Texas Hands Troubled IBM Contract To Capgemini, Xerox

The state of Texas has tapped Capgemini and Xerox to take over a troubled data center consolidation and management project that fell well behind schedule and suffered numerous technical foul-ups under previous contractor IBM.

Under deals announced this week, the Texas Department of Information Resources (DIR) will pay Capgemini $127 million over six years to provide overall project management services, and will pay Xerox and its ACS subsidiary $901 million over eight years to handle mainframe, server, and network services, as well as printing and mailing.

The plan calls for the outsourcers to combine the IT operations of 28 state agencies, including the Department of Health and Human Services, Texas Education Agency, and Department of Transportation, into two data centers in Austin and San Angelo that will host private clouds.

Texas first began looking to upgrade the computing infrastructure that supports key state agencies in 2006, when it hired IBM to consolidate, revamp, and manage its data centers under a deal that was to pay Big Blue $863 million through 2013.

[ In a cloud project, common sense gets you only so far: then the pain really kicks in. See 4 Cloud Computing Pain Points That Still Hurt. ]

But the project quickly fell off track amid scheduling conflicts and high-profile service outages that threatened to compromise sensitive data. In 2008, Gov. Rick Perry ordered a temporary halt to the project because he said state operations were at risk. Texas made the decision to effectively fire IBM in 2010, and IBM and the state reached an undisclosed settlement this month.

Todd Kimbriel, director of E-Government and IT Services for Texas DIR, said the IBM contract was hampered by the fact that Big Blue sought to perform many of the management and administration functions from off-site, remote locations. "The new contract has made it a preference that the people are on the ground in Austin. We want to have people in our seats with visibility among our staff," said Kimbriel, in an interview.

IBM has said that the state shares responsibility for the project's failure because it failed to perform necessary preparation work, such as application remediation, and didn't always provide support personnel or timely access to its systems.

Kimbriel conceded that infighting caused some problems with the previous contract. "Every state agency is autonomous, so when they are mandated to move their IT services into a state run data center, there was some resistance to that." He added that "most of the shock and awe" of moving to a central IT structure is now gone. "They've come to realize there are a lot of benefits to having this consolidated approach," he said.

Among other things, individual agencies will no longer have to maintain their own data facilities, and will have access to on-call IT help around the clock.

State officials said they have learned their lesson about tapping a single outsourcer for such a vast project, and are going forward with a new model under which work will be divided among multiple service providers, and managed by one so-called master services integrator (MSI)--in this case Capgemini. "It's a relatively new model, not a whole lot of people are doing it," said Kimbriel. "Because the model and governance structure is so dramatically different, it gives us greater flexibility to peel off any one of those towers and pull it away if they don't perform. It's a plug and play model."

As the MSI, Capgemini will be responsible for enterprise level services such as metrics reporting, help-desk management, technology roadmapping, and technology selection. "They're the watcher," said Kimbriel.

Capgemini and Xerox will consolidate data centers and build a private cloud environment that will support the agencies. "The intent is to establish a private cloud infrastructure within the state's data center, and that absolutely facilitates consolidation," said Mark Stein, VP for IT Services at Capgemini. Stein said Capgemini and Xerox are working with IBM to ensure a smooth transition. "We need to understand the old environment, but we're not going to replicate it."

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