Welcome!

Wireless Authors: Lori MacVittie, Carmen Gonzalez, Scott Hirsch, Trevor Parsons, Esmeralda Swartz

News Feed Item

ScanSource Sues Avanade, Alleging "Bait-and-Switch"

ERP Install Price Ballooned From $17 Million to Nearly $66 Million and Go-Live Date Jumped From 11 Months to Three Years and Is Still Not Live

GREENVILLE, S.C., Jan. 2, 2013 /PRNewswire/ -- Avanade, Inc., a joint venture between Accenture (NYSE: ACN) and Microsoft (NASDAQ: MSFT), has been sued by ScanSource, Inc. (NASDAQ: SCSC) for what ScanSource calls a "bait-and-switch," after ScanSource saw Avanade's initial estimate for the installation of enterprise resource planning (ERP) software system Microsoft Dynamics AX balloon from $17 million to nearly $66 million and from 11 months to three years, with the ERP system still not live.  ScanSource's project is believed to be one of the largest global enterprise level Microsoft Dynamics AX implementations to date. 

ScanSource contracted with Avanade in 2009 to replace its aging information technology infrastructure with a new core system that would support ScanSource's continued global expansion.  Avanade's implementation was originally scheduled to be completed within 11 months.

The lawsuit, which was filed in U.S. District Court in Atlanta, alleges - among other things - fraud, tortious misrepresentation and breach of contract, and seeks tens of millions of dollars in damages that ScanSource has incurred and will continue to incur, as a result of Avanade's misconduct.

The lawsuit alleges that Avanade knew it was not capable of performing the Microsoft AX implementation for ScanSource, and misrepresented its skills and abilities to land the lucrative engagement.  The suit also states that Avanade engaged in "bait-and-switch" sales tactics that defrauded ScanSource into believing that Avanade had, and would assign, highly-skilled consultants to perform the implementation.  Instead, as the lawsuit alleges, Avanade provided ScanSource with a revolving door of consultants who knew little or nothing about implementing Microsoft Dynamics AX software or managing large-scale global ERP projects.  The result was an incomplete and defectively designed system that suffered from numerous flaws and required extensive remedial work.  Avanade's incompetence was reflected in, among other things, the staggering 500,000 lines of software code it wrote in an attempt to have the Microsoft Dynamics AX platform meet ScanSource's business requirements.

According to the lawsuit, "As a result of Avanade's fraud and breaches, an implementation that was initially budgeted for $17 million has now cost ScanSource approximately $37 million - and is estimated by Accenture, Avanade's parent entity, to require an additional $29 million to complete.  This ballooning of the Project cost estimate from $17 million to approximately $66 million represents an almost 300% price increase for delivery of the global ERP implementation that is years behind the originally scheduled initial go live..."

The suit also states, "Avanade's inability to accurately estimate the effort required for the implementation caused ScanSource to de-scope some of its Minimum Business Requirements in an attempt to reduce the Project's escalating cost and keep the scheduled go-live dates intact.  As a result of this de-scoping exercise, ScanSource had to retain some of its legacy applications to perform certain processes that the new Microsoft AX system was supposed to handle.  For other de-scoped functionality, ScanSource was required to write its own applications to fill the gaps." 

"By forcing ScanSource to de-scope functionality, Avanade performed a classic bait-and-switch on ScanSource.  Specifically, after being engaged on the Project for only a few months, Avanade drastically increased its fees estimate, thereby forcing ScanSource to make the following choice:  either pay substantially more for functionality that Avanade was supposed to deliver as part of the initial quote, or forego that functionality to reduce a ballooning budget far in excess of what Avanade had represented and agreed to."

The lawsuit continues, "At regular intervals throughout the Project, Microsoft and Accenture performed quality assessments of the Project (the 'QA Reports').  Both Microsoft and Accenture concluded that the Project was being mismanaged and made recommendations, including the preparation of an integrated project plan, to stabilize the Project and get it back on a track toward go-live."

"The Microsoft quality assessment, which focused primarily on software development, documented hundreds of 'Issues' with the Avanade-developed code.  Many of these problems were characterized as 'Must Fix Issues.'  Microsoft further criticized the manner by which Avanade altered the core Microsoft AX code, noting that 'even single methods have multiple developers' and that '[v]ery commonly, base classes, forms and tables have been modified,' increasing the costs of future upgrades" and maintainability of the system. 

"Among other criticisms of the Project, the Accenture quality assessment noted that the Project could not be completed without additional fees of $22.5 to $29 million, and resource commitments totaling 11,504 workdays."

"Following receipt of the QA Reports, ScanSource delivered a Notice of Default to Avanade on May 17, 2012.  Despite providing an extended cure period, Avanade has failed to correct its breaches of the Implementation Agreement. When it became evident to ScanSource that Avanade had no intention of curing its defaults, on September 28, 2012, ScanSource provided Avanade with a Notice of Termination removing Avanade from the Project."

"The Notice of Termination followed repeated failures by Avanade to meet multiple scheduled and rescheduled go-live dates, and the realization that the Project -- still without a projected go-live date, and now estimated to cost at least three times Avanade's original estimate -- could not continue with Avanade as integrator."

ScanSource has contracted with a new global implementation partner to mitigate the damages and harm caused from Avanade's misconduct.  ScanSource plans on completing its new Microsoft Dynamics global ERP project.  Excluding any potential recovery from this lawsuit, ScanSource believes that the total spend for the ERP project could range from $58 million to $72 million and extend past fiscal year 2013, as stated in its prior 10-Q filing for the period ending September 30, 2012.

ScanSource is being represented by Mark P. Ressler of Kasowitz, Benson, Torres & Friedman LLP.

About ScanSource, Inc.
ScanSource, Inc. (NASDAQ: SCSC) is the leading international distributor of specialty technology products, operating from dedicated business units in North America, Latin America and Europe. ScanSource POS & Barcoding delivers AIDC (automatic identification and data capture) and POS (point-of-sale) solutions; Catalyst Telecom and ScanSource Communications provide voice, video, data and converged communications equipment; ScanSource Security offers physical security solutions; and ScanSource Services Group delivers value-added support programs and services. Founded in 1992, the company ranks #760 on the Fortune 1000. For more information, call the toll-free sales telephone number at 800.944.2432 or visit www.scansourceinc.com.

SOURCE ScanSource, Inc.

More Stories By PR Newswire

Copyright © 2007 PR Newswire. All rights reserved. Republication or redistribution of PRNewswire content is expressly prohibited without the prior written consent of PRNewswire. PRNewswire shall not be liable for any errors or delays in the content, or for any actions taken in reliance thereon.

@ThingsExpo Stories
The Internet of Things will greatly expand the opportunities for data collection and new business models driven off of that data. In her session at Internet of @ThingsExpo, Esmeralda Swartz, CMO of MetraTech, will discuss how for this to be effective you not only need to have infrastructure and operational models capable of utilizing this new phenomenon, but increasingly service providers will need to convince a skeptical public to participate. Get ready to show them the money! Speaker Bio: Esmeralda Swartz, CMO of MetraTech, has spent 16 years as a marketing, product management, and busin...
Samsung VP Jacopo Lenzi, who headed the company's recent SmartThings acquisition under the auspices of Samsung's Open Innovaction Center (OIC), answered a few questions we had about the deal. This interview was in conjunction with our interview with SmartThings CEO Alex Hawkinson. IoT Journal: SmartThings was developed in an open, standards-agnostic platform, and will now be part of Samsung's Open Innovation Center. Can you elaborate on your commitment to keep the platform open? Jacopo Lenzi: Samsung recognizes that true, accelerated innovation cannot be driven from one source, but requires a...
SYS-CON Events announced today that Red Hat, the world's leading provider of open source solutions, will exhibit at Internet of @ThingsExpo, which will take place on November 4–6, 2014, at the Santa Clara Convention Center in Santa Clara, CA. Red Hat is the world's leading provider of open source software solutions, using a community-powered approach to reliable and high-performing cloud, Linux, middleware, storage and virtualization technologies. Red Hat also offers award-winning support, training, and consulting services. As the connective hub in a global network of enterprises, partners, a...
P2P RTC will impact the landscape of communications, shifting from traditional telephony style communications models to OTT (Over-The-Top) cloud assisted & PaaS (Platform as a Service) communication services. The P2P shift will impact many areas of our lives, from mobile communication, human interactive web services, RTC and telephony infrastructure, user federation, security and privacy implications, business costs, and scalability. In his session at Internet of @ThingsExpo, Robin Raymond, Chief Architect at Hookflash Inc., will walk through the shifting landscape of traditional telephone a...
SYS-CON Events announced today that Matrix.org has been named “Silver Sponsor” of Internet of @ThingsExpo, which will take place on November 4–6, 2014, at the Santa Clara Convention Center in Santa Clara, CA. Matrix is an ambitious new open standard for open, distributed, real-time communication over IP. It defines a new approach for interoperable Instant Messaging and VoIP based on pragmatic HTTP APIs and WebRTC, and provides open source reference implementations to showcase and bootstrap the new standard. Our focus is on simplicity, security, and supporting the fullest feature set.
BSQUARE is a global leader of embedded software solutions. We enable smart connected systems at the device level and beyond that millions use every day and provide actionable data solutions for the growing Internet of Things (IoT) market. We empower our world-class customers with our products, services and solutions to achieve innovation and success. For more information, visit www.bsquare.com.
How do APIs and IoT relate? The answer is not as simple as merely adding an API on top of a dumb device, but rather about understanding the architectural patterns for implementing an IoT fabric. There are typically two or three trends: Exposing the device to a management framework Exposing that management framework to a business centric logic • Exposing that business layer and data to end users. This last trend is the IoT stack, which involves a new shift in the separation of what stuff happens, where data lives and where the interface lies. For instance, it’s a mix of architectural style...
SYS-CON Events announced today that SOA Software, an API management leader, will exhibit at SYS-CON's 15th International Cloud Expo®, which will take place on November 4–6, 2014, at the Santa Clara Convention Center in Santa Clara, CA. SOA Software is a leading provider of API Management and SOA Governance products that equip business to deliver APIs and SOA together to drive their company to meet its business strategy quickly and effectively. SOA Software’s technology helps businesses to accelerate their digital channels with APIs, drive partner adoption, monetize their assets, and achieve a...
From a software development perspective IoT is about programming "things," about connecting them with each other or integrating them with existing applications. In his session at @ThingsExpo, Yakov Fain, co-founder of Farata Systems and SuranceBay, will show you how small IoT-enabled devices from multiple manufacturers can be integrated into the workflow of an enterprise application. This is a practical demo of building a framework and components in HTML/Java/Mobile technologies to serve as a platform that can integrate new devices as they become available on the market.
SYS-CON Events announced today that Utimaco will exhibit at SYS-CON's 15th International Cloud Expo®, which will take place on November 4–6, 2014, at the Santa Clara Convention Center in Santa Clara, CA. Utimaco is a leading manufacturer of hardware based security solutions that provide the root of trust to keep cryptographic keys safe, secure critical digital infrastructures and protect high value data assets. Only Utimaco delivers a general-purpose hardware security module (HSM) as a customizable platform to easily integrate into existing software solutions, embed business logic and build s...
Connected devices are changing the way we go about our everyday life, from wearables to driverless cars, to smart grids and entire industries revolutionizing business opportunities through smart objects, capable of two-way communication. But what happens when objects are given an IP-address, and we rely on that connection, sometimes with our lives? How do we secure those vast data infrastructures and safe-keep the privacy of sensitive information? This session will outline how each and every connected device can uphold a core root of trust via a unique cryptographic signature – a “bir...
Internet of @ThingsExpo Silicon Valley announced on Thursday its first 12 all-star speakers and sessions for its upcoming event, which will take place November 4-6, 2014, at the Santa Clara Convention Center in California. @ThingsExpo, the first and largest IoT event in the world, debuted at the Javits Center in New York City in June 10-12, 2014 with over 6,000 delegates attending the conference. Among the first 12 announced world class speakers, IBM will present two highly popular IoT sessions, which will take place November 4-6, 2014 at the Santa Clara Convention Center in Santa Clara, Calif...
Almost everyone sees the potential of Internet of Things but how can businesses truly unlock that potential. The key will be in the ability to discover business insight in the midst of an ocean of Big Data generated from billions of embedded devices via Systems of Discover. Businesses will also need to ensure that they can sustain that insight by leveraging the cloud for global reach, scale and elasticity.
WebRTC defines no default signaling protocol, causing fragmentation between WebRTC silos. SIP and XMPP provide possibilities, but come with considerable complexity and are not designed for use in a web environment. In his session at Internet of @ThingsExpo, Matthew Hodgson, technical co-founder of the Matrix.org, will discuss how Matrix is a new non-profit Open Source Project that defines both a new HTTP-based standard for VoIP & IM signaling and provides reference implementations.

SUNNYVALE, Calif., Oct. 20, 2014 /PRNewswire/ -- Spansion Inc. (NYSE: CODE), a global leader in embedded systems, today added 96 new products to the Spansion® FM4 Family of flexible microcontrollers (MCUs). Based on the ARM® Cortex®-M4F core, the new MCUs boast a 200 MHz operating frequency and support a diverse set of on-chip peripherals for enhanced human machine interfaces (HMIs) and machine-to-machine (M2M) communications. The rich set of periphera...

SYS-CON Events announced today that Aria Systems, the recurring revenue expert, has been named "Bronze Sponsor" of SYS-CON's 15th International Cloud Expo®, which will take place on November 4-6, 2014, at the Santa Clara Convention Center in Santa Clara, CA. Aria Systems helps leading businesses connect their customers with the products and services they love. Industry leaders like Pitney Bowes, Experian, AAA NCNU, VMware, HootSuite and many others choose Aria to power their recurring revenue business and deliver exceptional experiences to their customers.
The Internet of Things (IoT) is going to require a new way of thinking and of developing software for speed, security and innovation. This requires IT leaders to balance business as usual while anticipating for the next market and technology trends. Cloud provides the right IT asset portfolio to help today’s IT leaders manage the old and prepare for the new. Today the cloud conversation is evolving from private and public to hybrid. This session will provide use cases and insights to reinforce the value of the network in helping organizations to maximize their company’s cloud experience.
The Internet of Things (IoT) is making everything it touches smarter – smart devices, smart cars and smart cities. And lucky us, we’re just beginning to reap the benefits as we work toward a networked society. However, this technology-driven innovation is impacting more than just individuals. The IoT has an environmental impact as well, which brings us to the theme of this month’s #IoTuesday Twitter chat. The ability to remove inefficiencies through connected objects is driving change throughout every sector, including waste management. BigBelly Solar, located just outside of Boston, is trans...
SYS-CON Events announced today that Matrix.org has been named “Silver Sponsor” of Internet of @ThingsExpo, which will take place on November 4–6, 2014, at the Santa Clara Convention Center in Santa Clara, CA. Matrix is an ambitious new open standard for open, distributed, real-time communication over IP. It defines a new approach for interoperable Instant Messaging and VoIP based on pragmatic HTTP APIs and WebRTC, and provides open source reference implementations to showcase and bootstrap the new standard. Our focus is on simplicity, security, and supporting the fullest feature set.
Predicted by Gartner to add $1.9 trillion to the global economy by 2020, the Internet of Everything (IoE) is based on the idea that devices, systems and services will connect in simple, transparent ways, enabling seamless interactions among devices across brands and sectors. As this vision unfolds, it is clear that no single company can accomplish the level of interoperability required to support the horizontal aspects of the IoE. The AllSeen Alliance, announced in December 2013, was formed with the goal to advance IoE adoption and innovation in the connected home, healthcare, education, aut...