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Fri, Apr 25, 2008 15:08 EDT

Why You Shouldn't Sue Software Vendors--Even If They Deserve It

Topic: Applications

Blog: Information Collective

Current Rating: 4 Comments: 10

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.

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Tue, Apr 29, 2008 9:28 EDT
Anonymous user
Posted by: RCJ
Rating:

I have been involved in a failed SAP and a failed custom development install. In both cases as the vendor we agreed that it was best to refund all contract monies to the customer.

In the SAP we got an early version of their apparel module and it just could not do the job.

In the custom development effort, we just plain missed the boat, we offered to start from scratch and re-do the effort for the original contracted amount (we would of taken a 7m loss).

All in all we lost but it was still cheaper that airing our dirty laundry, paying the lawyers and the bad press.

Agree it is better to settle than to fight.

 
Wed, Apr 30, 2008 14:59 EDT
Anonymous user
Posted by: MLR
Rating:

The situation you are relating is pretty much the same I have right now with a SAP implementation that includes the apparel solution.

But is not always a matter of software failures but implementation strategy, methodology or knowledge. Could be the first one, the second one, or both. So, do you have to sue or settle with the software provider, with the company who implemented or both?. The line there is very thin and at the end responsability gets diluted

At the end your bussines is going to suffer and probably won´t get satisfied with the results

 
Tue, Apr 29, 2008 11:15 EDT
Posted by: kwartick
Rating:

Just saying that you shouldn't sue your vendor even if they deserve it sounds a bit one sided. While it is a tool of last resort I think the author should have represented the consumer better by providing a few alternatives. I assume that once litigation is on the table that negotiation, dialog and threats have been tried. A cheaper recourse is to start an online campaign against the vendor through blogs, posts, networking, and even a dedicated web-site. Start out small and build it up. Give the vendor a chance to offer recourse.

 
Tue, Apr 29, 2008 12:46 EDT
Anonymous user
Posted by: YHildreth
Rating:

What would you do if it was a building contractor? The course of escalation should not be significantly different for a software vendor. It is this strange abiguity and double standards that allow for too many failed projects, poor product quality, and inordinate profits for companies that work with impunity.

 
Fri, May 2, 2008 1:08 EDT
Posted by: MPatel
Rating:

I am afraid i disagree with this analogy. Let's think about it ...

-- How many times do you start a construction without *every single minute detail confirmed on paper*? Whereas most software projects start with a very high level "business requirements".

-- How many times do you request changes after construction has started that could potentially require major redesign of the parts already constructed? You don't ... because you can see, visualize and understand the effect. Unfortunately, in software it is not so easy --- especially in enterprise wide systems.

Just my humble opinion after being part of several successful / unsuccessful software (yep SAP!!) projects.

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