Outsourcing giant EDS has experienced its share of troubles lately, including a plunging stock price and a restructuring that has it trying to coax 12,000 American employees into taking early retirement.
Now broadcaster BSkyB is accusing EDS of willfully misrepresenting its ability to provide call center services and is seeking 709 million (U.S. $1.4 billion) in compensation, reports FinanceWeek.
BSkyB contracted with EDS to run its customer service system in 2000, agreeing to pay 48 million (U.S. $97.6 million) a year. It ended the contract two years later after renegotiation efforts failed.
Contract disputes are not uncommon in outsourcing agreements, a partner in law firm Kaye Scholer told IT Business Edge in a recent interview, Breaking up Is Hard to Do: Getting out of an Outsourcing Contract, with a "mismatch of expectations" a common culprit.
But the EDS case is different because of BSkyB's contention that EDS was "deliberate and dishonest" with its sales pitch and its contract negotiations, according to FinanceWeek.
The amount of damages is also unusual. While the original contract called for EDS to pay up to 30 million (U.S. $61 million) if performance standards weren't met, BSkyB is basing its claim on profits it says it lost due to the resulting poor customer service. It also says it had to spend 170 million (U.S. $346 million) on a new CRM system in the wake of the failed agreement.
EDS just agreed to pay $490,900 to settle a Securities and Exchange Commission investigation of misrepresentation of outsourcing contracts related to bribes paid by a former executive of A.T. Kearney, which was spun off from EDS in 2005, reports Bloomberg News.