British Sky Broadcasting (BSkyB)

The following entry is a record in the “Catalogue of Catastrophe” – a list of failed and troubled projects from around the world.

British Sky Broadcasting (BSkyB) Limited – Middlesex, UK
Project type: Customer Relations Management system
Project name: Sky CRM Project
Date: Jan 2010 court case concluded   Cost: £265M


Call center worker

Call center worker
(source wiki commons)

2010 marked the end of another chapter in what is reputed to be IT’s longest and most expensive court battle: the battle between BSkyB (a digital television service provider, telecom and media organization based in the United Kingdom) and Electronic Data Systems Corp. (EDS). The case has its roots in BSkyB’s Feb 2000 announcement that they were planning on upgrading their customer relationship management software. As a successful organization in a growing market, BSkyB had found that their existing Digital Customer Management System (DCMS) was unable to keep up with the service levels customers were expecting and as a result their “churn rate” (the rate at which customers were leaving BSkyB) was too high. To overcome the problem BSkyB initiated the “Sky CRM Project”, with the mandate of sourcing for and implementing a new enterprise wide Customer Relationship Management (CRM) System.

To initiate the process, BSkyB turned to Arthur Andersen (AA) consulting to review their current CRM practices and to map out a strategy for moving forward. In an initial review presented in Jan 2000 AA suggested that implementing the new systems would cost anywhere between £60M and £90M depending on the assumptions used. They also proposed that the project could complete an initial implementation (in a single newly built call centre) within 9 months of project initiation (assuming the call centre construction work were already complete) and that conversion of BSkyB’s other existing call centres would be challenging but could be done in a further 6 to 9 months.

Following initial internal planning an Invitation to Tender (ITT) was published on 17 Mar 2000.  The document indicated that the project objective was: “The Build and Implementation of a World Class Contact Centre for BSkyB and the further retrospective fitting of environment, culture, process and technology to existing sites” and that the target for the first implementation would be around the 9 month mark. The intention was to equip a new contact centre (in Manchester) that would first utilize the new systems (phase 1) and then to retrofit the new system into the existing call centres in Dunfermline and Livingston (phase 2).

Three primary bids were received. One by PricewaterhouseCoopers (PwC), one by EDS and one from AA (although AA subsequently withdrew and partnered with EDS as a sub-contractor on the EDS bid). Following bidder presentations, EDS was selected because BSkyB was impressed by EDS’s assertion that the work could be completed in just 18 months. Under the proposal EDS was to be the systems integrator and they were to oversee the implementation of the CRM software supplied by Chordiant Software Inc. To allow work to proceed a Letter of Intent was signed on the 9th Aug 2000 indicating that the first phase would be implemented by 1st April 2001.

Unfortunately, the relationship between BSkyB and EDS got off to a shaky start. Even before the contract had been signed EDS advised that the delivery dates and budgets they had committed to in their original tender could not be met. As a result BSkyB dropped the Manchester call centre from the project and redefined the project phases. Despite that initial hick-up the prime contract was signed on 30th Nov 2000 and the Sky CRM Project was officially launched with a budget of £50M and a new phase one “go-live” delivery date of 31st July 2001.

As with many large scale IT projects, the project did not proceed as planned. The phase one delivery schedule slipped again and BSkyB and EDS agreed to new delivery dates in a Letter of Agreement dated 16th Jul 2001. Despite the extensions the project continued to have difficulties and although phase 1 did go live on 19 Oct 2001 the system caused significant operational issues. Reports indicate that following live release there were 718 “severity 1” issues reported.  Typically in such projects a “severity 1” issue is an issue that has system wide implications and /or the potential to cause significant impact to customers. This painful deployment period lasted until Feb 2002 and only at that point was a manageable degree of operational stability reached.

Following the problems BSkyB took things back into their own hands and in Mar 2002 signed a new Memorandum of Understanding (MOU) with EDS that redefined the EDS role and the scope of work. Notably, the MOU meant that BSkyB would assume the systems integrator role and that Phase 2 would be split into five stages 2.1 through 2.5. EDS would however continue to supply staff to the project.

Following the project “reset”, stage 2.1 was implemented on 14th Nov 2002, stage 2.2 on 21st Mar 2003 and a de-scoped version of phase 2.3 finished its live implementation in Mar 2006. After that the remaining scope was dropped and the project terminated. At the time of closure the project had cost a whopping £265M instead of the original £50M budgeted.

In December 2003 BSkyB initiated legal proceedings against EDS. In a claim that would eventually total more than £700M BSkyB sued for “deceit, negligent misrepresentation and breach of contract”. At the heart of the issue was the allegation that EDS had not done sufficient due diligence in submitting their bid and had as a result had knowingly given commitments to BSkyB that were not based upon a solid project plan. Those commitments implied to BSkyB that EDS had sufficient qualified staff to complete the project, that those staff were ready to start work immediately, that the technology to be used was proven, and that the work could be completed in the required timeline and at the stipulated cost. Those commitments became the foundation upon which BSkyB’s expectations of the contract were based and the platform upon which BSkyB selected EDS as the winning bid.

As the sequence of events that followed the acceptance of the EDS bid demonstrated there was a gap between BSkyB’s expectations and what actually transpired. Resourcing issues, project delays and quality problems were reported as the project progressed and as the court documents show the representations made during the bid process were not accurate predictors of what would eventually happen.

Many of the issues were related to the way in which the EDS bid was put together and the representations EDS made to BSkyB through the bidding process. The bid was seen by BSkyB as a firm commitment, but the reality of the situation was that there was no firm scope baseline upon which to base a firm commitment. Errors were made in calculating the price (the court case reports Excel calculation errors which resulted in under bidding on price), contingency was stripped out of the contract (presumably to make the bid more attractive to BSkyB) and there was no detailed resourcing plan for the project at the time the bid was made. Court proceedings further revealed that an internal “red team” review performed by EDS in Aug 2000, reported that the scope lacked definition and shortage of staff (quantity and skills sets) were problems on the project.  The red team noted that they did not believe the system could be implemented by the then target date of 1 Apr 2001.

Following a lengthy legal process, in January 2010, BSkyB was awarded a settlement of £200M. The Honourable Mr. Justice Ramsey of the England and Wales High Court (Technology and Construction Court) determined that EDS had breached the contract and performed misrepresentation. He added that without a new CRM system, BSkyB suffered business loss in terms of “churn”.

In his lengthy decision, the Honourable Mr. Justice Ramsey detailed significant faults, mostly by EDS – but not all. Although the judge did not rule in favour of all of BSkyB’s allegations, the ruling did establish that EDS had not done sufficient planning before giving assurances to BSkyB that they could deliver the project according to the agreed schedule and budget. As such EDS had misrepresented what they would be able to deliver. He also found that had the truth been disclosed to BSkyB they would have chosen the PwC bid and hence taken a very different path.

Note: EDS countered with a claim of £4.8M for unpaid invoices and so the story has not quite reached its final end just yet.

The editorial team

Contributing factors as reported in the press and the court proceedings:
Failure to define scope before committing to schedule and budget to a customer. Failure to communicate the risk of the lack of scope definition to the customer during the bid process and through the contractual arrangements. Ineffective resource planning. Resource skill set shortfalls in some of the staff assigned. Poor program management. Failure to document the project effectively. Poor quality management practices resulting in the problems with the phase 1 deployment (e.g. the test environment used was not an accurate replication of the production environment in which the system was to function).

See also:

  1. J.P. Morgan – Excel spreadsheet error

Reference links:

  1. BSkyB Selects Chordiant Software for Multi-Million Dollar Unified Customer Relationship Management Strategy – Original press release from Chordiant
  2. Media Giant BSkyB sues EDS over troubled CRM system – by Marc L. Songini, dated August 17, 2004
  3. England and Wales High Court (Technology and Construction Court) Decisions –  dated January 26, 2010
  4. BSkyB v EDS judgment at long last – a dodgy degree, a dog called Lulu and some lessons for both customers and suppliers – by Mills & Reeve, dated February 2010