Buckley Powder, a Colorado company that supplies dynamite and other explosive products for mining and construction firms, is suing Infor Global Solutions, a business applications development firm.
The lawsuit claims that Infor failed to complete the creation of an upgrade of its TakeStock inventory management software. The work was to be completed within 180 days from the date of the work order. After 18 months, the work had not been completed.
What’s at stake:
Key functions of Buckley’s operations, including inventory control, distribution and manufacturing.
Buckley Powder’s filed a lawsuit that states a “breach of contract and unjust enrichment based upon Infor’s failure to perform its duties in breach of the Software Services Agreement.”
In December 2011, Buckley Powder entered into a service agreement with Infor to “provide coder implementation of the SX.e software system,” a broad upgrade from Buckley’s existing TakeStock inventory management software, according to the lawsuit.
The SX.e software essentially is an integrated suite of software for enterprise resource planning.
The applications include product development or marketing, material purchasing, inventory control, distribution, manufacturing and supply chain among others, according to Kim Harrington, Panorama Consulting Solutions in Denver, CO.
SX.e is software that Buckley is an advance over TakeStock, also an Infor product.
SX.e monitors inventory demand and warehouse management. The upgrade should also help the powder company get “better performance, faster growth, and fewer headaches,’’ according to Infor.
This software automates purchasing from suppliers, lowering costs and increasing operational efficiency.
Setting up an ERP system such as SX.e can be time consuming and expensive. That’s because the supplier and customer need to work out the best team from both firms to install the software, according to Michael Krigsman, analyst with Asuret, a consulting firm in Boston, MA. And then closely manage the process, to make sure it gets installed on time and correctly.
According to details from the 2013 ERP Report by Panorama Consulting Solutions, “the average cost of an ERP project is $7.1 million and would take 16.6 months to implement.”
The reason why it takes so long depends on several factors including size of the company, the specifications for the software and the composition of the team working on installation.
Infor declined to comment on any reasons for delays in completing the upgrade for Buckley. Buckley also declined comment.
“A lack of consensus on project governance is a large reason why ERP implementations often fail,” according Erik Kimberling from Panaroma Solutions.
According to the services work order (SWO) in the lawsuit, Buckley said “work must be performed under their executed work order for a period not to exceed 180 days from the Work Order date.” The work order was placed in December, 2011. The lawsuit was filed in July, 2013.
Buckley says “it had been 18 months since the execution of the service agreement and the SWO. The SX.e software system has not been implemented, the project has been plagued by setbacks and non-performance on behalf of Infor.”
Furthermore, Buckley had “fully compensated Infor for the project,” according to the suit. Hence, “Infor is in default of the services agreement and the SWO for failure to provide the agreed upon Services to Buckley in accordance with the express performance deadlines,” reads the suit. The upgrade project, Buckley said in its suit, had “specific mutually agreed upon deliverable dates.’’
Buckley has sued Infor for the $185,691.58 that it paid for work performed on the project.
Look for the key clauses that can hurt you. Rework them, before it's too late. Here are examples, from the Buckley Powder case.
Conditions on Providing Services:
“Licensee must assign a project manager who will assume responsibility for management of the project for which the Services are provided. Licensee will establish the overall project direction, including assigning and managing the Licensee’s project personnel team.”
This indicates to the court that Buckley is responsible for any delays. Infor says, in effect, it is not taking any responsibility for being on time.
A clause such as this should be stricken from the agreement and replaced with one that indicates what is expected going in for Infor to deliver and when. That clause could refer to an appendix that details the deliverables and dates. And that should be part of what is filed with the court.
Scheduling and Cancellation of Scheduled Services
“The parties agree that once Licensee and Infor have scheduled a specific time during which Infor will provide services … Licensee will be obligated to pay Infor for such services as if Infor had performed such Services on the date schedule.”
Payment is based on the “time during which” the supplier provides services. Payment is not based on when specific code or deliverables are received.
Modify the clause to make it clear that payment comes after specific services are rendered. Instead this became a time-bound payment method and not a service-bound one, according to Krigsman.
“Unless otherwise stated in the applicable Work Order, Infor will invoice Licensee for all Services and applicable charges on a bi-weekly basis, as Infor renders the Services or Licensee incurs the charges, as applicable… Licensee will pay each Infor invoice within fifteen days of the date of invoice. Late payments are subject to a late charge equal to the lesser of (i) one and one-half percent per month; and (ii)the highest rate permitted by applicable law.”
Sets a bi-weekly payment schedule and a late date that the customer must adhere to.
Make payment due within two weeks of each specified delivery of a service. Focus on deliverables.
Limited services warranty and remedy for breach.
“Infor warrants to Licensee that, for the period beginning on the specific date of the applicable Work Order and continuing for ninety days after the completion of Services pursuant to that Work Order, Infor will render all Services under such Work Order with reasonable care and skill.”
Disclaimer of Warranty.
“Infor makes no other warranties whatsoever express or implied with regard to any services provided under this services agreement and/or any work order, in whole or in part… Infor expressly does not warrant that the services will meet licensee requirements.”
Failure of Essential Purpose.
“Limitations…apply even if any remedy specified in this services agreement is found to have failed of its essential purpose, and regardless of whether licensee has accepted any service under this service agreement.”
It can’t get any clearer than this. The agreement, signed by Buckley’s CFO, clearly states Infor “does not warrant that the services will meet licensee requirements.”
Turn it around. Make sure the service supplier expressly warrants that the services rendered will meet your company’s requirements. Or no payment will be made.
Michael Krigsman, analyst with Asuret, a consulting firm in Boston, MA. wonders how experienced the CIO, CFO and other internal business managers at this company are.
Buckley’s area of expertise is not in technology. But good managers still can figure out how to manage its delivery, rather than going along with what appear to be boilerplate terms.
Cautionary note: Neither side has commented on the suit. And the court may be provided with more documents with further details of the agreement or agreements struck.
But what is shown and analyzed here are documents filed with the court by the aggrieved party, Buckley.
Of these, the agreement is on Infor letterhead, indicating who set out the terms. And there is no indication of alterations by Buckley.
Plus, Buckley gives no indication of why it allowed non-performance to last 18 months – particularly, if, as its filing appears to indicate, Buckley is responsible for managing the project.
Buckley’s attorney declined to comment on the case.
If Buckley agreed to pay only when specific services were provided, the outcome would have been different, according to analyst Krigsman. “They would have paid a fraction of what they did,” he says.
Buyer beware. Read the fine print. And change it.
Dipti Kumar is a writer and reporter for CruxialCIO. The piece of technology she hopes to own in the future is a 3D printer that produces multi-cuisine food. She worked as a news anchor, reporter and producer with NDTV-HINDU, a news organization in India, before moving to New York in 2012. She is pursuing a post-graduate degree in health and science reporting.