Texas Flag/Photo courtesy of U.S. House of Representatives Texas Flag Photo courtesy of U.S. House of Representatives

Low morale and a faulty one-size-fits-all approach are among several problems associated with Texas' data center consolidation and IT services agreement with IBM, according to a study released Friday, Nov. 13, by the Texas Department of Information Resources (DIR). The report recommended that Texas renegotiate the contract by the end of 2009.

The study, called the Holistic Remediation Strategy, was prepared by consultancy EquaTerra at DIR's request. The report says that neither the state nor IBM -- the vendor managing the contract -- are seeing the benefits that were predicted when the $863 million contract was awarded in 2006. IBM has not yet broken even from a profit standpoint, and the DIR isn't receiving the service it expected, according to the study.

Despite the problems, the study backed the concept of consolidation because it can drive cost savings and improve service when executed properly. But DIR's agreement with IBM "is not sustainable" as currently implemented, according to the report.

"The contract sets up DIR as the single voice for the agencies; however, DIR is not empowered to fulfill this function," the study said. "The contract is predicated on a one-size-fits-all solution that does not map well to the diverse portfolio of genuine business needs across state agencies. This paradigm causes contention between all parties."

In addition, the DIR, IBM and the participating state agencies are "exhausted and highly stressed." The combination of low morale and intractable issues "has resulted in the emergence of hostile and sometimes aggressive behaviors by team members from all sides. It has also resulted in a large and growing backlog of unresolved contract disputes and unfulfilled requests for service," according to the study.

Besides addressing morale and governance, the report recommended creating a transformation master plan, reviewing service levels, improving the data centers' LAN and wide area network, and making data backup more robust and transparent in order to reduce the risk of data loss, among many other items.

"There's probably not a lot of surprises [in the study], but morale here has picked up considerably within the next couple weeks. The communication with IBM and DIR has been elevated; we're having more planning meetings, and everyone seems more amenable," Karen Robinson, Texas' interim chief technology officer (CTO), told Government Technology.

Robinson said the state "was at the table" with IBM on Friday, and that the financial terms of a renegotiated contract likely wouldn't be changed. A subcommittee of the DIR board also met Friday to discuss the IT consolidation study and how its recommendations can be implemented, and its finding could be made public in a matter of days, she added. A steering committee that includes the executive directors of agencies participating in the consolidation has been formed over the past four weeks, she said.

IBM spokesman Jeff Tieszen didn't address the company's willingness to renegotiate the contract terms, but he said IBM remains committed to working with Texas.

"We feel that the report confirms that the data center services project remains the best way to achieve the state's original objective, which is to modernize its technology, enhance information security and disaster recovery, and provide flexibility to meet evolving requirements.

Consolidation Drifts

In 2006, Texas awarded IBM an $863 million contract for the provision of IT services to 27 state agencies, and included consolidation of 31 state agency data centers into two state-of the-art data centers managed by IBM. The consolidation was initiated in 2005 by legislation that directed the state to cut its IT costs, and improve service and reliability.

But the consolidation has been rocky. Last fall, Gov. Rick Perry ordered all consolidation be halted because of IBM's "apparent failure" to back up data of 20 state agencies.

Matt Williams  |  Associate Editor