The British satellite broadcaster BSkyB has won a court ruling against the IT supplier Electronic Data Systems (EDS), which it accused of lying in a sales pitch for a £50m customer service upgrade.
Damages will be awarded at a later date, and BSkyB has…
The British satellite broadcaster BSkyB has won a court ruling against the IT supplier Electronic Data Systems (EDS), which it accused of lying in a sales pitch for a £50m customer service upgrade.
Damages will be awarded at a later date, and BSkyB has stated that it expects EDS, which was taken over by American IT giant Hewlett-Packard in 2008, to pay “at least £200m” in damages.
BSkyB took legal action against EDS in 2004 for deceit, negligent misrepresentation and breach of contract. The case stems from a contract the company signed with EDS to create an advanced customer service system in 2000.
The contract was terminated in March 2002 following a series of delays and budgetary overruns on the part of EDS. BSkyB completed the work itself at a cost of £265m.
Mr. Justice Ramsey of the Technology and Construction Court in London accepted BSkyB’s assertion that EDS had falsely misrepresented its ability to complete the task in its sales pitch for the contract.
The main allegation upheld was based on the fraudulence of EDS’ argument that it had made a proper analysis of the amount of time needed to complete the initial delivery and go-live of Sky’s contact centre; and the opinion it could and would deliver the project within the timescales referred to in their responses to Sky.
The judge found that EDS had not made sufficient analysis of what would be required to turn the project around in the stated target of eighteen months.
The other allegation where EDS was found culpable was a claim for negligent misrepresentation based on EDS’ mid-project claim that it had developed an achievable plan for project completion that was based on proper analysis and re-planning.
Seven more BSkyB claims regarding EDS resources, risk profiles and methodologies failed due to the Court not accepting them as examples of repudiatory breaches.
Hewlett Packard has said that it will appeal the verdict, stating: “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.”
The case has major implications for relations between IT and technology suppliers and their clients.
Commenting on the case, law firm Bird&Bird said: “The decision reminds suppliers of the extent to which they can be held accountable for statements made in the pre-contract phase of a project. It is certain that many suppliers will use this decision to galvanise further action on the risk management, training and communications aspects of their bidding and sales processes. The finding of negligent misrepresentation prior to the mid-project settlement agreement emphasises the need for suppliers to take care when making proposals to a customer to re-baseline a failing project.”
The court ruling boosted an already good week for BSkyB, which reported first half 2009/2010 net profits of £256m, a 51% increase on the £156m generated during the equivalent time last year.
Revenue rose by 10.5% to £2.87bn, though operating profit before exceptional costs only grew by 4% to £402m, a lower figure than the £413m anticipated by industry analysts.
This slower growth was partly due to the continued intense investment in marketing and supply for the company’s high definition services. Net incremental investment in this area was estimated to be £70m for the half year.
172,000 new pay TV subscribers were added during this period, but the real gain was in HD, where 482,000 customers took up the service, a 156% increase year on year.
BSkyB CEO Jeremy Darroch said: “While the economic outlook remains uncertain, we enter 2010 in a good position and we will continue to focus on a consistent set of priorities.
“In addition to customer growth and take-up of additional products, we will seek to extend and build on our leadership position in high definition and seek to grow our share in home communications. We will continue to invest sensibly where we see long-term advantage and stay disciplined on costs.”
