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IBM's Devil's Triangle: An enterprise software soap opera

Summary:IBM faces lawsuits and public embarrassment in the Philippines over a failed government project involving the company's
DB2 database product.
By Michael Krigsman

IBM faces lawsuits and public embarrassment in the Philippines over a failed government project involving the company's DB2 database
product. The situation offers a textbook example of the Devil's Triangle, and demonstrates the tensions and conflicts that arise between
technology vendors, customers, and system integrators.
Background. The Government Service Insurance System (GSIS), a Philippine agency responsible for managing the pensions of government
employees, installed DB2 in 2006. By early 2008, the system began showing signs of weakness. Local newspaper, the Philippine Daily
Inquirer, describes what happened:
[GSIS chief legal counsel Estrella Elamparo] explained that the software started showing problems in early 2008, particularly in handling
voluminous chunks of data.
IBM upgraded its database system purportedly to enable it to handle unlimited volumes of data, Elamparo said. However, the reported
upgrade only worsened the problem because instead of fixing the problem, the database began mishandling data and prevented the
simultaneous use of data.
The government threatened lawsuits in response, according to the paper:
The Government Service Insurance System warned...it would launch a series of legal actions against IBM for incalculable damages that
the pension fund sustained due to defective computer software.
GSIS went on to purchase a full-page spot in major newspaper, the Manila Bulletin, and published an open letter explaining the situation.
The Bulletin reports:
The Government Service Insurance System (GSIS) has put out an open letter to its active members and pensioners, detailing how the
software installed by computer giant IBM in the GSIS system has, to borrow the Funds own term, turned into a nightmare.
GSIS has been having difficulties processing the claims and benefits of members, pensioners and other beneficiaries, as well as the glitches
encountered in some instances in the posting of payments made to the GSIS.
Another Daily Inquirer article describes the technical environment:
Full swing implementation was in 2008 after GSIS tapped systems integrator Questronix Corporation. Under the contract, Questronix would
implement a full database package using DB2 version 8 and an SAP business application.
However, the agency started seeing problems with DB2 version 8, particularly bad pages on the tables. The agency later discovered that the
DB2 tables could only handle 256 gigabytes of data, which was lower than what GSIS needed.
The database software was then upgraded to DB2 version 9.1, which could handle 512 exabytes of data, or one billion gigabytes.
[Elamparo] explained their database table exceeded 2 terabytes (2,000 gigabytes) worth of transactions. We expected DB2 to keep running
since it was only 2 terabytes.
GSIS is now pursuing various legal measures against IBM, including filing criminal charges accusing IBM Philippines of bid rigging in
connection with the project. From local newspaper BusinessMirror:
Elamparo [said] that IBM Philippines may be held liable for possibly dictating the bids of its dealers as a third party who is technically not a
By giving various discount levels to its dealers involved in the bidfrom 30 percent to 80 percent IBM Philippines is in effect empowering
one dealer over another, since those who had gotten a bigger discount would naturally be able to bid lower, Elamparo said.
She brought the National Bureau of Investigation's attention to Section 65 of RA 9184, which bars a bidder from employing schemes that
restrain natural rivalry of bidders, refrain from bidding to provide another bidder undue advantage, and knowingly submit high bids to have
the contract awarded to a prearranged lowest bidder.
IBM response. In a statement to local television station, ABS CBN news, IBM denied creating the problems, pushing blame back to GSIS and
third-party system integrators:
"GSIS did not engage IBM in the selection, customization and implementation of this system. IBM was the OEM (original equipment
manufacturer) provider to one of the technology vendors engaged by GSIS. GSIS does not have any maintenance or support contract with
IBM," the statement read.

"Nonetheless, in view of our long standing relationship with GSIS and out of goodwill, IBM has been working with GSIS' solution providers to
resolve GSIS' system issue."
IBM also denied violating procurement laws, according to another local station, GMA NEWS TV:
The Philippine unit of US-based IBM said it does not agree" with the statements made by the pension fund which earlier said that the
company asked one of its dealers to pull out from a bidding for an IBM Linux server.
"When IBM was notified of GSIS's concerns last year, we took immediate action to thoroughly investigate the matter and found there were no
irregularities in the way we conducted our business. We shared these findings with GSIS," IBM Philippines said in a statement.
SAP distanced itself from the situation, saying it has no contract with GSIS:
SAP Philippines said that it had no contractual relationship with the agency in the implementation of its IT infrastructure software or
consultancy services.
Instead, the software company stressed that GSIS licensed SAP software from Team Synergia, a local value-added reseller.

Whose fault is it on failed ERP implementation?

In our opinion, both GSIS and IBM have their share of the blame. GSIS purchased a
DB2 system from IBM and then hired Questronix Corporation to integrate the
system with an SAP business application. IBMs liability to GSIS is simply to provide
the system, without being part of the selection, customization and implementation
of such system. This set up, which is a textbook definition of a Devils Triangle is
bound to have problems since the complexity of the technology makes it impossible
to completely entrust the implementation to a third party. GSIS should have
disclosed to IBM sufficient information on the project so that they could have
arranged a better engagement wherein IBM takes part in the implementation of the
system. On the other hand, IBM, knowing that its client handles critical functions
should have been more committed in determining the particular needs of GSIS