It’s always hard to say just what factors leads a customer to cancel a major project with a vendor. But the news that the state of Indiana has canceled a $1.34 billion contract with IBM to automate much of the services associated with managing the state welfare system smacks of a classic case of overpromising on what IT could actually deliver in the first place.

IBM was about three years into a 10-year deal to automate the Indiana state welfare system. While the state acknowledges that the IBM system helped reduce fraud, it dinged IBM for not helping to improve service as promised. Indiana is instead going to return to a process that demands more hands-on interaction with welfare recipients.

What Indiana is experiencing here is what thousands of companies that have attempted to create self-service applications already know. The more you automate the service process, the less actual contact you have with the customer. This can be a good thing if done properly because it lowers costs. But thousands of companies have found themselves losing touch with their customers because too many processes were automated to the point where there was no meaningful, ongoing contact with the customer.

There have been numerous instances where companies have had to rethink their self-service application ambitions in the face of customer realities. The Indiana state welfare system appears to be only the latest highly public example of a self-service application issue that is confronting companies all across the globe.