How Much Too Long Did Lands’ End Wait For Its Payroll Upgrade? Maybe A Million Dollars Too Long
Written by Frank HayesLands’ End has landed in a nasty fight over software licensing. On January 17, the Sears mail-order and online subsidiary sued the supplier of its HR and payroll software, Genesys Software Systems, which wants Lands’ End to either pay for a new million-dollar license or pull the plug on the software immediately.
The lawsuit has the tactical advantage of freezing the situation, giving Lands’ End a little more time (very little more time) to find a new home for its payroll system. But it’s also an object lesson in software end-of-life issues—that lesson being, “when a vendor has you over a barrel, it doesn’t have to play nice.”
Lands’ End’s complaint—technically, a request for the court to declare that the license doesn’t expire until October 2013—was filed after months of negotiations broke down this month. Lands’ End has been bargaining since last August for a short-term license extension while the retailer moved to different HR software.
According to the complaint, Genesys Director of Finance Colin Macdonald sent a January 9 E-mail message to Lands’ End IT Director Andree Fredrick that read: “Thanks for your time today. As a point of clarification, I was in error when I mentioned the 20-year license. We no longer offer term licenses, but our perpetual license is currently priced at $999,950.00. I have escalated this to David Fiacco, our COO, and would ask that you reach out directly to him to schedule a call. As you are aware, your license expires on January 19th, 2013. We will be sending a representative to Land’s End on the 19th to certify the de-installation of the software.”
Lands’ End argues that, although it signed the 20-year license in January 1993, the retailer paid for “a non-exclusive and non-transferable right to use the software described in the Agreement for a term of twenty years,” in the words of the license. But the retailer says it wasn’t able to actually use the software until Genesys finished installing and configuring it on a Lands’ End mainframe (originally MVS/ESA using a VSAM database—why would Lands’ End want to move off that?) the following October.
Thus, Lands’ End says, it should get the full 20 years of use it paid for, and the license should terminate in October 2013.
That argument is a stretch, said StorefrontBacktalk Legal Columnist Mark Rasch. “On the facts, I think Lands’ End loses,” Rasch said. “The license term starts on the day you sign the contract. They have the right to use it for 20 years from that date. Just because they can’t use it doesn’t affect their right to use it.”
Ultimately, that will be for a U.S. District Judge in Wisconsin to decide. But it’s already clear that Lands’ End waited too long to start moving off the old HR system—and then put too much trust in a vendor who clearly wasn’t going to keep the retailer as a customer. When a vendor’s executives break off negotiations and say, “Gimme a million dollars,” they’re not being polite—but they must figure they have nothing to lose.
-Marc
January 24th, 2013 at 12:49 pm
RE: …but they must figure they have nothing to lose.
I’m definitely not a fan of strong arm tactics like this. I also can’t believe anyone would sign a term license like this for a mission critical system. That being said, Genesys does have something to lose. If I were Lands’ End, I would make sure we never did business with Genesys again. And if I were an employee of Lands’ End and I moved on to another company, I would strongly advise my new employer to not use Genesys either. Press like this would also be considered a loss in my books so they do have something to lose.
I guess if Genesys is planning on closing it doors and is just trying to milk any existing customers for what they are worth, then maybe there is not a downside. And for Lands’ End, this would be another reason not to pay the new licensing fees.
January 31st, 2013 at 2:53 pm
Software vendors are notorious for these types of tactics. What is uncommon is that these tactics are made available in the public forum, such as through a lawsuit.
Genesys was acquired by PeopleStrategy out of Atlanta a few years ago. (not the same Genesys that produces workforce management software for contact centers) – PeopleStrategy appears to be a going concern, so Land’s End will certainly have to pony up here.
Also, term licenses were very common (typical) in the software world back then are are still somewhat common – perpetual licenses are certainly the more common practice now. Keep in mind, they signed a 20 year agreement and had plenty of time to make a switch – someone was obviously asleep at the wheel at Land’s End and probably should be fired because of this gaffe. Complete mismanagement.