The company plans to build a new customer service call center in Daleville, Ind., a small town northeast of Indianapolis, according to a statement released Monday by Indiana Gov. Mitch Daniels.
The center is expected to employ up to 500 workers.
The plan is part of a deal under which IBM and its partners agreed to create 1,000 new jobs in Indiana in exchange for receiving a contract to help modernize the computers that power the state's welfare eligibility system.
IBM also agreed to upgrade the supercomputer located at Indiana University and create a technology design center at Purdue University in Indianapolis.
IBM will initially hire 200 workers to open the center later this year, and will add an additional 300 by 2010, according to Daniels' office. The town of Daleville and Delaware County provided a package of incentives to IBM worth $419,000 to entice the company to locate the $2.9 million call center in the town.
IBM already employs about 1,000 workers in Indiana.
Technology outsourcers are benefiting as states overhaul the systems that gird their health and human services programs. Last week, Affiliated Computer Services completed the acquisition of a line of health and welfare management software products from Albion, a unit of India-based Scandent Group, to help meet the demand.