Crawford & Co, a US claims handling company, is suing Cognizant saying the IT services provider failed to staff, manage and implement a software project at the company and caused it significant problems over five years.
It is rare for a client to sue an IT firm. Issues are typically settled mutually and there are very few instances when it reaches the courts. In the past, Wipro was sued by client National Grid and it paid $75 million to settle the case in 2018. In 2016, Tata Consultancy Services paid $26 million to settle a case with US district Orange County.
Crawford’s suit against Cognizant is related to an enterprise resource planning project that initially began in 2014 and continued to have issues until 2018. ET has a copy of filing.
“Cognizant failed to perform as promised under the Work Schedules. And because the purpose of PeopleSoft Financials was to operate the entirety of Crawford’s finances, the damages resulting from Cognizant’s failure have been severe,” the lawsuit filed in February with the Georgia Northern District Court said.“The combination of poor coding standards and insufficient testing resulted in multi-million dollar revenue recognition problems and a multi-million dollar effect on the bottom line,” the suit added.
Crawford said complaints were made not only by Crawford’s project manager but that its Chief Global Information Officer and its Chief Operating Officer also escalated the problem.
“Crawford had worked with Cognizant for years in good faith to implement PeopleSoft Financials. In 2018, as the second phase of implementation experienced greater and greater problems, with no remedy from Cognizant, Crawford tried to resolve the problems with Cognizant’s work,” the suit said.
In October 2018, the company told Cognizant it was transferring the work to another provider. The suit further states that, in January, Cognizant determined that the problems with the project with ‘excusable’ under the terms of the Master Services Agreement and that result from actions that were beyond its reasonable control.
“And even though Crawford disputed the invoiced amounts pursuant to the MSA, Cognizant demanded payment of all but a small reduction within 30 days,” Crawford’s suit states.
Crawford is asking for a jury trial. Cognizant has until April 18 to respond to the complaint “Cognizant looks forward to fully defending itself and telling its side of the story in the proper forum,” a Cognizant spokesperson told ET in response to a questionnaire detailing the statements in the lawsuit.
Enterprise resource planning systems touch virtually every part of a company’s business and implementation hurdles are common. Research firm Gartner estimated three years ago that between 55%-75% of projects fail to meet their objectives. It expects even a greater proportion of cloud-based ERP projects to fail.