3M and Infor in Legal Dispute Over 3rd Party ERP Support
December 6, 2011 Alex Woodie
A dispute over third-party support for BPCS and Infinium software has landed 3M and Infor in a Minnesota courtroom. Last month, 3M filed a complaint against the ERP giant for allegedly demanding about $21 million in exchange for allowing a third-party to service and support the heavily modified versions of BPCS and Infinium for 3M.
According to the original complaint filed by 3M on November 23 in U.S. District Court for the District of Minnesota, 3M originally licensed the AS/400-based software from SSA Global in 1997. Along with a perpetual license, 3M bought a support agreement from SSA to obtain upgrades, updates, and receive technical support.
Over the years, 3M purchased the rights to additional seats of software, first for BPCS and then for Infinium, which SSA Global bought in 2002. Its latest purchase came in 2009, when 3M paid Infor $1.5 million for 1,000 seats, giving it a total of 8,000 seats (only 7,000 of which are used, the company says).
During this time, the $26 billion industrial giant says it has heavily customized BPCS and Infinium to fit its needs. “Currently, only about 50 percent of the Software used at 3M is original to Infor,” 3M’s claim states. “Because of 3M’s highly customized version of the software, Infor employees–who are familiar with later, non-customized versions of the Software–are unable to assist 3M with much of the necessary support for the Software.”
In November 2009, 3M turned to Cognizant, a large New Jersey-based IT services and business process outsourcing (BPO) firm with clients all over the world. 3M says that under the master professional services agreement (MPSA) that it signed, Cognizant agreed “to perform maintenance and support for the Software under 3M’s direction, and to assist 3M, at 3M’s direction, with enhancements and customizations of the software.” The work began in June 2010.
Originally, Infor was OK with that setup, according to 3M’s suit. “Infor has long been aware of 3M’s relationship with Cognizant and has expressly approved of Cognizant as a third-party provider for 3M, thereby lulling 3M into a false sense of security,” the suit states.
Just the same, before the work commenced, 3M wrote to Infor to request a change to the license agreement allowing third-party access to 3M’s BPCS system. This was to facilitate “a third-party managed service approach to support certain internal systems at 3M going forward,” the claim states.
Initially, 3M’s Infor contact didn’t voice any objections to this, according to 3M’s complaint, and things seemed to be moving forward smoothly. Just after Cognizant began work on 3M’s systems in June 2010, Infor forwarded a “Software Use and Confidentiality Agreement” for Cognizant to sign. However, the IT services company never signed it because it felt it didn’t properly define Cognizant’s duties.
Infor started an audit of 3M’s software license use in January 2010, and in January 2011, 3M told Infor that it had “outsourced day-to-day operation and/or maintenance” of the software, to Cognizant. However, 3M maintains that it has never outsourced management of the software, the claim states.
In July 2011, Infor accused 3M of being out of compliance with the license. In a letter, the software company said 3M had “outsourced the day-to-day operation of the software by which Cognizant accesses the Software.” Infor offered to allow 3M to grant rights of access to the software to third parties for $20,923,596. Later, Infor lowered that number to between $17 million and $18 million.
In November 2011, 3M says it received a demand from Infor to pay $7.8 million in fees for “back usage” by 3M, a number that Infor said it would “discount” to just $5.9 million. However, Infor said that, if it was unable to resolve the matter amicably, Infor would have “no choice by [sic] to pursue all appropriate legal remedies in connection with 3M’s breach of the license agreement.”
3M accuses Infor of acting in bad faith. “Recently, Infor has attempted to extract from other licensees exorbitant and unjustifiable fees based on frivolous breach-of-contract claims.” Even though 3M didn’t believe that it violated the agreement, it elected to end its contract with Cognizant, the claim states.
3M is seeking a declaration from the court that Cognizant did not perform the “primary function” of “day-to-day management and support responsibility” for the system, and that 3M did not breach the license agreement. Even if it’s found in violation of the agreement, 3M maintains that Infor is not due any damages.
Infor has not yet filed its response against 3M’s initial claim. In a story in Computerworld, which broke the story, Infor spokesman Dan Barnhardt indicated an out-of-court resolution is quite possible. “We are currently working with 3M to bring this matter to a speedy and satisfactory resolution,” he says.