EDS’s failure to deliver a CRM system originally costed at £47.6 million (US$70 million) has ultimately cost EDS owner, Hewlett Packard, £318 million (US$465 million) in damages!
The long-running legal battle – it started in 2004 – between BSkyB and EDS is finally over. There will be no appeal. Hewlett Packard, which acquired EDS in 2008, has negotiated a settlement of £318 million for a bungled CRM implementation.
Here’s what happened. In 2000, BSkyB, the UK’s largest satellite broadcaster, called for tenders to design, build, manage, implement and integrate processes and technology for a new CRM system for Sky’s Scottish contact centers. EDS won the bid in the face of keen competition from PwC, but then failed to deliver the project. Sky eventually sacked EDS and, in 2002, brought the project in-house.
Instead of the intended CRM project going live in July 2001 and being completed by March 2002, Sky contended in court that the functionality for the CRM system was only completed in March 2006 at about 5 times the budgeted cost – £265 million.
In their claim, Sky alleged that EDS had made fraudulent and negligent misrepresentations as to resources, cost and time that led to EDS being selected in preference to PwC.
Sky initially claimed damages of £709 million (US$1.03 billion). Apart from the extra costs that had been incurred to develop the system, a significant part of the Sky claim was accounted for in lost business benefits, of two major types – churn reduction and call volume reduction.
In his 468-page judgment, the UK’s High Court Judge, Justice Ramsey found against EDS in only one particular – that they has misrepresented the amount of time it would take to deliver the project. Ramsey ruled “EDS are liable to Sky in deceit for that misrepresentation.”
Since then both sides’ legal teams have negotiated an accommodation. It’ll cost HP £318 million, which is significantly less than their initial claim of £709 million, but about 7 times the value of the initial contract. This sum includes interim payments of £270 million that EDS has already made to Sky in February 2010.
Hewlett Packard, unsurprisingly, wants to move on. A spokesperson wrote in a statement: “This matter is now closed, having been settled fully and finally on mutually agreed terms. We will not be commenting further publicly on this legacy issue.”