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BSkyB Wins £709m Lawsuit Against HP-EDS
E5Rebel writes "In a massive legal case in the UK, HP-EDS has been found guilty of 'fraudulent misrepresentation' by their sales team when winning a major CRM project. Settlement could cost £200M out of an initial claim for £700M. HP's only relief was that parts of the claim were dismissed, but the core claim was upheld. HP is likely to appeal. Outsourcing will never be the same again. HP workers have been on strike against pay cuts last week; no doubt management will try and screw them further to pay for this debacle."
Confused much? EDS is HP. The customer was BskyB.
BSkyB was the client in this case, EDS was the company contracted to provide services. EDS has since been bought by HP and so HP is now on the hook for the EDS fubar.
Anyone know of any large outsourcing company that deliver what they promised, to a decent quality?
Capita are another company that comes to mind. They have ripped off most public services in the UK with their poor products. Capita did a good job at ripping Birmingham City Council off with their new web site.
Although it's possible things have changed in the past decade, having worked for EDS as a new graduate, I take issue with your assertion. It's full of high GPA recent college grads, with a seriously over-inflated sense of their own competence, doing 'work' they are not qualified for, managed by people whose sole qualification is that they are the sub-set of that group who lacked the ambition to leave their employment in order to do something less pointless long enough to be promoted.
IAAL. I work with technology contracts. I think that the only reason a lawyer will be scratching his head is because of the genuine unlikelihood that the customer could actually prove a fraud case against a vendor. That's not to say it's impossible, just so unlikely. What's clear is that this was not a contract case. If it was merely a contract case, it would have looked to the four corners of the agreement. The plaintiffs (the customer) had to work extra hard (i.e., $40M in legal fees hard) to prove the fraud.
Customer-clients regularly come to me with contracts that have:
1. no objective criteria to measure success/failure
2. all of the liability for delays, failure to perform, etc. allocated to the Customer
3. do not have sufficient input from the technical people that will actually be working on the project.
4. no contractual remedies for failure.
5. no change management process.
Point #1 is the most important. In this case, if there were objective criteria to measure success, then the breach of contract case is simple to prove. It is like engaging in the design/plan phase of development before you even sign the contract. If a customer can't figure out what objective criteria it needs, it's probably not a good time to enter a $40M contract. Take for example, the objective criteria that the EDS software will meet the minimum process per second with 150 active users. Easy, does it do? If not, see points 2 and 4.
Point #2 is often overlooked. Customers regularly sign contracts that permit a vendor to deliver something non-conforming on the delivery date and not be in breach. The contracts are also usually written so that the additional time spent correcting the non-conforming deliverables are paid by the Customer. These are usually sneakily inserted under the "right to cure" a breach provision. At some point, the vendor (not the customer) should be paying.
Point #3 is necessary in order to establish point #1 and point #2. Management has this idea: oh we need ___ system. Let's find a vendor of ___ system. However, it is the technical people that need to set the objective criteria and then be able to test that it was met.
Point #4 is the stick with which you beat the Vendor into meeting those requirements. Every customer should be asking, "what happens if they don't deliver?" I say, "show me the money." Of course, you can customize however you see fit. Customers however don't usually ask.
Finally, point #5 is so painful its hard to write about. A lot of time and money is lost because the customer does not have a good internal change management process. In addition, the customer does not put that change management process in writing with the vendor. Any change management process should be coordinated through a project manager. The process should require 1. estimates of cost and 2. affect on time line. These should require signature of someone higher up the chain than the project manager if there is a big impact on price or time--what constitutes a "big impact" should be spelled out (e.g., more than $10,000 or more than a 1 week).
As a last tidbit: technology people need to STOP SIGNING AGREEMENTS WITHOUT A REAL LEGAL REVIEW. This includes the stupid little EULAs that you click ok to. That includes the purchase of off the shelf software. That includes signing up a third party for professional services. Those words mean things. Spending $1-3K now saves a boat load on the backend.
I am not a lawyer. This is not legal advice. And even if I were a lawyer, I am not your lawyer. That said, the limits on verbal agreements are pretty narrow in the US. Basically:
Are not able to be made with a verbal contract. Everything else goes. For example, multi million dollar stock transactions are done verbally every work day. (yes end of day settlement does turn into a he said she said discussion with millions on the line during market downturns.)
So, in the US a company sales team that promises that it can duplicate Google.com in six months for ten million dollars, could be screwed if the company cashes the check. Even if no executive officer signs off on it. (Then again a company that is depositing ten million dollar checks without oversight is screwed anyways.)
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