IBM versus Texas: Who’s at Fault?
Thursday, 09 September 2010 07:43
The Data Center Journal has in recent weeks covered the ongoing dispute between the State of Texas and IT-giant IBM over a data center consolidation project gone awry. IBM took on the contract, valued at $863 million, to help Texas “merge the data centers of 28 state agencies into two upgraded and secure facilities,” according to Statesman.com (“UPDATED: IBM says state must change to avoid recurring data center troubles”). In many contract disputes—especially contracts of the scope of the Texas data center consolidation project—each side has at least some legitimate complaint against the other. But in this ongoing dispute, who should bear the brunt of the blame?
The contract between IBM and Texas was signed in 2006 and suffered problems from the start. For instance, Texas Governor Rick Perry ordered state agencies to cease their work with IBM, citing a lack of proper data backup procedures on the part of the IT giant. Texas accused IBM of causing the loss of records, and the company ended up paying almost $1 million in fines to the state. In July of this year, Texas issued a 30-day warning calling on IBM to “cure” certain shortcomings in meeting its contractual obligations (as viewed by the state) or face termination of the contract, which could also carry certain negative ramifications for IBM. Texas then went on recently to state that it would take over contract management and would seek new bids on some portion—whether in total or in part—of the contract, suggesting that IBM may be on the losing end of this battle.
So is IBM to blame for the failure of a large government bureaucracy to consolidate? Given the extensive, complicated, and virtually incomprehensible language that composes modern-day contracts, one may never be entirely sure who is to blame. (And the precise interpretation of a contract, at least in terms of its legal repercussions, all depends on which judge presides over ensuing cases.) But some conjecture can be made in this regard on the basis of the history of these kinds of projects.
As noted above, many contract disputes involve sufficient blame to implicate both parties to one degree or another. In this case, Texas isn’t the only one complaining. Most recently, IBM’s VP and Global Project Executive Cynthia McLean responded to a July 16 letter from Texas Department of Information Resources (DIR) Executive Director Karen Robinson. In her responds, McLean rebutted Texas’s claim that IBM had failed to live up to its end of the bargain. According to DataCenterDynamics (“IBM pushes back at Texas State over $860m data center consolidation contract”), McLean stated that “IBM respectfully disagrees with DIR’s contention that IBM has breached or otherwise failed to live up to its obligations...In fact, IBM has repeatedly and consistently gone above and beyond its contractual responsibilities in an effort to overcome DIR’s failures to perform its own obligations.”
So, the accusations go back and forth. But one can surmise from the nature of government bureaucracies and the history of such consolidation efforts (at least on the Federal level) that a lack of cooperation, and perhaps active resistance, on the part of Texas state agencies may have been partly to blame. According to Government Technology (“Texas Says It Will Seek New Data Center Contractors”), IBM stated that state agencies opposed the effort: “Ceding control of their individual IT environments...was (and continues to be) unpopular with the constituent agencies, and...those agencies not only failed to cooperate, but in many cases actively resisted the project.” Government jobs are lucrative and highly secure (compared with those in the private economy); thus, such resistance to a project that would likely affect (if not eliminate) some of those jobs is to be expected.
In addition to bureaucratic roadblocks, IBM was taking on a nearly impossible task to begin with. The U.S. Federal Government, for instance, initiated an attempt in 1995 to consolidate its total number of data centers. The effort was, to put it mildly, a miserable failure, with the number of Federal data centers nearly tripling between 1998 and 2010. IBM was therefore taking on a project—on a smaller scale, to be sure—that the Federal Government failed to accomplish. Needless to say, then, the troubles that have ensued in the project are not entirely unexpected. If IBM is correct that state agencies have thrown monkey wrenches into the project, then the company cannot be held entirely responsible for the projects dismal state. To be sure, the state of Texas may have some legitimate claims against IBM. The bureaucratic mentality, however, almost guarantees that Texas is also, if not mostly, to blame for the mess. Whether IBM is able to complete the contract may depend on the opinion of a judge (or series of judges); the company’s trouble in Texas may provide a stern warning, however, to any organization that thinks it can consolidate Texas’s data centers.