EDS’s defence that it did not make fraudulent claims about how long it would take to develop and install a £48 million CRM system for BSkyB was seriously damaged when a senior staff member committed perjury in the English and Welsh High Court.
Sir Vivian Ramsey, who presided in the BSkyB vs. EDS case, found that Joe Galloway, managing director of CRM for EDS at the time it pitched for Sky’s business, had misled BSkyB about how long it would take to complete the work when it emerged that he had lied in court about his academic qualifications.
Galloway claimed that he had attended Concordia College in the US Virgin Islands in person to earn his MBA. This was shown in cross examination to be a lie. In fact, Galloway had bought his qualification from an online ‘diploma mill’.
It emerged that Mark Howard QC, who was acting for BSkyB, had also procured a similar degree for his pet dog, Lulu. The mill had awarded Lulu somewhat better results than it had Galloway. This revelation led the judge to rule that Galloway was not a credible witness.
Mr Justice Ramsey said that Galloway had been cavalier in providing estimates of timing for the project that he knew were not supported by adequate analysis.
At paragraph 840 of the long-awaited 468-page judgement Mr Justice Ramsay writes: “I consider that Joe Galloway approached the whole question of the time to achieve go-live in a cavalier fashion. As the person with the title of managing director, he was the main person involved in the estimating process. His evidence as to what had been done in relation to the time estimate shows that he was aware that no proper attempt had been made to assess whether go-live could be achieved in 9 months and complete delivery in 18 months. His approach was to ignore the need for analysis. I am driven to the conclusion that he proffered timescales which he thought were those which Sky desired, without having a reasonable basis for doing so and knowing that to be the position. He knew that no proper analysis of time had been carried out and he knew that he had no basis for saying that go-live could be achieved in nine months and complete delivery in 18 months.”
The judge added: “In my judgment his conduct went beyond carelessness or gross carelessness and was dishonest.”
BSkyB claimed £709 million (US$1.13 billion) in damages from EDS due principally to lost business benefits as EDS failed to deliver the required system. Sky eventually sacked EDS and brought the project in-house.
The liability cap specified in the contract – £30 million – has been set aside as a result of EDS’s dishonesty, and in principle, Sky could be awarded maximum damages of the full £709 million. The quantum of damages has yet to be decided. Sky has said it expects damages of at least £200 million. EDS will appeal the judgement.
This case has been watched carefully by IT outsourcers and is expected to result in changed behaviors.