Suppliers and customers should do more thorough homework before
contracts are signed.
There is no more conservative industry than insurance - yet one of
its biggest IT suppliers has had at least its fair share of
high-profile IT disasters.
In the early 1990s the Sperry organisation, which later became
Unisys - a major supplier of IT to the insurance sector - ended up
in the High Court, being sued over the failure of a marine
insurance project. The user in this case, marine insurer Tindall
Riley, had seen evidence that a not dissimilar Unisys-based system
had been developed successfully within six months at Aetna Life.
Tindall Riley was not familiar with the project maxim that "what
works for the company down the road probably won't work for you."
In the Tindall Riley case the judge awarded damages against Unisys,
saying that some of its sales claims had not been true.
In 2001, Unisys again ended up in the High Court after another
insurance company, United Assurance (later Royal London), sued over
the failure of a project to build an integrated system designed to
cut costs and improve the service to clients. The project was based
on Unisys' flagship insurance product Unisure.
United had ended the contract and sued Unisys for
misrepresentation, claiming the Unisure system was not scalable and
was not capable of meeting expected volumes of business. A 31-day
High Court hearing ended in a settlement without a judgement when
both sides agreed to pay their own legal costs, amounting to many
millions of pounds.
Now another Unisys customer, Prudential Europe, is suing the
supplier over the alleged failure of a project to build Web-based
systems for selling and processing insurance policies. As at United
Assurance, the project was based on the Unisure package.
The insurance industry has a reputation for preferring established,
robust technologies to anything approaching leading edge. Its
innate conservatism is understandable because the insurance
industry's raison d'être is to protect against loss.
Yet it is, ironically, this caution that could have played a part
in events leading to all three disputes.
Tindall Riley, United Assurance and Prudential adhered strictly to
the rule book when choosing and commissioning the systems. But were
customer and supplier seduced into treating some risks less
seriously than they should have, because they had witnessed success
at a number of reference sites and, in the case of United Assurance
and Prudential, they were also buying a standardised package?
In other words, did they expect too much to be delivered too soon,
without appreciating fully the risks of tailoring systems to suit a
particular company's needs? If so neither customer nor supplier are
blameless; both have a responsibility to understand what they are
letting themselves in for before signing a contract.
It is easy to learn the lessons after the event; yet the reason
that there are so many IT disasters is because suppliers and
customers do not always apply themselves to learning the lessons of
project failures before they enter into new contracts.