The ruling awards $50 million to IBM, which includes some equipment fees. It also says IBM will pay money to the state for breach of contract.
The Indiana Supreme Court wants the state and IBM to settle a contract dispute outside of court.
The state alleges the computer giant failed to modernize and manage the state's welfare system.
The state originally hired IBM in 2006 to modernize its welfare system.
The Indiana Court of Appeals Thursday ruled that tech giant IBM did breach its welfare management contract with Indiana.
The state signed a $1 billion contract with the company in 2006 but canceled the contract three years later.
Attorneys made their closing arguments in court regarding the dispute between the state and IBM, which was hired to remodel Indiana's welfare system.
After five weeks of testimony, the lawsuit between the state and IBM is drawing to a close.
The trial State of Indiana v. IBM began Monday. Governor Mitch Daniels will not testify in the case.
Indiana canceled a contract with IBM to process its welfare applications. IBM is suing for money it says the state owes the company.