Why the BSkyB vs EDS ruling was only a matter of time

bryang | 2 Comments
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Ask any IT manager that has dealt with a supplier sales representative if that rep is always utterly honest and scrupulous when describing their products or services, and most would smile knowingly and shake their heads.

IT suppliers oversell. They are not alone or unusual in that - most of us have experienced over-selling of some form as individual consumers, let alone in our working life.

Imagine a salesman faced with the final negotiations for a multimillion-pound deal, sitting across the desk from the IT director with a pen hovering above the contract and an expectant sales manager waiting back at the office. If he does not come back with a signature, he's in trouble. You're only as good as your last deal. The pressure to get the business is huge.

I should know - I was once an IT salesman. I have sat at that desk, and it wasn't a lot of fun (and that's one of the reasons I'm not a salesman any more).

If the IT director looks up and says, "Of course, this system will work won't it?", sales staff are trained not to commit, not to say anything that could be deemed a contractual commitment. But for some, under that pressure, knowing that a simple "yes" will get the deal, they do what they feel they have to do, and then forget they said it. I worked with plenty of sales executives who would not have given it a second thought, and would be too busy calculating their commission to worry. Sorry, but it's true.

So perhaps the biggest surprise in the precedent-setting BSkyB vs EDS court ruling this week, is that this is the first time a supplier has been held to account for misrepresentation. It was only a matter of time before a big enough customer, with a big enough wallet and a big enough sense of grievance, went all the way through the legal process. The judge effectively ruled that an EDS employee oversold what the company could deliver. HP, now the owner of EDS, denies this and will no doubt appeal.

But every IT supplier, and every IT manager, could be affected by this important ruling.

Suppliers will be less willing to accept a contract without a requirements specification nailed down to the last detail. IT projects are not like buildings, it's not as simple as creating a blueprint and a bill of materials. But faced with unlimited liability, that degree of risk means suppliers may be forced to treat IT contracts as if they were.

On the other hand, the next time an IT decision-maker  is faced with an underperforming supplier or problem project, if they can find any suggestion of misrepresentation, the precedent has been set for over-ruling contractual limits on supplier liability.

Watch how that focuses the minds of your sales rep the next time you are waving your pen over that contract.

2 Comments

I take a slightly different view.

1. Litigation makes lawyers wealthy, but wont really speed delivery. Of course it is a right, but should be regarded as very much 'last chance saloon'

2. The answer lies in alternative delivery methods were flexibility and true partnering exists between supplier and client. Over-engineering requirements and contractual elements will bog down development and innovation. Instead look at creative ways to structure contractual engagement and the distribution of risk/reward.

With "true partnering" (Comment 1) there does need to be an element of trust between the vendor and the customer, with honesty and integrity being shown by both parties.

What is clear from the EDS/BSkyB judgement is that that honesty and integrity were singularly lacking on the part of the EDS manager responsible for tendering for the project. The judgement goes into great detail about the distinction between mere "sales puff" and downright dishonesty. Whilst limits of liability may work where there has been overselling/overpromising, they will never work where there has been dishonest or fraudulent behaviour.

So this judgement is less ground-breaking then many in the industry, particularly lawyers, may have been expecting, especially given the length of time taken for it to be issued (over a year). You have never been able to limit liability in the case of fraud, and this case merely confirms it.

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