Why You Shouldn’t Sue Software Vendors–Even If They Deserve It

Most every IT department employee, from CIO to database administrator to project manager, can probably recall a software implementation that took too long, cost too much money and never worked as the software salesman had promised because, they believe, they were sold bad software.

Perhaps it was infested with thousands of unfixable bugs in the code; maybe it couldn’t scale or customize to their organization’s needs, as the vendor’s sales reps had claimed it would; or maybe it was total vaporware and the project was an unmitigated failure.

Whatever the case, they felt like they got screwed by their vendor.

In a sense, that is exactly what trash-disposal company Waste Management thinks about its ERP revenue management system that it bought from SAP in 2005. And that’s why in March 2008, after three years of disappointment with SAP’s “fake software,” as Waste Management claims, it decided it had had enough of SAP’s Waste and Recycling product.

At that point, Waste Management figured that it’s only course of action was to sue SAP for $100 million.

In recent conversations with IT executives I asked them if they had ever sued a software vendor and whether, in retrospect, it was a good thing to do.

Most had known about or participated, in some capacity, in the litigation process against some well-known and some not-so-well-known vendors. And what nearly all of them had decided was that suing your software vendor just wasn’t a smart thing to do.

Sure they had all been disappointed by software packages and could tell tales of broken vendor promises, but when it came to critical enterprisewide software implementations, the bigger picture mattered most.

And that is this: Any lawsuit would be a lengthy, resource-intensive and costly process, running into the millions in legal fees on large-scale software projects for your company. (And you still would not have the software capability that your company needs.)

Two, your company would probably lose the case. Or, if the case drags on and on, your company would probably end up settling for way less than you thought you deserve and what you had already paid out in legal fees. (And you still would not have the software capability that your company needs.)

And three, it would be a huge distraction to your IT department and could wreak havoc in planning your future technology strategies. (And you still would not have the software capability that your company needs.)

Of course, companies always reserve the right to sue their vendors if the software is indeed vaporware and the vendor is clearly in the wrong or did something illegal. (Two CIO articles cover this topic: “Double Jeopardy” and “University ERP: Big Mess on Campus.”) Sometimes, however, merely hinting at the threat of a lawsuit will get vendors to return a call or fix the bugs infinitely faster than retaining an army of lawyers.

But initiating a major lawsuit against a software vendor should be the very last option.