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Article 2 – The new duties of systems suppliers.

Research on tens of thousands of new IT systems has shown that less than 30% are ever delivered on time, on budget and according to what was promised. A massive 73% cost more than twice their original budget AND take more than twice as long to implement as planned. This is the second in a series of six articles by David Craig showing how you can ensure that your new IT system works on time and on budget.

In this article, I’m going to start talking about the legal obligations on IT systems suppliers to deliver what they have promised. Please, please do not switch off – this is hugely important. This is not for lawyers. This is essential information for any organisation (in the public and private sectors) which is buying or has bought IT systems.

Over the last ten years there have been over a hundred court cases which have defined the duties and responsibilities of suppliers of IT systems. These have meant a massive change in the law which provide a large degree of protection for organisations buying IT systems. However, few organisations know about these changes and even those that do know about them do not understand how to benefit from them. In this article we will just focus on the duties of IT suppliers who represent themselves as ‘specialists’ or ‘experts’.

Most IT suppliers claim to be ‘experts’ or ‘specialists’ in some area – finance systems, ERP systems, CRM, warehouse/stock management or whatever. One large consultancy, for example, claimed on its website that all its 10,000 or so consultants were ‘specialists’. While most of us would probably view such claims as just marketing puffery, in the eyes of the Law calling yourself an ‘expert’ or ‘specialist’ or ‘professional’ immediately places significant duties of ‘reasonable care’ on you in terms of the advice and services you provide to your clients.

Typically, if you ask an IT supplier or consultant to respond to a Request for Proposal (RFP) or an Invitation to Tender (ITT) to provide a new system, most suppliers just tick the boxes on the tender document and, providing the price is reasonable, you will choose the supplier who ‘ticks the most boxes’ – the one whose system appears to be closest system to what you think you need.

However, the Law says that potential suppliers must do much more than confirm which of your requirements their system will meet. According to the law, if a supplier represents themselves as having specialist knowledge or expertise, they must tell you three key things:

1. What they are going to provide to meet your needs
2. What they not going to provide
3. Any ‘consequential effects’ of what they not going to provide

This all means that if there are areas of your RFP or (ITT) which a supplier will not provide, the supplier must both highlight those areas for you and explain to you whether the areas their system will not cover have any ‘consequential effects’ on the overall functioning of their system in your organisation. Most suppliers never do this and buyers are not even aware that the supplier should be identifying any gaps between what they want and what the suppliers are proposing and whether these gaps will have any significant effect for the system.

But there’s much more than that! The Law puts further duties on suppliers who represent themselves as ‘specialists’ or ‘experts’. If your organisation has omitted some key feature of a proposed system from your tender document, the supplier has a ‘duty of reasonable care’ to inform you that the feature is missing and what effect this will have on your system’s success. For example, if you are putting out a tender for a finance system and your tender document does not mention the need for a ‘trial balance’ facility, your supplier, as a specialist in finance systems, has a duty of reasonable care to inform you that the trial balance feature is missing from your tender document and the effect that this omission will have on your future finance system’s viability.

According to the Law, if you buy a system and there are problems (delays, cost over-runs etc) due to the fact that the supplier has not warned you in advance of an issue that they as a specialist could reasonably have been expected to have anticipated, then the supplier MUST correct these problems at the supplier’s own expense. Surprisingly few organisations buying IT know about the duties of suppliers who represent themselves as specialists and thus fail to benefit from the protection these duties offer systems buyers.

Your IT systems supplier will always try to pass the responsibility for any problems onto you – but the Law says that if the supplier as an ‘expert’ could have reasonably anticipated the problems, then the suppplier must fix them at their own cost.

In my next article we will explain the other key area of supplier responsibility – when you pay a supplier as a consultant to scope your operations to assess their system’s suitability.