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Thursday, May 15, 2008

Bad idea: suing your software vendor

Thomas Wailgum, blogging for CIO magazine, thinks that it's not wise for customers to take legal action against software vendors. He looked at the lawsuit against SAP for $100 million, filed by Waste Management, and decided to interview IT executives of other organizations to get their perspective on the litigation option. He found a strong bias against the idea of suing vendors:
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.
The reasons cited against taking legal action were three:
  1. Enormous cost of litigation.

  2. Odds against winning the case.

  3. Distraction from the business that the litigation would bring, as executives would need to participate in discovery, etc.
Wailgum admits that sometimes the threat of legal action is useful to "get vendors to return a call or fix the bugs infinitely faster than retaining an army of lawyers." But still he insists that "initiating a major lawsuit against a software vendor should be the very last option."

Generally, I would agree. I have seen one or two cases over thirty years where there may have been a clear misrepresentation and the threat of legal action was justified. Generally, though, vendors recognize their culpability in such cases and they get settled long before they reach court.

But I've seen more cases where the customer simply didn't do its homework and bought into the vendor's sales pitch without due diligence. Rather than admit that they didn't really understand what they were getting into, customers feel the need to blame the vendor. Legal action is a way of saving face. The problem is more acute among small companies, where the whole decision might be made by the owner. In larger companies, there is often enough shared leadership to prevent a purely emotional response. And better legal advice as well.

So, if lawsuits against vendors are generally counter-productive, what's the alternative? As indicated above, doing one's homework up front is the key. Software decisions, especially in small and mid-size businesses, are still too often being made based on too little information. Key requirements are not defined. Critical business processes are not mapped. Software demonstrations are based on the vendor's scenarios instead of the customer's. References are not checked, or they are limited to those that the vendor provides. And customers underestimate the resources that they will need to devote to the project to make the implementation successful.

There are many other keys to successfully implementing major systems. But I agree that legal action is not one of them.

by Frank Scavo, 5/15/2008 08:56:00 AM | permalink | e-mail this!

 Reader Comments:

Good points. It seems are society has become way too litigious.
Software vendors like SAP are too "professional" to oversell the solutio to customers. Taking legal action is the last step to claim compensation and end the relationship.
In Canada, we don't sue nearly as much as Americans do. I appears to be part of doing business in the US. And then why have so many sued Epicor?
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