EDS vs BSkyB – Does your vendor sales team know what they can deliver ?
DATE: Feb 10th, 2010
A recent ruling in the UK courts highlights the outcome of a lengthy expensive legal tussle between BSkyB ( the client) and EDS (the supplier) on making false promises and over committing. This is one of the most visible cases where what the sales teams promised, what was in the contract and what was eventually delivered ( or not ) showcases the gaps in what potentially vendors may be willing to promise and deliver. For a £48 million contract, BSkyB was seeking damages to the tune of £700 million, but in a statement said on tuesday this week that it expects to receive about £200 million.
The contract in dispute is a 2000 contract signed between EDS and BSkyB to provide customer service technology for BSkyB call centers. BSkyB terminated the contract two years later and moved the work in house.
In 2004 BSkyB filed a suite against EDS that is misled the company on project timing and cost ( Hmmm – I wonder what percentage of projects really get done on time and within cost!). Typically there is a liability cap in all vendor contracts. This one had a cap of £30 million. The challenge for EDS is that the ruling claims deceit which make the cap invalid according to the ruling.
In a 468-page document that detailed the judgement, EDS was found to be at fault . It also appears that the the individual in question , who was an EDS employee and was later fired , Joe Gallway, was responsible for mis representing himself and for communicating to BSkyB that proper due diligence and analysis was done for the time needed to complete the delivery.
This is not the first time that there have been any issues with any outsourcing contract. Typically such arbitration processes are very expensive and lengthy and companies try hard to avoid these. This still remains the challenge and although this ruling is a showcase precedent and a warning for suppliers to re look at their hiring policies for sales , it does not point to a system wide failure on supplier governance. I will do little to cause any wide spread panic or goverance triggers . The ruling also primarily focused on the misconduct and lies of an individual which makes it more of a personnel issue vs a total supplier side governance failure. Given the prohibitive cost and time of these lengthy legal battles, now though with a client friendly precedent, this ruling may have a limited impact on the supplier community long term. The impact of this would also be localised to how the firms sell within the UK markets and may have effect on larger deals and how they are structured and priced. It does question though the disconnect between the sales team of vendors which are trying harder in a growing competitive world to differentiate themselves and willing to go the ‘extra step’ and the delivery teams which come to the table once the deal is done.
Mohit Sharma is the CEO of Corrystone Global Partners. Corrystone is a specialized outsourcing advisory firm providing consulting, staffing and training services to mid size firms and government agencies. We work with mid size firms and government agencies which are exploring low cost options for IT, Business Process work and looking at ways to further optimize cost and manage operational risk. Contact us at info@corrystone.com to learn more about how we could help you with your outsourcing intiatives.
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