IBM?

Negotiate a new final agreement by February 2010. The scope and timing of the contract will change but not the price tag.

Complete consolidation of the data centers by December 2010.

kalexander@statesman.com; 445-3618