IBM's withdrawal from New Zealand's controversial police INCIS (integrated national crime information system) project comes hard on the heels of another body blow - the loss to EDS of the $NZ1.5 billion ($1.21 billion) Telecom New Zealand outsourcing contract.
Collectively, the two may reduce staffing levels from a traditional 1000 people to as few as 400.
IBM's Asia-Pacific communications director Fred McNeese confirms the 25-strong INCIS project team and 150 contractors will be laid off. That's on top of an expected 300 to 400 jobs to go because of the Telecom loss.
Big Blue is in danger of becoming Baby Blue in the New Zealand market.
McNeese puts a public relations spin on the financial fallout from INCIS. "There is no effect on the bottom line because it was still in development," he said. "[But] we've done more work than we've been paid for meeting the needs of the customer. We are owed money."
IBM has reported substantial after-tax losses for the past two years, attributed by most people to INCIS. Parliament has been told IBM has absorbed as much as $NZ50 million in directly related costs.
McNeese says the contract with the police had grown to be more and more complex. "It's far different to the original agreement," he said. "The additional complexity has meant increased costs. But we have fulfilled our contractual obligations."
IBM will continue to provide maintenance for part one of INCIS.
McNeese wouldn't speculate on the possibility of litigation, but it seems clear it is unavoidable.
New Zealand Finance Minister Bill Birch has said the government is extremely disappointed by IBM's decision and is seeking legal advice. Police Commissioner Peter Doone says he is "appalled".
Police will be looking at legal remedies, he says.
IBM supposedly told the government at midday last Monday it was withdrawing from INCIS.
Meanwhile, Computerworld NZ was told by senior industry sources the previous week it was all over and that IBM had asked the government to delay the announcement.
The project is three years late and $NZ30 million over its original $NZ98 million budget.
IBM had suggested alternatives to police, he says.