BSkyB/EDS case settled at last

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But buyers of IT services could end up paying more.

Yesterday, a 10 year legal marathon drew to a close, as HP agreed to settle its dispute with broadcaster BSkyB, for the sum of £318 million.

The case dealt with a failed CRM implementation by EDS, now part of HP. It attracted attention, not just because of the length of the case, but the damages being claimed by BSkyB – over £700 million – and accusations, upheld in court, that EDS’ principal salesman had lied about the project delivery.

The original project was meant to cost £48 million. “Fraudulent misrepresentation” by staff working for EDS meant that the IT supplier could not protect itself by a clause limiting its contractual liability to £30 million. BSkyB, for its part, ended up implementing the system in house. The result was that the broadcaster spent £270 million on the system, and it was four years late.

Given the amount of time and money already spent on the case, an out of court settlement makes sense for both parties. HP will want to move on from a problem that was not of its making, and by settling, BSkyB at least has certainty on the issue of compensation, without the need to wait for a further court hearing to settle damages.

Yesterday’s settlement will not, though, be the end of the matter for the IT industry, and the BSkyB/EDS case could well push up the cost of IT outsourcing and services contracts.

Fraudulent misrepresentation remains rare in the IT world, but companies bidding for contracts will need to do more to ensure that any statements they do make about project costs and delivery can be backed up.

This is likely to mean more compliance checks within companies bidding for contracts. According to Sam Jardine, an associate at law firm Eversheds, it might also force bidders to spend more time scoping and planning projects, to ensure projections are realistic.

Contractors will also have to take more steps to ensure negotiations are properly recorded and evidence stored in case a contract is later challenged in court, Jardine says.

This might all be to the good, if IT projects are better planned and thought out, and if that translates into on time and on budget delivery.

If contractors have to spend more on their bids, that cost will inevitably be built into the contract pricing, or translate into less investment during the contract itself.

IT buyers also need to keep in mind that if they force contractors’ bids down, or ask bidders to truncate the bid preparation process, that might well lead to costly disputes further down the line.

In IT, as in so much else in life, you get what you pay for.

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