BSkyB Wins £709m Lawsuit Against HP-EDS 187
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."
Re:Scope creep? (Score:4, Informative)
Confused much? EDS is HP. The customer was BskyB.
Re:Scope creep? (Score:5, Informative)
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.
Re:Scope creep? (Score:3, Informative)
HP does not play a part in your conversation until 2008.
EDS told BskyB that they would deliver a CRM system with golden monkeys, BskyB changed their idea for the system to blue unicorns.
The whole delivery tanks, HP buys EDS in 2008 and gets the bill for another 900m pounds.
Outsourcing (Score:4, Informative)
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:If EDS has to tell the truth it is dead. (Score:3, Informative)
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.
Re:Scope creep? (Score:3, Informative)
Not sure you read the article. HP completed purchase of EDS after the trial ended, so the only thing HP has to do with this lawsuit is it owns the losing party, which it didn't during the contract. The judgement took 17 months to reach from the end of the trial in July 2008. So the trial ended, and the judge sat around meditating for 17 months, and HP bought EDS.
EDS did not want some sort of CRM, BSkyB did. EDS is an outsourcing company (was, now it's part of HP) and would provide CRM, not purchase it. EDS, now owned by HP, had fraudulently misrepresented itself in a sales pitch in 2000 for the system
It's more likely that EDS promised some sort of a system, and BSkyB led EDS around through as you said scope creep. EDS thinks it upheld its end of the bargain, BSkyB thinks its requests were within reason. Of course, I don't know the details of the contract, nor any more specifics than what's in the article, but your version is completely wrong.
Re:Overstated. (Score:5, Informative)
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.
Re:If EDS has to tell the truth it is dead. (Score:3, Informative)
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 for a company we did a pile of work for over the course of a few years) and I can tell you there are some very good people in there. A lot of chaff too, but that is the way of things (in a large organisation chaff that know they are chaff can hide behind others, and once found can be difficult to legally sack), and they often move at the speed of a snail with severe alcohol poisoning (again, this I saw as mainly a function of the size of the beast). I've never dealt with the sales or management teams though, so things could be very different up those parts. There did seem to be notable communication disconnects between some levels of management and the people doing the work (I can't comment on sales - I never had reason to deal with them at all).
Re:If EDS has to tell the truth it is dead. (Score:1, Informative)
Well I have seen a couple contracts that went well for EDS. But I also know they are great at bidding such that the client ends up adding more and more into the contract. They would give the store away to suck the client into the position of bleeding out extras.
And having seen two contracts, I don't see how this could be the first time. Both contracts read like some moron wrote them. No meaningful performance standards were written. (Only time to acknowledge a problem was written in.) When it came to a list of services and who was responsible for what, nothing concrete was written. Instead they had phrases that referred to providing the same services as before when those had been in debate for years.
I was in a company purchased by EDS and spent a long time working for them. The best thing that happened to me was when I was laid off by HP. EDS had a legion of morons in their legal department and based their business on selling a lie. They would promise the impossible and then find a way to make it look like the client's needs had changed to milk more money for not delivering. I am glad that I was laid off.
Re:If EDS has to tell the truth it is dead. (Score:3, Informative)
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, there are as many as three possible votes (yes, no, abstain).
2. Car registry. Finland has 5.2 million inhabitants and less cars. Their system could not cope with the amount of updates to the database.
The biggest problem is that the buyer, usually government, will happily extend the price to several times the original to get something working ... so it makes sense for the TietoEnator to put the least capable into the work.
Re:If EDS has to tell the truth it is dead. (Score:3, Informative)
Re:No comment... (Score:4, Informative)
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.)