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Friday, February 12, 2010

IT outsourcing vendors run for cover

"In what could be an important decision for the IT outsourcing industry and its customers, a London court recently ruled that EDS (now division of HP) must pay damages to a former outsourcing customer for failing to live up to its sales pitch.

British Sky Broadcasting (BskyB) had signed a £48 million outsourcing contract with EDS to build a customer service system in 2000, but terminated the deal early in 2002 after what it said was "woeful" performance by the IT service provider. SkyB alleged deceit, negligent misrepresentation and breach of contract by EDS.

Although the total costs and damages will be determined at a later date, BskyB said it expects EDS will be liable to pay at least £200 million—more than four times the amount of the original contract."

Enough India's famed IT vendors? Now don't go promise the moon and hope customers would tolerate project failures like before. Though the U.K. court ruling was decided largely on the basis of facts from one person's statements as opposed to systematic failings of the outsourcer or outsourcing vendors as a whole, dissatisfied outsourcing customers may go digging through notes from the pre-contract courtship phase of their relationships to see if arguments around fraud can be made.



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