adequate compensation."

New Approach

The DIR implemented governance changes earlier this year designed to give state agencies a stronger voice in the outsourcing project. And the state intends to alter its approach to server consolidation, regardless of how the current dispute ends, according to Swedberg, who manages the Texas data center contract.

Rather than shifting the entire contents of state servers onto new machines in the privatized data centers, the state will evaluate and prioritize each application running on agency servers and come up with an appropriate course of action. "This is very important because it's going to help us better tailor the priorities of what we transform first based on business requirements and technical risks," he said.

In addition, agencies will gain more flexibility to decide the level of service they need - for instance, how much downtime an application can have and how quickly problems must be fixed - for each application they run.

"Every application within the portfolio of an agency isn't alike. They all don't need the same level of service in terms of availability and everything else," said Swedberg. "So by going to an application-based transformation, we can go in and profile that application and, working with agency business executives, understand exactly what level of service each level of application really needs. And give them the tools to better be able to manage their IT budgets for data centers."

But Tieszen said changes implemented by the state fail to address a fundamental problem with the outsourcing plan: the DIR's lack of authority to centrally manage the initiative.

"Let's face it: The DIR is an agency with very little real influence, despite whatever state organizational chart you might look at," he said. "They were given a mandate to centrally manage the agencies and they failed to do that. They failed to get buy-in from the agencies from the very beginning."

Those problems have slowed server modernization and consolidation to a crawl and greatly increased IBM's costs, he said.

Committed to Consolidation

Despite the current problems, Texas remains committed to some form of data center consolidation, DIR officials said, adding that the concept enjoys support from a cross-section of state leaders.

"There's no going back from consolidation," Swedberg said. "We've got the buy-in across the board from the legislators, governor's office and executive directors of agencies. ... Everyone understands that it's the right direction to go."

Robinson characterized the DIR's warning to IBM as an effort to protect state agencies. "This is not a termination notice; this is a notice to cure," she said. "Our goals are to ensure the continued reliability and integrity and availability of the state's information technology resources."