Outsourcing
Outsourcing ‘will change’ after £709m BSkyB-EDS court verdict
Letting contract disputes get to court is a disaster, say observers
By Leo King | Published 11:00, 09 December 08
Sky is seeking £709 million in damages from IT services company EDS after it allegedly acted “dishonestly” when pitching for a £48 million contract to build a new CRM system back in 2000.
A history of the BSkyB and EDS court case
Work on the £48 million CRM system began in 2000.
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In 2002, BSkyB made a claim of £49m after the project allegedly slipped and contract discussions failed. This claim was raised to £709m by last year as the dispute heated.
BSkyB accuses EDS of fraudulently exaggerating its abilities when pitching in 2000 for the contract.
EDS says BSkyB did not know what it wanted from the system, and kept introducing new requirements.
BSkyB's £709 million claim is based on allegedly lost benefits as a result of delays, and costs it says it incurred to put it back on track. EDS calls the size of the claim “absurd and extravagant”.
Several outcomes are possible: BSkyB could be awarded all, a portion, or none of its claim.
EDS denies the claim, and said in court that it fairly represented its abilities. EDS's defence is that BSkyB did not know what it wanted from the system, and that the extent and complexity of Sky's requirements "kept on emerging like handkerchiefs from a magician's sleeve" during the roll-out.
A verdict from the year long case is expected at the end of this month or in early January. BSkyB and EDS declined to comment on the case for this article.
Whatever the verdict, the case will have wide-reaching implications for the outsourcing industry as a whole, according to industry observers.
Conflicts between outsourcers and clients are not unusual, according to Nigel Roxburgh, research director at the National Outsourcing Association. Businesses often claim that IT suppliers fail to deliver what they promised, and suppliers say in return that clients change requirements as they go along, making it difficult to bid for, plan, and roll out projects. However, few disputes reach court, he noted.
The case is an unusual one which could set a legal precedent.
“There’s a lot of interest from outsourcers to see which way the BSkyB-EDS verdict goes,” Roxburgh told Computerworld UK. “If the case is upheld [in favour of BSkyB], it could lead to a real scratching of heads, particularly among lawyers,” Roxburgh said.
A win by BSkyB could mean that conversations and emails between parties before a contract is signed and during rollout, are legally-binding statements. Such communication has come up extensively in witness questioning in court. This could have potentially serious consequences for outsourcing firms, making them reluctant to speak about project strategy apart.
This would be a dangerous situation for outsourcers, Roxburgh warned. “If other representations become more important than contracts themselves, it could indicate that contracts effectively have no value,” he said.
