No agreement yet between state, IBM on data center contract

AMERICAN-STATESMAN STAFF

Updated: 2:16 a.m. Saturday, April 10, 2010

Published: 8:57 p.m. Friday, April 9, 2010

A final agreement between IBM Corp. and Texas to continue the troubled data-center contract is proving elusive.

Negotiations have dragged on long past the February target set when the state and IBM agreed "in principle" to restructure the contract for consolidating the data centers of 27 state agencies into two streamlined and upgraded facilities.

The $863 million data center project, launched in 2007 , has been vexed by delays, equipment failures and service complaints.

Last fall, an outside consultant blamed the problems on both IBM and the state but said the deal could be salvaged.

Since then, IBM executives and state officials have been trying to find common ground on revising the company's responsibilities and the size of the contract.

IBM recently delivered cost estimates to the state that "give us a much better understanding of the financial challenges we face to fix the contract," said Marcus Cooper , communications director for the Department of Information Resources, which is overseeing the contract.

The cost to IBM to see the contract to the end is rumored to be as high as an additional $500 million.

Cooper said that he could not confirm or deny that figure and that the discussions are ongoing.

"No one other than those at the table know what numbers are being discussed," Cooper said.

IBM spokesman Jeff Tieszen referred questions to the state.

Cooper said that the state was re-evaluating its position based on the cost information from IBM and "considering all options."

One of those options is to dissolve the contract entirely.

Texas has done it before. In 2007, the state ended a five-year, $899 million contract with Accenture LLP to run call centers enrolling Texans in the food stamp program and Medicaid.

The outsourcing deal with Accenture was plagued by service problems and never delivered the anticipated savings.

Similar complaints have been lodged against the IBM-led partnership, known as Team for Texas .

The state expected to save $176 million over the course of the seven-year contract by merging the facilities that house agency servers and mainframe computers. The consolidation was also expected to improve operations and security.

State agencies, however, quickly began to complain of problems, including poor service, data losses and additional expenses.

In 2008, Gov. Rick Perry temporarily stopped 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 fixed.

A year later, the Texas secretary of state asked to pull its elections system from the project to ensure the integrity of elections.

The original aim was to have all 27 of the agencies' data-center operations running out of the consolidated facilities by December 2009.

So far, four agencies are fully operating out of the consolidated data center, Cooper said.

kalexander@statesman.com; 445-3618