EDS, the consultancy powerhouse now owned by HP, has been found guilty by the British High court of lying to its former client, BSkyB, in order to win a contract worth £48 million to build a tailor-made customer relationship management (CRM) system.
Electronic Data Systems is now liable to pay damages to BSkyB evaluated at up to £200 million, more than four times the value of the contract for which it bid and which PwC, its archrival, lost.
The court clarified a significant grey area saying that the client was misled by the contractor over its set of skills and that a clause that limit any potential damages to be paid by EDS to £30 million was invalid.
Alan Owens, a litigation partner at London-based Morrison & Foerster LLP, told The Wall Street Journal that "It is probably the decision that service providers have been dreading, We can expect a drastic change in behaviour among sales teams bidding for major contracts."
EDS' downfall started 10 years ago when it won a contract to build a CRM solution for BSkyB in Scotland but by 2002, the latter decided to terminate EDS' contract and finish the project itself and ended up spending £265 million to get it done.
Then strangely enough rather, than having EDS suing BSkyB, it was the other way round with a lawsuit filed against EDS in 2004 by Sky's owner claiming that the IT Outsourcer firm over timeframes.
A spokesperson for HP added that “This is a legacy issue, dating back to the EDS business in 2000, which HP inherited when it acquired EDS in 2008. We are pleased the Court dismissed the majority of the allegations made. While we accept that the contract was problematic, HP strongly maintains EDS did nothing to deceive BSkyB. HP will be seeking permission to appeal. As the world’s largest technology company, HP has built a solid reputation based on strong governance and adherence to the highest ethical standards.”
The judgement by Sir Vivian Ramsey, who has a strong background in Civil Engineering, marks the end of a seven year court battle that has BSkyB claiming around £700 million. It is also by far the most expensive legal dispute that has engulfed the IT industry with legal costs on both sides amounting to around £100 million.