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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."
AC disclosure: I work for BSKYB, but not in CRM ... thank f**k.
Yes, the CRM system has problems, and from a tech perspective I'd agree that it's not worth £48M (OMFG!). However, I think it's amazing that things got this far. If we're in a capitalist society then I also want this to be a meritocracy and I want someone in Sky to publicly take the blame for this 3rd party POS. Regardless of the internal or external software teams, it should never be allowed to degenerate to this level of incompetence.
There was a slashdot article awhile back about an SAP implementation at Waste Management that went bad.
Similar situation to this one.
I really think large companies buying these systems are going to start recording the sales presentations, burn them to DVD, and insist on including them in the contract.
That way the sales representations BECOME part of the whole agreement, and are actionable.
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.
Has anybody ever heard of (or better yet been involved with) an EDS project that went well.
Anyone?
EDS is characterized by: lots of promises, no delivery, never saw the experts present during negotiations again, lots of low GPA recent college grads doing 'work' they are not qualified for.
I don't know how EDS stays in business. Kickbacks to purchasing officers with no stake in the projects is my guess.
John McAfee 'It was like that time I hired that Bangkok prostitute; to do my taxes, while I fucked my accountant'
When I was in the U.S. Navy I was lucky to be at a command that was a test platform for an SAP implementation for the Navy(ERP was the Navy name for it). When I was there, if you were a "power user", even if not a computer junkie, it was very easy to get a grip on the program and use it very effectively. Of course, we had alot of complaining by alot of older people that didn't like change (every group will have these people). The actual rolling out of the platform was painful, but once it was in and operating it was great.
Our only issue was that we needed to be able to store classified "Confidential" information. This was information that was simply above public release, but below "Secret". Our procedures required certain safegards that were not easily implemented into SAP at the time. We had a plan to get it to work, but at a pretty significant cost.
Googling I just found www.erp.navy.mil, so it looks like the Navy has started using it more broadly. As much money as the gov't dumps into crazy stuff, I would be the first to say SAP/ERP was money well spent! Just don't mention NMCI(Navy and Marine Corp Intranet).
I worked as an independent consultant at GM (run by EDS) and at Sky, cleaning up the mess they left behind.
Firstly, on behalf of all the independent consultants and contractors at both sites let me say thank you to EDS. Thank you for our fees. Without your stunning incompetence all down the line none of this would have been possible.
The reality at Sky:
I joined a couple of years after EDS was slung out. Sky had a creaking legacy (green screen) customer installs system. They needed a comprehensive, fully architected CRM system capable of handling their millions of customers. EDS came in, did a brilliant sales demo, then sent in the drones. This is their standard operating procedure. They have smart people to call on - for sales calls. When it looked like they were about to get slung out of GM suddenly the kind of guys who wrote RFCs were all over the place. Once the attention was off they disappeared back to sales calls. This is how all outsourcing operations run.
Sky discovered pretty quick that they were being handed a pos that could never scale to a multi-million customer operation. Pretty quick being after a couple of years of pointless development. After they ditched EDS things didn't really improve: every department (customer services, billing, actuarial, etc etc) chose a "best of breed" app (more like "best of sales demos" app) then spent years customising it to fit. Then a bunch of said indy contractors tried to integrate it all together. We did the best we could.
Counting the bodies in the development halls, and allowing for what Sky had to pay to get people to work in Livingston (Detroit was comparable, if rather bigger) I'd estimate their costs at £50+ Million a year over rather more than five years. This settlement would put a big dent in that, but it certainly won't cover the cost of EDS's truly monumental incompetence.
Coda:
Between the GM and Sky gigs I had a drink with Compaq's top salesman in Toronto. I related the disasters at GM for amusement value, only for him to express his undying affection and admiration for EDS. What goes, I asked, for there was a twinkle in his eye. He explained thusly.
EDS would come to him for a quote for 10,000 PCs in their upgrade cycle for a major client. Said salesman would provide a quote for top of the line PCs at below cost price. A massive loss for Compaq. He would put this deal on paper, fully specced, and pass it across the desk for signatures.
*Three years later* EDS would come back with the sign-off and a purchase order. Compaq would give them 10,000 of the dregs of the warehouse. They would all surpass the three-year-old spec in the contract. Massive profit for Compaq.
I imagine the salesman made a pretty decent bonus too.
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.