BskyB’s Court Win Over EDS Has Lessons for Everyone

At first glance, British Sky Broadcasting’s coup in its legal battle with EDS (now part of Hewlett-Packard) seems to be a much-needed wake-up call to the outsourcing industry: Don’t promise what you can’t deliver.

The years-long legal battle began after British Sky Broadcasting (BskyB) terminated its contract with EDS in 2002. EDS had been hired to build a new CRM system for the broadcaster. After the firing, BskyB reportedly completed the system in-house. In 2004, it sued EDS, alleging “deceit, negligent misrepresentation and breach of contract,” and asked EDS to reimburse it for Ł709m (the original contract was valued at Ł48 million). Though a London court has now ruled that EDS has to pay damages, that amount has not yet been determined—but BskyB said it expects EDS will be liable to pay at least Ł200 million.

On its face, the ruling is about delivering what you promise. Specifically, the judge on the case in the Royal Courts of Justice found that EDS “had lied to Sky in order to secure a contract,” according to a statement released by BSkyB. That’s pretty clear.

But there’s plenty more to learn from the ruling.

Service providers need to involve the team that will actually go in and do the work early on in the sales process, so that team fully understands what the sales pitch is and what the sales team is promising (and the delivery team should raise their collective hand at the onset if they believe the sales team is over-promising).

Service providers also need to remember this: customer service, not quarterly goals, should be the driving force behind all sales and outsourcing engagements.

The lessons in BskyB vs. EDS aren’t only for providers, however.

Sure, never believe the hype. That’s easy enough. What’s harder, however, is to understand what your outsourcing requirements are when you sit down with a prospective provider, and articulating those requirements so the provider understands them too.

Equally challenging is ensuring that the contract you sign is a clear representation of your needs, and what, when and how the provider will meet those needs. It’s not a bad idea to have another group within your organization review the contract, and sometimes independent, third-party review of the contract is necessary.

Service levels need to be set at the get-go, and there needs to be agreed-upon metrics in which to measure and monitor those levels

Finally—and I can’t say this too often or stress this too much—your work does not end once the ink has dried on the contract. Outsourcing may mean you don’t have to deal with day-to-day IT maintenance, but the IT operations still belong to your company, and are still the fuel for your business processes. You have got to stay involved with, and regularly monitor, the outsourcing engagement.

I do think the BskyB win will have some ramifications on future outsourcing deals. In Stephanie Overby’s story on the implications of the BskyB EDS case, analysts say the ruling is unprecedented and could encourage more companies to file suits and seek damages for poor IT delivery performance. The ruling could also make vendors more skittish about accepting risk.

What lessons and/or fallout do you all think we’ll see because of this?