Atos Origin breached contract with DeBeers, judge rules

Judge recommends damages of around £1 million over failed integration project, but observes that diamond company shared responsibility for delays

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A judge has recommended that IT outsourcing provider Atos Origin pay diamond company DeBeers around £1 million in damages over a failed integration project that fell apart in 2008.

Atos Origin stopped working on the project to integrate DeBeers’ supply chain systems in Botswana because it felt it had “fundamentally changed from the original contracted terms in terms of scope”.

This represented a breach of contract, Mr Justice Edwards-Stuart ruled on Friday, thereby making Atos liable to pay damages. “Atos knew that the course upon which it had embarked would amount to a breach of contract. It committed that breach of contract deliberately and that amounted to both wilful and deliberate default.”

However, he also found that responsibility for delays in the project was to be shared by both parties.

The judge concluded that the main reasons the project went off track were: delays by DeBeers in finalising the scope of the project; change requests from DeBeers that represented a significant departure from the scope; shortcomings in the design of the system during development and “possibly, lack of effective communication between Atos and Atos India.”

The court ruling provides detailed insight into how an IT outsourcing engagement can fall apart and contains some damning revelations about both sides.

For example, Mr Justice Edwards-Stuart concluded that certain documents prepared by one of DeBeers’ technical solutions architects early on in the development stages, including a service-oriented architecture model, “consisted of little more than wholesale copying of other materials, which were then altered slightly to make it appear that they had been specifically written for [DeBeers].”

Meanwhile, an internal memo written by an Atos Origin principal architect who was brought in to troubleshoot the project revealed his belief that systems analysis was a “lost art” at the IT outsourcing company.

“We have signed-off business functional requirements. We have a team of dev[eloper]s ready to build to those requirements. We have a number of architects and key designers busily defining how the devs are to build the systems. But we have no definition of what system is to be built,” wrote David Cunningham in May 2008. “In short, what is missing is systems analysis.”

The damages represent the cost for DeBeers of building an alternative system, minus the loss incurred to Atos Origin as a result of DeBeers’ actions. The £950,000 figure is significantly less than the £8.3 million compensation DeBeers originally sought.

DeBeers has yet to build such an alternative system due to some unnamed, confidential issue.

Last week, Atos Origin announced its intention to acquire Siemens' IT division, a deal that will give it the second largest share of the European IT services market after IBM.

Atos has yet to respond to Information Age's request for comment on the DeBeers case.