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Will IBM learn from its mistakes?

If you were watching Australia's technology industry closely last week, you'd have noticed that one particular company has been having a really bad time.
Written by Renai LeMay, Contributor on

commentary If you were watching Australia's technology industry closely last week, you'd have noticed that one particular company has been having a really bad time.

IBM logo

(IBM logo image by Patrick H, CC2.0)

I refer, of course, to IBM.

Yesterday the workers at its "Flight Deck" facility in Baulkham Hills voted overwhelmingly to pursue a range of industrial action — including, if it comes to that, indefinite stoppages.

I've personally been out to the centre several years ago during IBM's last all-out war with its own staff in the facility. I believe the facility is an innocuous-looking building mostly hidden behind a grove of trees. But its innocent exterior belies the conflict that is currently reaching boiling point inside.

Over the past few months more and more details have come to light about just how unwilling IBM is to negotiate with its own staff at the Flight Deck on some form of collective agreement for the paltry amount of staff — just 80 — that work there.

If you believe the Australian Services Union — which, according to ballot papers released yesterday, represents at least 50 of the staff in the facility — IBM has done everything in its power to refrain from negotiating with the union over a collective agreement — complying with what the union has claimed is a global policy of not negotiating with unions.

And the record of IBM's court battle with the union in front of the Fair Work Australia tribunal certainly lends credence to that fact.

The way Big Blue's legal team questioned its own staff appeared to be nothing short of torturous. Its lawyers went to great extremes to make the company's case that the union should not be allowed to represent the staff.

When Fair Work Australia eventually ruled in favour of the union, and IBM was ordered to enter talks with the ASU, IBM appealed the decision and asked for more time, claiming that one of Fair Work Australia's senior bureaucrats had made an error in their ruling. That request for more time was turned down by Fair Work Australia.

However, if anyone thought IBM would take that move lying down, they had another think coming.

IBM's response — just two and a half weeks later — was to sack some 19 staff at the Flight Deck, representing 25 per cent of the workforce, with the union claiming the jobs would be shifted offshore.

It's not the first time IBM has suffered extensive problems with workers at the Baulkham Hills facility. The same sort of trouble was going on back in 2008. And there have been other examples of poor treatment of IBM staff over the years, such as the revelation in April 2009 that Big Blue had told staff it would no longer pay for tea or coffee for staff in its Australian offices.

The other IBM news last week that rocked Australia's IT industry was a devastating report published on Wednesday by the Queensland State Government's Auditor-General Glenn Poole on the state's payroll disaster at Queensland Health — a project for which IBM was the prime contractor.

Now don't get me wrong ... there is plenty of blame to be shared around in the report, and there is no doubt that both Queensland Health and government shared services provider CorpTech share quite a lot of responsibility alongside IBM for the debacle, which has left many Queensland Health staff without pay.

For starters, the report notes that there was confusion between the trio about each parties' responsibilities, authority and accountabilities with regard to the project, resulting from what appeared to be a poor governance structure.

Queensland Health did not formally agree to the project's initial scope, and negotiations took place over the life of the project — resulting in over 47 change requests — a problem that resulted from business requirements not being set clearly from the beginning of the project.

Nevertheless, one fact from the report that really stuck in my mind indicating a very serious mistake on IBM's part right at the beginning of the project. The audit of the project found it was envisaged that the new Queensland Health payroll system would be based on what was believed to be a very similar implementation of SAP software at the state's Department of Housing, with minimal changes required for Queensland Health.

This is what IBM stated about the project in the initial statement of scope:

"Our understanding is that there is a relatively small amount of functionality required as a minimum to make the interim software functional for Queensland Health that is relatively small in nature."

IBM's understanding of the situation proved to be wrong, and the events of the past six months in Queensland — which have led to serious political implications for the government, including calls for the resignation of the health minister — have proven how wrong it was.

What should have been apparent to IBM when the scope of the new payroll system was being drawn up was that Queensland Housing and Queensland Health are about as far apart in nature as two departments can be and still be within the same government.

The simple fact, as the audit report noted, is that the Department of Housing's implementation catered for between 1200 and 1300 employees and just one award structure, while Queensland Health's new system would be required to cater for about 78,000 employees and multiple award structures.

I have no doubt that IBM's recommendation that the new system also use Infor's Workbrain rostering system was intended to address this incredibly obvious issue. And certainly there is evidence that IBM went to great lengths to fix the mistake in scope after it realised it made it. But it does not explain why IBM staff believed that such a massive undertaking could ever cost it just $6.2 million to implement in the first place (in March 2010, it was estimated that IBM's contract had blown out to $24 million and the system still does not completely work).

After all, it's not as if IBM couldn't have known the risks.

Big Blue's contract with Queensland was inked in December 2007. Just a few months before, Western Australia's auditor-general had published a landmark report very much like the one that his Queensland counterpart Glenn Poole published last week.

In that report, WA Auditor-General Colin Murphy lambasted Western Australia's own shared corporate services project, which like Queensland's, aimed to consolidate government financial and HR systems, for being two years late and more than $66 million over its previous $122 million budget. IBM wasn't involved in the WA project — it was an Oracle-based project and more of the integration work was being done by the government.

Though in Queensland, the sticking point for the project was not the migration of the financial systems, but the migration of payroll systems. And — critically — Murphy had noted that part of the problem was that the complexity of the awards governed public sector employees had been underestimated.

The disturbing thing about these events surrounding IBM last week was not that they happened. Other companies — Telstra comes to mind — have faced problems with unions and their staff. And other companies — Oracle, for example in the WA Government's report — have faced issues with implementing government projects, which go wrong notoriously often.

The problem, to me, was what else IBM said and did last week.

The Australian Computer Society announced that IBM Australia managing director Glen Boreham had been appointed ambassador of National ICT Careers Week for 2010, despite the industrial action announced within one of IBM's facilities.

"For me, a career in ICT is about making a difference in the world. It's about working with people, helping people, finding new and better ways of working," Boreham said in the press release. "Helping the brightest and best coming into the workforce to realise that potential for possibility — the endless horizon."

I bet that the Flight Deck staff couldn't quite see that "endless horizon" when they were staring down the barrel of an IBM lawyer quizzing them in depth at the Fair Work Australia tribunal about how precisely they carried out critical backup duties ... while paying for their own coffee.

Then, precisely one day after the Queensland Government publicly threatened to sever IBM's contract to build Queensland Health a new payroll system and sue for damages, the company issued a statement lauding its work on the Federal Government's Standard Business Reporting project.

Now I know that success certainly hasn't been IBM's only one. I have been particularly impressed by the energy Boreham and co have shown in dragging Australia's governments and energy utilities into the new millennium over the past several years and, of course, we can't forget that IBM was largely successful in its mission to help the Department of Immigration and Citizenship implement its mammoth Systems for People project.

But just for right now, I would like to entreat IBM to stop and think about several things rather seriously. Is it treating its staff the right way? Are its processes for evaluating new work — such as Queensland Health's payroll system — adequate? And most of all: is it man enough to admit and learn from its mistakes?

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