IBM: Co-Op Insurance talking direct to coding subcontractor helped collapse of £55m IT revamp project

Was it Agile's fault? Was it the billing? Sueball rolls on

The Royal Courts of Justice in London

IBM has blamed ex-customer Co-Op Insurance for the crash of a £55m project centring on Agile software development, but admitted the systems it built "would not have" boosted the insurer's top or bottom line anyway.

This is the latest exchange in a £130m lawsuit that was first filed by Co-Op Insurance against Big Blue at London's High Court in December 2017 – after Big Blue walked away from a large-scale upgrade of Co-Op's core insurance systems in a contract signed in January 2015.

Both sides spent this year making legal filings accusing each other of screwing up their commercial relationship and causing the collapse of the project.

At its heart, the Co-Op's suit claims that software written by IBM subcontractor the Innovation Group had so many "deficiencies" that it was not fit for purpose – and had missed its deadlines. The insurer eventually withheld a planned payment, as was reported by the Insurance Post.

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IBM has denied the upgraded software was unusable and alleges, in brief, that the project's disintegration was the Co-Op's fault. As part of the £55m contract, IBM would have licensed "certain software products" to the insurer for £7.966m.

No, it's YOUR fault and it wouldn't have helped you anyway

Near the end of the contract, claimed IBM's lawyers in their most recent filing of 31 October, the Co-Op got so fed up it started talking directly to the subcontractor instead of Big Blue, contributing further to the breakdown of the commercial relationship.

"As from around 7 July 2016, the Claimant [the Co-Op] disrupted the Defendant [IBM]'s planning activities – and Release 2 progress as a whole – by seeking to bypass the Defendant and engaging directly with Innovation Group and embarking on re-planning activities that not only adversely affected the project but also frustrated rather than assisted the Claimant's purported aim of vacating its legacy data centre," claimed Big Blue's lawyers in the recent filing, seen by The Register.

IBM office - from IBM newsroom

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Big Blue's legal eagles also "denied that Innovation Group was responsible for 'the problems and delays to the project' as alleged," putting all of the fault onto the Co-Op. Bizarrely, IBM claimed that had the upgrade gone to plan, "it would not have resulted in any increase in the [Co-Op]'s profitability or revenues".

Let that sink in for a moment.

This was in response to the Co-Op's earlier filing – in which the insurer appeared to be attempting to include "costs incurred in reliance upon a counter-party's performance of a contract and wasted as a result of the counter-party's repudiatory breach" in its claim for damages "in order to put it in the position it would have been in had the contract been performed".

Earlier this year the Co-Op Group reported a 25 per cent fall in insurance sales to £331m.

Agile, comatose, same difference

As part of the Agile methodology being used for the contract, the Co-Op was supposed to write user stories that IBM and the Innovation Group were to jointly turn into a usable piece of software. The Co-Op alleged that what was intended was a single drop (or release) of the product, ready for user acceptance testing, but this had instead degenerated to a planned "79 drops" before the whole contract finally collapsed.

IBM's lawyers responded to this by saying: "The reason why delivery was split into drops was to accommodate the Claimant's failure to deliver business information and user stories" – adding that by April 2016, the Co-Op's own user acceptance testing (UAT) report "showed a pass rate for 72 per cent for the tests that had been run".

According to IBM, this was proof that there was not "an excessive number of defects" – but Big Blue denied that it "had 'allowed' only six weeks for UAT," insisting "that was the period agreed upon by the parties" and denying that the later cancellation of UAT by the Co-Op was because of "the number of test failures and/or blockages".

When is a payment not a payment? When it's an 'application gate', allegedly

IBM claimed that Co-Op workers asked for references in the contract to be changed from "software payment" to "application gates" which it alleged was an effort to disguise what was being bought and paid for.

In Big Blue's version of events, Co-Op workers Graham Bolton, Justin Gilroy and Kevin Webb "explained at a meeting held at [IBM]’s Southbank offices on 8 June 2015" that the Co-Op wanted "to avoid the appearance that it was purchasing software assets".

Payments for the software, it was said, "were to be made on a calendar basis and without reference to the status of the project at the time that each tranche of payment became due".

In its previous legal filing the Co-Op had said the renaming was "to emphasise that the payments, albeit in respect of software licences, were to be made when the application being developed by [IBM] reached a particular stage, and were to be made as the project reached certain gating points".

Whether the payments were being made on a scheduled basis regardless of Agile progress, as claimed by IBM, or were actually being made as the insurance app reached defined stages ("gates") of usability looks like something that will be decided by a judge.

The case continues. ®




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