The state of Texas has stopped work on an $863 million outsourcing project under which IBM is transferring state records to a centralized computer system.

Governor Rick Perry said in a letter to a state IT officials that IBM failed to perform "the crucial backup of data for more than 20 state agencies," according to a report Wednesday in the Dallas Morning News.

The Governor also said that project overseers failed to implement a series of check and balances meant to ensure the project's security. The newspaper reported that, in one instance, half of eight months' worth of Medicaid fraud records were lost due to a server malfunction and that the state has fined IBM $900,000 for the failures.

IBM's contract for the work is slated to last seven years. It's not immediately clear when the work will resume.

In a statement, an IBM spokesman said the company is cooperating with state officials to fix the problems. "IBM welcomes the review ordered by Governor Perry," the spokesman said. "There have been some issues with data backup and recovery and IBM has been working with the Texas Department of Information Resources to resolve those issues as quickly as possible."

IBM's spokesman said that Texas' IT operations "have steadily improved since the project began last year and plans are in place to continue to improve those operations."

Despite the setback in Texas, IBM's outsourcing unit remains strong. For its most recent third quarter, IBM reported that outsourcing sales increased 8% year-over-year to $9.9 billion.