Indiana cancels $1.3 billion IBM contract

For a brief time a few years ago, I worked on an outsourcing ("strategic sourcing") project for an IBM client, NiSource. It was not a good experience for me. I was taken off the project after less than three months. It was the low point of my otherwise rewarding and successful 11-year career at IBM.

NiSource is a well established, well run Mid-Atlantic utility company. We were an IBM team of about 20 people who advised NiSource on how they can improve their business operations, mainly sourcing (what used to simply be called procurement) of services. I saw several nuggets of good ideas, but overall the project was disorganized, lacked focus and lacked staff level client support. The contract was signed without an agreed scope of work. Most importantly, IBM had no specific experience in running, no less advising, a utility company, and brought very few new ideas to the table. I knew that it was destined to fail. And it did.

So it is no surprise to me that I have heard since, either from contacts inside IBM or in the news, about IBM contracts being canceled. Chase. Texas. Sprint.

Today is another in the series.

"Gov. Mitch Daniels’ (Indiana) canceled the state’s $1.3 billion welfare modernization contract with IBM Corp. in October after months of complaints and rising error rates. The state’s error rate was more than 19.5 percent in July. The move came after hours of testimony critical of the IBM contract. "

This is a big deal. In the past, IBM and the client have gone out of their way to say that contracts are canceled NOT because of fault by IBM, rather as a change in business strategy. In this case, IBM is accused of poor quality. IBM's reputation is damaged. Not that IBM would ask me, but the problem at IBM is five parts as I see it:

1. These projects are typically understaffed (afterall, the goal is lower costs).
2. The staff that IBM does provide is comprised of a few talented people who are supported by dimwits from BRIC countries.
3. The client company staff is not cooperative, since they believe they will all soon be laid off (and will).
4. The projects lack focus. The sales teams fail to develop accurate scopes of work.
5. Last and most important, IBM mid to upper level management lacks ability.