Apple's new board member, Virginia's computer nightmare

November 18, 2010: 9:32 AM ET

The former CEO of Northrop Grumman comes to Cupertino with $2.4 billion albatross

Ronald D. Sugar, who was named to Apple's (AAPL) board of directors Wednesday, was chairman and CEO of Northrop Grumman (NOC) in 2005 when the Los Angeles-based aerospace giant beat out IBM (IBM) in a bid to rebuild the state of Virginia's computer infrastructure from top to bottom.

The contract -- now valued at $2.4 billion, the largest in the state's history -- covered everything: mainframes, servers, desktops, laptops, voice and data networks, operating systems, e-mail, security, help desk and data center facilities.

It was the crown jewel of Sugar's push to expand Northrop's information services business -- which has since grown to 24% of revenues -- and was held up a national symbol of the benefits of private-public partnerships.

But for the people of Virginia, it's been a nightmare, plagued with cost overruns, missed deadlines, security breaches and balky service.

A scathing legislative audit in Oct. 2009 cited problems at almost every state agency that uses a computer -- a prison left without inbound phone service for hours, a state police department without Internet access for days, computers that crashed at the department of motor vehicles. In April 2009, a hacker broke into a state drug database, stole a reported 8 million patient records and 35 million prescriptions, and demanded $10 million ransom.

And that was before the big crash.

It hit last August, nearly nine months after Sugar's retirement, when a data storage unit in Richmond warehouse failed and 26 of Virginia's 89 departments lost computer service for as much as eight days. It was the worst computer disaster in the state's history. Among the highlights, as reported in the Washington Post:

  • 45,000 people couldn't renew their driver's licenses.
  • The tax department was unable to issue refunds and liens.
  • The department of juvenile justice couldn't release its inmates.
  • The department of veterans services, which manages two long-term care centers and two cemeteries, couldn't pay its bills.
  • Social service employees had to work overtime to get food stamps and welfare checks to 380,000 residents

Service was eventually restored, but the problems continue. There was another outage just last Friday which down computers at several state agencies. The DMV was unable to process licenses for about an hour.

The system, according to Marcella Williamson, a spokesperson for the Virginia Information Technologies Agency, is standardized on Hewlett-Packard (HPQ) hardware and Microsoft (MSFT) software. "We use the entire Microsoft stack," she told Fortune. "Exchange, SharePoint, Microsoft Office, SQL servers and .Net for development."

"They aren't Apple computers," she says. "I can tell you that."

Apple has not responded to a request for comment.

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About This Author
Philip Elmer-Dewitt
Philip Elmer-DeWitt
Editor, Apple 2.0, Fortune

Philip Elmer-DeWitt has been following Apple since 1982, first for Time Magazine, and now on the Web for Fortune.com.

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