IT Project Failure Rates are set to improve
I just read this morning of a land mark legal case between BSkyB and EDS which is set to change the way IT Projects are run in the future.
The Technology and Construction Court found in favour of BSKYB following the company’s five-year battle with EDS over a failed customer relationship management (CRM) system. The case is the most expensive legal dispute in the history of the IT Industry, costing both sides an estimated £40m each. I have to say with 70% IT Project failure rates (please see CHAOS survey ) it is a surprise we have not seen a case like this earlier. It is extremely rare for an IT supplier to be accused of fraudulent misrepresentation and even rarer for a supplier to be found guilty of it. Make no mistake this is a landmark decision which in my view will give rise to suppliers reviewing sales techniques (no longer will project managers be a salesman’s flunky), contractual arrangements and what is presented to customers in terms of their capabilities, services and products. Oversell and a supplier’s days could be numbered.
This judgment and the potentially huge settlement are of such magnitude that no supplier can afford a project failure. They will all have to be more careful in assessment of risk, more careful in what they bid for, and will face increased bidding costs because of the extra preparatory work. No longer with IT Projects be oversold and prior to sign up suppliers will have to take more steps to assess whether a project is feasible and the client is prepared to:-
• Specify in detail their requirements
• Accept “fit for purpose” governance
• Accept the adoption and application of Project Management best practices
• Tolerate the employment of experienced qualified Project Managers
As a former Lloyd’s Underwriter of Professional Indemnity Insurance I can certainly say that this judgment and its huge payout to the plaintiff will have a dramatic impact on premiums for fraudulent misrepresentation and professional indemnity. Insurance costs will be another factor in pushing up IT development bid prices. I believe some suppliers may not bid if they think the user is uncertain about their requirements and are unwilling to follow project management best practices. I truly believe that some IT buyers may face fewer bidders or no bids at all.
BskyB won its five-year legal battle against EDS after judge Vivian Ramsey accepted BSkyB’s claim that EDS had misrepresented its capabilities in selling a CRM system, though EDS’s new owner HP will seek leave to appeal. BSkyB’s lawyers, Herbert Smith, say EDS will have to pay a minimum of £200 million which is several times the cost of the original system. BSkyB was able to show that EDS’s main witness, CRM practice jead Joe Galloway, had lied. EDS dismissed Galloway as soon as it discovered that he had lied in court. The question I would like to ask knowing the industry only to well, is what parting gifts or “Golden Good Bye” is Joe Galloway receiving on the way out.
I predict this judgment will cause lawyers to question the contracts between suppliers and users. Misrepresentation undermines the contractual deal. It means the customer can recover an amount greatly in excess of the contract value. It undermines the certainty and contracting principles which suppliers and customers have assumed for many years. In the past the contract was regarded as sacrosanct. This judgment shows shows that the contractual cap on potential liabilities in the event of a failure may mean little if the user can establish that the supplier misrepresented its capabilities.
I fully expect the old boy IT Consultancies to cotton onto the meaning of this judgment but the Indian outsources often having a lack of management maturity and due to their rapid growth have a God Like Attitude of “we can do anything” and a cultural inability to use the words NO. However, in my view given time all IT Suppliers will need to change client engagement and project management practices. I fully expect to see in coming years a beneficial impact on the 70% project failure rates we have all become accustomed too, and the employment of qualified /proven and experienced Project Managers.
No longer will I have to interview Project Managers for their “skills project undertakers” but their abilities to deliver correctly estimated, managed and successful delivered projects. Fantastic
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