If you've got a question about outsourcing contract law, Mike Henley at PA Consulting is a good person to ask. Before joining PA's sourcing practice seven months ago, he was a partner at commercial law firm Hammonds for over 20 years, most recently heading up its IT practice.
So when I got the chance to speak to Mike recently, I was interested to get his perspective on the recent BSkyB/EDS case, in which PA Consulting acted as an expert witness.
To quickly recap on this case, the court found that during the sales process, EDS "fraudulently misrepresented" the time it would take to design and build a customer relationship management (CRM) system for BSkyB. While EDS's new parent company Hewlett-Packard intends to appeal, it has been ordered to pay BSkyB £200 million in interim damages. In total, BSkyB is claiming £700 million in damages from EDS. The original contract value? Around £48 million.
So what does this case say about how the law treats breach-of-contract in IT cases? In Mike's opinion, the case creates nothing new in the way of legal precedent. While EDS built a clear liability cap of £30 million into the contract, this was deemed to be invalid, because EDS lied to get the contract.
Nor does he believe it will lead to more disgruntled customers of IT suppliers seeking legal redress, inspired by BSkyB's claim for a sum twenty times greater than the original contract value. "Litigation was the answer for BSkyB in this case, but it won't be the answer for many companies," he says.
For a start, cases like these are lengthy, expensive and time-consuming to pursue. EDS pitched to BSkyB back in 2000. The CRM project was scheduled to finish in 2002. BSkyB sued EDS in 2004 and finally completed the project in-house in 2006. The trial began in 2007 and it took the judge a further 18 months to reach his judgement.
So is there anything that IT suppliers and their clients can learn from the case? The old rule - caveat emptor, or 'let the buyer beware' - still applies, Mike says.
"What we're saying to our clients is that it's a false economy to embark on one of these projects just because they really want to get started, without being totally sure what they want and communicating that clearly to the supplier," he says. "If the specification isn't stable, then sure as night follows day, the supplier will respond to their requests by telling them it's not in the spec."
That said, the ruling could drive large suppliers working on large deals to scrutinise more closely the governance they have in place around the sales process. At the same time, customers should be committed to performing more "hard-headed due diligence" when considering the pitches of prospective suppliers.
But what about the complaints, frequently raised by large IT suppliers and outsourcing companies, about the huge costs they devote to pitching for deals, many of which they won't end up winning? Do these costs create an environment where there's a temptation to cut corners or make careless promises?
"You're right - it's a very common refrain. I have some sympathy for suppliers in that respect, because procurement processes can be lengthy, labyrinthine and absorb a lot of resources, so the cost of making a sale can be very high," he says. "But I don't think for a minute that means that many suppliers are cutting corners to the extent of fraud."