Legal eye: BSkyB's £200m win against HP EDS

The BSkyB judgment by a court against EDS could have significant implications for the IT industry. It also shows where to go if you want to get your dog an MBA.

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The judgment in which HP owned EDS was told to pay broadcaster Sky TV £200m for a failed CRM system, could have significant implications for the IT industry, both in the United Kingdom and globally. It also shows where to go if you want to get your dog an MBA.

In finding that the initial sales process which led to a significant IT services contract involved elements of deceit, the court opened up the service provider to a huge damages exposure, way beyond the value of the contract. CIOs embarking on similar IT or outsourcing services contracts in future will be concerned whether this ruling will affect service providers' view of risk (and, as a result, price) and whether their projects will feel any tangible impacts of more cautious, legally-constrained service provider behaviour.

Also in the future, customers of unsuccessful IT projects may be encouraged to seek similar remedies - and IT service providers on projects partly or wholly delivered in the UK will be wary of conduct which might lead to similar massive liabilities.

On 26 January 2010 - and after a wait of 18 months since the trial ended - the English High Court has finally ruled on the complex, long-running dispute arising out of an IT services contract between satellite broadcaster BSkyB and global IT contractor EDS, which is now part of HP. In addition to "ordinary" breaches of contract by EDS, the Court found EDS liable for a deceitful misrepresentation which induced BSkyB to contract with it, exposing EDS to potentially unlimited liability.

Damages claimed were originally over £700 million (US$1 billion) although more recent estimates suggest that the figure may be closer to a minimum of £200 million (US$325 million).

The case, the first IT dispute in the UK in which deceit of this sort has been established, has potentially wide-ranging consequences for the IT and outsourcing services industry in the UK - although the effects could well be felt globally if the large multinational service providers react by adjusting their approach to the contract sales process across their entire operation. In particular, the case will affect the way in which service providers take their services to market and run bids, addressing as it does the circumstances in which:

A: A service provider can be held to account for its pre-contract sales pitches;
B: service providers can rely on, or customers overturn, contractual limitation of liability clauses.

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