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BSkyB Wins £709m Lawsuit Against HP-EDS 187

Posted by kdawson
from the pants-on-fire dept.
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."
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BSkyB Wins £709m Lawsuit Against HP-EDS

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  • Overstated. (Score:3, Insightful)

    by Itninja (937614) on Tuesday January 26, 2010 @06:42PM (#30911160) Homepage
    The summary: "Outsourcing will never be the same again."

    TFA: "Nigel Roxburgh, research director at the National Outsourcing Association, previously told Computerworld UK that if the case is upheld in favour of BSkyB, "it could lead to a real scratching of heads, particularly among lawyers."
    • Re: (Score:2, Funny)

      by machine321 (458769)

      it could lead to a real scratching of heads, particularly among lawyers."

      At least they've been practicing scratching the other end.

      Sorry, I mean practising.

      • it could lead to a real scratching of heads, particularly among lawyers.

        At least they've been practicing scratching the other end.

        I settle for "real beheadings, particularly among lawyers."

    • by HornWumpus (783565) on Tuesday January 26, 2010 @07:06PM (#30911378)

      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.

      • Re: (Score:3, Informative)

        by Anonymous Coward

        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.

        • I always assumed anybody with a decent GPA would have some experience/contacts by graduation and be able to get a better job.

          I know I did.

          I guess the defining characteristic of EDS employees is 'not knowing what they are doing'. GPA varies.

          I have had to interact with EDS staff. I don't believe _they_ ever got a high GPA (except maybe in the school of education.)

        • Re: (Score:3, Informative)

          by twiddlingbits (707452)
          Having worked for EDS as Senior Technical Staff I can tell you that you EDS was greatly burdened with incompetent, underperforming, meddling middle managers who had nothing better to do but get in the way. HP has sacked most of that level. Technology wise EDS has a few very sharp good people, lots of good processes (commonl NOT followed), many hard workers who put in ungodly hours to try to fixing the mess the meddling managers created but seems to like to overcommit and underdeliver. They do a good job of
          • Re: (Score:3, Funny)

            by afabbro (33948)

            They do a good job of things like hosting and infrastructure (in fact they host most of the airline reservations systems worldwide)

            Hopefully you just chose a bad example ;-)

      • Actually, the computer thingies in job centres work fairly well. The underlying database that they provide access to is badly designed, and badly filled in, but the terminals themselves largely work (and have EDS logos on them).

      • Re: (Score:3, Insightful)

        by Cederic (9623)

        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.

        This hardly differentiates EDS from their competitors. :(

        • Granted.

          Which should make this a scary decision for any of these scumbags doing business in England.

          • by Cederic (9623)

            I'm kind of torn.

            Do I want the scumbags to all go out of business, and stop sucking so much IT budget into their black hole of incompetence, giving the people that can actually do the work the chance to get paid more and deliver things?

            Or do I want them to continue fucking it up, as my next career move could well be independent consultancy addressing exactly this type of scenario?

            Time to read up on Game Theory..

      • by rocker_wannabe (673157) on Tuesday January 26, 2010 @09:01PM (#30912368)

        Apparently you are not familiar with the Navy NMCI Contract with EDS. I haven't been following it lately (as in the last few years) but it had VERY overpriced systems on the contract and mostly hired people who didn't have much experience because they were cheap. That contract would keep even the worst managed company in gravy for quite a while. I don't know what most of the military guys thought about it but just ask any civilian employee for the Navy what they thought of NMCI and listen to the expletives fly.

        I'm not sure how any company can sell computer software or services without lying, even unintentionally. Anything worth bidding on by EDS is going to be complicated enough to keep them from knowing what they really have for a month at least.

        The worst part is if you're going to expect technology salesmen to tell the truth then you're going to eliminate at lot of material for the Dilbert comic strip, among others.

        • Re: (Score:3, Insightful)

          by dkleinsc (563838)

          The old saw that seems applicable here: The difference between a software salesman and a used car salesman is that the used car salesman knows he's lying.

      • Re: (Score:3, Informative)

        by asdf7890 (1518587)

        I don't know how EDS stays in business. Kickbacks to purchasing officers with no stake in the projects is my guess.

        Government contracts for one thing. Hardly anyone (or no one) else of notable size bids for them most of the time as they simply don't want to deal with the red tape and other hassle (taking part in a procurement process can be very expensive in terms of time and effort, especially for large projects, especially for governments), so EDS get some fairly lucrative contracts due to being the only real contender in the procurement process.

        I've worked alongside EDS (they managed the IT and other infrastructure f

      • Has anybody ever heard of [..] an EDS project that went well.

        No, and that's not surprising in their field. As a company that provides infrastructure, EDS projects are expected to go well. It's not notable when they succeed.

        There's just not a lot of articles in the news about "Multi-billion dollar project went as expected". It's not that they never do, rather it's not newsworthy when they do.

      • Re: (Score:3, Informative)

        by jhol13 (1087781)

        In Finland there is company called Tieto (formerly TietoEnator). The sole reason why it stays in business is size. It is almost the only big player in the field.
        No small company can compete with their claims.

        TietoEnator has horrible track record. Just to point two (of many):
        1. Parliament voting system. Took several years as the first(?) system was overloaded by the votes - maximum of 200. Yes two hundred votes (given within few seconds) overloaded the system, the tests showed pretty much random output. BTW,

    • Re:Overstated. (Score:5, Informative)

      by reebmmm (939463) on Tuesday January 26, 2010 @08:23PM (#30912066)

      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'm not in any way a lawyer, but I can't understand how ANYONE would sign a contract for work without #1 and #4 spelled out clearly. Yet we see this over and over and over and over....

        • by dkf (304284)

          I'm not in any way a lawyer, but I can't understand how ANYONE would sign a contract for work without #1 and #4 spelled out clearly. Yet we see this over and over and over and over....

          With a big multi-year project, #5 is at least as important. Things will change because nobody can accurately predict what will happen in the future. But if there's no way to manage the inevitable changes, everything will go badly wrong and in unexpected ways.

  • Stupid Ads in TFA (Score:2, Insightful)

    by Amasuriel (1176527)
    From TFA:

    Amanda Bucklow at mediation firm In Place Of Strife said that even “a long and extraordinary mediation process would have taken only a few days and cost a lot less” than the legal fees spent by both parties.

    And now breaking news! Random person trying to sell you some services thinks you should buy their services!
    • by Kuroji (990107)

      Nevermind that apparently a long and extraordinary mediation would only have taken a couple of days, according to her.

  • SAP (Score:3, Insightful)

    by 16K Ram Pack (690082) <tim DOT almond AT gmail DOT com> on Tuesday January 26, 2010 @06:53PM (#30911248) Homepage

    Somewhat off topic, but perhaps related to the topic:

    Has anyone ever worked in a company where they had a SAP implementation where overall the users and management (and I don't mean snr management who are above it) are actually happy with the outcome?

    • Re:SAP (Score:5, Insightful)

      by BlueBoxSW.com (745855) on Tuesday January 26, 2010 @07:01PM (#30911330) Homepage

      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.

    • Re:SAP (Score:5, Interesting)

      by cyberjock1980 (1131059) on Tuesday January 26, 2010 @07:08PM (#30911392)

      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).

      • by Locke2005 (849178)
        Just don't mention NMCI(Navy and Marine Corp Intranet). Well, there's your problem right there... when have the Navy and Marine Corp ever managed to agree on ANYTHING?!?
    • by codepunk (167897)

      I am sure there where some that went well and many that went bad. Now most of them
      I am sure are a horrible burden to the bottom line. Installing and running something
      like SAP is all well and good when the company is making money and can afford it. When
      the bottom drops out the expense and maintenance I am sure only quickens the pace
      of demise.

  • The lawsuit alleged that EDS, now owned by HP, had fraudulently misrepresented itself in a sales pitch in 2000 for the system, leaving Sky to pick up the pieces and take on heavy costs as it implemented the system itself. EDS, on the other hand, said Sky did not know what it wanted, and kept introducing new requirements, making it difficult to deliver.

    and

    “If other representations become more important than contracts themselves, it could indicate that contracts effectively have no value,” he sa

    • by Creepy (93888)

      Well, I get a certain amount of schadenfreude when I see EDS get bad publicity because they basically wily-nily bought companies, destroyed their benefits, sucked any cash surplus out and fired half the workforce before cutting them loose so their stock didn't go junk. Yes, I am speaking from personal experience, and yes, I'm a bit resentful (how do you spin off a company the EDS way? Fire everyone and let the new company rehire - HR LOVED that one, btw). HP, I don't have any qualm against you aside from

    • by WarlockD (623872)

      This took 18 months TFA. We don't have the reams of documents they possibly went though.

      I can see the manager of Sky emailing a manager at HP/EDS on why its taking so long and the manager blatantly lies. I can also see Sky, after a few months into the projects getting some off hand information decides the change the spec in mid stream.

      All this compounded by the fact that neither side seriously looked at either sides contract. I am sure both's in house lawyers did, but upper management don't look at that

  • by Anonymous Coward on Tuesday January 26, 2010 @06:59PM (#30911314)

    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.

    • by mgblst (80109)

      People don't get to be in important positions by taking the blame for problems. They get to be in those positions by deflecting the blame to someone else.

    • by Cederic (9623)

      It's hard to allocate blame in these cases. The internal staff typically work excessively hard to make the original contract work.

      Someone senior usually gets booted out halfway through that leaving someone new to pick up the pieces, but the person booted out tends to have been constrained by various factors and acting with the best intentions, but caught out by a mix of supplier incompetence (don't assume malice), internal incompetence, overcommitment, inappropriate priorities and sometimes just being in ov

    • If we're in a capitalist society then I also want this to be a meritocracy

      That's kind of like saying "If floorplan of this room is a triangle, I also want it to have interior angles that total 360 degrees."

  • by rickb928 (945187) on Tuesday January 26, 2010 @07:11PM (#30911436) Homepage Journal

    I've done a lot of contract work, but nothing on the scale of a CRM install. Despite that, there are somem things that are the same, no matter the size of the job;

    - The relationship is key. If you don't forge a good relationship with your client, you will always suffer. Always.

    - If the relationship is good you can overcome any obstacle. Even total failure. Yes, even if your solution turns out to not work at all, you can work out the relationship.

    - Relationships are give-and-take. If you succeed wildly, you will get more and better. If you do fairly well, you get what is due. If you mostly fail, you work it out. Sometimes it doesn't work out, true. If you fail totally, well, you get what you deserve.

    - Importantly, don't get into a relationship you don't intend to actually work on, and don't have any real expectation of success. Someone on the engineering side of HP-EDS needed to tell the sales side 'we can't do all this'.

    - Most important, don't go into a relationship with a crazy partner. Sky may have violated this one. Money makes contractors crazy. Trust me on this. The more money, the crazier. Those of you who have real-life relationships with real-life people will find corollaries to this, and they are indeed true. You do not need to waste your 401K to learn this, ok? The tabloids will offer proof enough. Same thing in business. Almost the same process.

    • Granted you don't want a LTR with the crazy girl ether.
    • by Locke2005 (849178)
      It's not the relationship, it's the specification. I've never seen a project that had a complete, unambiguous specification, but this one sounds much worse than usual. Sounds like BSkyB went forward on this with this on just a wink and a handshake and figured they'd iron out the details later. Uh, no... the specification needs to be agreed on up front. Sounds like stupid people on both sides of the table to me -- BSkyB stupid for not specifying in the contract exactly what was being delivered and what the a
    • Someone on the engineering side of HP-EDS needed to tell the sales side 'we can't do all this'.

      And since when has THAT ever worked?

    • by Bigjeff5 (1143585)

      It all boils down to poor project management, and it's always one (or more) of three reasons. The difficulty in coordinating the non-technical management's expectations and what the sales team thinks is possible with what is actually possible at a given price is the reason something like 80% of all IT projects fail. It's always either scope creep, budget creep, or time creep that kills them.

      This sounds like a case of scope creep to me, and I'm actually surprised UK law is screwed up enough to award a 700

      • Of course it is going to fail if you're trying to hit a moving target.

        But it's surprising and somewhat depressing how few consultants are willing to give their management that kind of tough love.

  • Shouldn't BSkyB just get back whatever they paid EDS/HP for the project, e.g. £48 million? What's the rest of the £200 million/£700 million claim for?
    • Probably lawyer fees. :P
    • Re: (Score:3, Insightful)

      by ebcdic (39948)

      Presumably they incurred costs as a result of EDS not providing what they were supposed to.

      Sky and EDS - it couldn't happen to two nicer companies. With luck no-one will win except the lawyers.

      • by Locke2005 (849178)
        Lawyers for both sides have run up and estimated £40 million in legal fees... sounds like the lawyers have already won.
    • by asdf7890 (1518587)

      Shouldn't BSkyB just get back whatever they paid EDS/HP for the project, e.g. £48 million? What's the rest of the £200 million/£700 million claim for?

      • Money spent: £48m
      • + legal fees
      • + other costs incurred during the project (project management and other staff time for planning/training/whatever within BSkyB)
      • + money expected to be needed to implement a replacement or fix
      • + money to cover the time and process of finding a new partner for said replacement/fix
      • + losses considered to be due to the failed project, including difficult/impossible to financially assess issues such as reputation (it was a customer relations system that failed, after all)
      • +
  • by BigSlowTarget (325940) on Tuesday January 26, 2010 @07:19PM (#30911492) Journal

    FTA it sounds like the salesmen lied and the contract didn't include the lies. The court found EDS liable for what the salesmen said (and prolifically emailed) rather than the signed contract. If that holds it's not outsourcing that will become difficult but selling many complex and high priced products. Each sales meeting could be a contract negotiation with legal implications as well as a demo or whatever. You sales guys might need to drag the lawyer to all your customer meetings going forward. Sales support would become a major pain as well.

    • What happens a lot is that the sales people tell we can do A, B and C for you. Then pricing happens, and client is only willing to pay for A.
      Contract is limited to A and closed. Then client figures out that in the end they need B and C.
      Is that the sales peoples fault?

      I still think this is a difficult case and am not aware of all details.

    • by chiguy (522222)

      Each sales meeting could be a contract negotiation with legal implications as well as a demo or whatever.

      This would be awesome for the techs who have to deliver the goods.

      The sales guys can't just make false promises any more. They'd be on the hook too.

      Management would be scared of over-promising in presentations and reign in the sales team.

      Now that would change company dynamics.

      Ahhhh, if only.

    • by Cederic (9623)

      It'll hurt clients too; I usually ask salespeople for indicative costs, stating (honestly) that I'm not going to treat them as a promise, a commitment or something I can hold them to.

      I just need an order of magnitude understanding of how much of my company's money I'm going to have to spend to implement their product. If I have a business need then there's a massive difference between mobilising a whole procurement process for a product because it meets the need superbly, and initiating internal development

  • by Anonymous Coward on Tuesday January 26, 2010 @07:25PM (#30911558)

    Being an HP/EDS employee myself, I can guarantee you that I will get screwed.
    They already cut my pay once by 5%(plus 15% for one month). After doing this, they also cut several employee's salaries in a "job code alignment", which was just a pay cut in disguise.
    This is before and after laying off hundreds of employees, replacing them with morons from India and Malaysia because they are "equally efficient but cheaper".
    On the bright side, our CEO make record income thanks to his salary/compensations and his tremendous bonus. Apparently flushing your company down the shitter puts you at the top of the bonus queue.
    HP/EDS is run by greedy morons, who outsource all the work to poor morons.
    I'm happy to have a job and I hope this whole event doesn't affect me(although I'm sure it will), but HP/EDS can suck it for all I care.

  • Outsourcing (Score:4, Informative)

    by SimonTheSoundMan (1012395) on Tuesday January 26, 2010 @07:27PM (#30911580) Homepage

    Anyone know of any large outsourcing company that deliver what they promised, to a decent quality?

    Capita [capita.co.uk] 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 [birminghampost.net] at ripping Birmingham City Council [birmingham.gov.uk] off with their new web site.

    • Re: (Score:3, Insightful)

      by Locke2005 (849178)
      What planet are you from?!? Everyone knows you don't get to be the lowest bidder on a project by giving the customer everything they want! All salesmen lie; the really good salesmen actually know when they are lying. If you didn't fully specify the list of deliverables, the acceptance criteria, and the liquidated damages for failing to meet the criteria was in the contract, then shame on you for signing that contract in the first place! Sure, if you're doing it in house or buying from somebody that gets pai
    • Re: (Score:2, Interesting)

      by 16K Ram Pack (690082)

      Anyone know of any large outsourcing company that deliver what they promised, to a decent quality?

      No. And I'd never in my life hire one.

      If you're a big company with a reasonably bespoke requirement for software which isn't going to die after a few months, then you should treat it as part of your company. I'm amazed when companies think they can treat their complex data like something as simple as business stationery or the car fleet.

      The one time it's worth going 3rd party is for highly specialised expertise or non-bespoke software.

  • 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.

    Let me give you a little fucking hint, when the company you work for, losses a 200M lawsuit, because you were a fuck up ... a pay cut should be the least of your worries.

    Where the fuck did this ridiculous sense of entitlement come from? What the hell is wrong with people now days? You don't exactly get raises when you screw up, ESP

    • by Cederic (9623)

      I'm confused. You work 80 hour weeks trying to implement the impossible solution your fuckwit sales team promised to the client, fail because it really genuinely is impossible, and then get fucked over by the new owner of your company.

      How exactly are you responsible for the £200m lawsuit? Other than increasing its costs by not refusing to work on the bloody thing in the first place (i.e. quitting or getting sacked).

      EDS had a terrible reputation and I pretty much hated the company, but that doesn't mea

      • Re: (Score:3, Insightful)

        by HornWumpus (783565)

        When a fuckwit sales team promises the impossible they have given you license to not work.

        The outcome is inevitable. As you state it's an 'impossible solution'.

        Just stop working, look busy and focus on getting another job.

        Remember who gains/loses if someone somehow implements the 'impossible solution'.

        The sales maggot gains, his lies are now truth. His commission is now from a successful project. He will be telling new lies for the foreseeable future.

        The developer loses, he worked his ass off to

  • The bottom of page quote for this:

    Even if you can deceive people about a product through misleading statements, sooner or later the product will speak for itself. - Hajime Karatsu

  • Oh my God (Score:3, Funny)

    by TRRosen (720617) on Wednesday January 27, 2010 @12:27AM (#30913554)

    Sales people lied...I'm Shocked.

  • by Anonymous Coward

    I was called into the middle of a $110 million dollar contract between a very well known multibillion dollar company and HP. I was a subcontractor for HP that was assigned to make things work on the front lines. The vendor promised a migration of tens of thousands of computers without any need for desktop engineers other than simple boxing and unboxing. Over 800 packaged apps were on the line and over 50 desktop platforms had to be made to move to a single standard image.

    The client at the time had an alm

  • Outsourcing companies and system integrators use a number of tricks to ensure the project is profitable whilst being the lowest bidder. These include:
    • Removing highly qualified engineers from the team early and replacing them with new graduates
    • Ensuring that changes to the specification are expensive
    • Over-promising during the sales process

    None of these is healthy and when it goes wrong, the only winners are the lawyers. I worked with a Major European Telco which outsourced the development of a large so

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