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BSkyB wins CRM lawsuit - HP set to appeal

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28th Jan 2010
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BSkyB wins its protracted legal action against EDS relating to a CRM implementation, after a five-year case. But EDS owner HP is set to appeal.

British Sky Broadcasting (BSkyB) Group has won a five-year legal action against EDS for deceit, negligent misrepresentation and breach of contract in relation to a Chordiant CRM system roll out.

Handing down the judgement at the Royal Courts of Justice, Justice Vivian Ramsey ruled that EDS had lied to Sky in order to secure a contract as part of the company's investment in a new customer relationship management system.

While the final amount of costs and damages will be determined by the Court next month, Sky expects that based on the judgement, EDS will be liable to pay Sky an amount of at least £200 million. But in fact the liability faced by EDS and its owner HP is theoretically unlimited. BSkyB's contract with EDS had contained limits on how much EDS could be liable to pay in damages, but BSkyB has claimed that allegations of fraudulent misrepresentation overrules those limits.

That's likely to be a major bone of contention. At one point in the five years the case has been running, BskyB sought about £700 million in damages from EDS - many times the value of the original system.The original contract was worth around £48 million, but BskyB's claim included damages for costs and lost benefits. BSkyB’s lawyers claimed during the trial that the project ultimately cost more than £265 million after it had to seek help from PricewaterhouseCoopers.

In addition, BSkyB claimed that were it not for false representations by EDS it would have chosen PricewaterhouseCoopers, a competing bidder, in the first place. Justice Ramsey accepted that EDS's bid team made fraudulent misrepresentations to win the business to supply and install Chordiant's CRM software to run BSkyB's contact centre.

HP intends to seek permission to appeal against the decision. "We are pleased the court dismissed the majority of the allegations made," said an HP spokesman. “While we accept the contract was problematic, HP strongly maintains EDS did nothing to deceive BskyB."

Super-dooper system

EDS' defence was based on blaming project cost and time overruns to what it felt was the undefined and changing scope of BSkyB's requirements. "The main problem with this project was that it was wholly unspecified. Sky knew that it wanted a super-dooper CRM system, but had little more idea of what it wanted or needed," said its legal representatives in court. Documents filed with the court added that BskyB "did not know what it wanted, but was determined to arrange things in such a way that it paid as little as possible for it."

At the heart of the dispute was a system built around hardware from Sun Microsystems and CRM software from Chordiant. When the deal with EDS was announced in 2000, BSkyB said it planned to use the CRM system to integrate disparate data sources and create more comprehensive customer profiles.

In addition, the company's subscribers would be able to access information such as account and billing data via phone calls, the Web or interactive TV services. By 2002 Chordiant was able to boast that BSkyB had successfully implemented Chordiant 5 Marketing Director "to build and execute more successful and streamlined marketing campaigns".

The return on investment in 2002 seemed impressive. BSkyB was able to build campaigns in a single day that had previously taken two weeks and the time it took to execute campaigns dropped to approximately 12 hours, down from 36. The number of campaigns BSkyB could consecutively manage grew by around 30% and because it could save campaign components BSkyB found it could re-use previous work, in turn freeing up time for more strategic tasks such as analysis and customer communications planning. But it was also in 2002 that BSkyB severed its relationship with EDS after the IT services firm allegedly "failed to perform its contractual obligations".

The case is the most expensive legal dispute in the history of the IT industry and one that is likely to set a precedent for contracts between suppliers and customers. With a judgement that took 18 months to produce and which runs to 460 pages, this is the first time that a judge has found in favour of the claimant in a case of this scale.

For HP – which did not own EDS at the time the project took place – it's a bit of embarrassing PR that it could clearly well do without. In a statement, the firm noted: "This is a legacy issue dating back to the EDS business in 2000, which HP inherited when it acquired EDS in 2008. As the world's largest technology company, HP has built a solid reputation based on strong governance and adherence to the highest ethical standards."

EDS was founded by Ross Perot, the American businessman and former presidential candidate, in Texas in 1962. It was taken over by HP in 2008 and renamed HP Enterprise Services.

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