Unrealistic expectations

Suppliers and customers should do more thorough homework before contracts are signed.

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.
This was last published in September 2002

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