ScanSource settles dispute with former channel partner

More than a year and a half after POS distributor ScanSource Inc. sued former channel partner Avanade Inc., the latter has agreed to pay $15 million in damages in a settlement that was not immediately announced.

ScanSource confirmed the settlement to CDN, which was outlined in its 10-K report filed with the U.S. Securities and Exchange Commission (SEC) in late August.

A small paragraph in ScanSource’s annual report outlined the arrangement, reached last June, which also saw Avanade reverse “$2 million in accrued liabilities for unpaid invoices” and the company pay “a contingency fee of $1.5 million to the law firm who represented [ScanSource].”

The net legal recovery for ScanSource sits at just below $15.5 million, according to the report.

South Carolina-based ScanSource, which has offices in Mississauga, Ont. first took its ERP implementation partner to court back in January 2013 over what it described a “bait-and-switch” tactic.

Avanade, a joint venture between consulting company Accenture and Microsoft was alleged at the time to have known it was not able to perform Microsoft AX implementation for ScanSource, and misrepresented its skills to land the contract.  ScanSource claimed that the result was incomplete and defective, despite seeing Avanade’s estimate of the installation rise from $17 million to nearly $66 million, and from 11 months to three years.

Under the settlement, both parties agreed to “mutually dismiss all claims and counterclaims against the other,” according to ScanSource’s report.

According to the author of the web site Exposing Evil Empire and a former Accenture employee who asked for anonymity, the total cost to ScanSource of trying to implement Microsoft Dynamics AX ERP with Avanade and Accenture was approximately $50.5 million after the settlement.

“[ScanSource] has taken a large blow from this failed project,” he said. Aside from the cost of the failed project, the source claims ScanSource’s work on revamping its aging IT infrastructure to keep up with expansion has been delayed by at least three years.

“When organizations have large problems like this motivation and employee engagement goes down,” he said. “They have to spend time solving frustrating problems instead of innovating their business.”

Representatives of Avanade Inc. declined to comment.

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Dave Yin
Dave Yin
Digital Staff Writer at Computer Dealer News, covering Canada's IT channel.

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