Top consultant says litigation is on the rise in IT

Author and consultant Tom DeMarco laments the loss of innovation and the trend toward legal action in the technology industry. Columnist Rick Freedman talked with DeMarco to find out what these developments mean for today's consultants.

Tom DeMarco’s work has had a genuine impact on my philosophy of IT consulting. Early in my career, one of my mentors introduced me to DeMarco’s book, PeopleWare: Productive Projects and Teams (Dorset House, 1999), and its effect on me was instantaneous and dramatic. In it, DeMarco asserts that human skills and interactions, more than technical skills or techniques, influence the success of IT projects.

DeMarco, a faculty member of Cutter Consortium, is also a principal of the Atlantic Systems Guild, a computer-systems think tank with offices in the United States and Great Britain. One of his best-known works is The Deadline: A Novel About Project Management (Dorset House, 1997). This Faustian account of a project manager who literally bets his life on a project delivery date uses a compelling story to teach some important lessons about IT project management.

I recently spoke with DeMarco about his current endeavors and the trend toward litigation in the IT field.
In the next installment of my conversation with Tom DeMarco, he’ll help consultants understand how to stay out of litigation, we’ll talk about his work consulting with IT companies worldwide, and we’ll look into the future of IT in the next century. Look for the next installment in the weeks to come.
Freedman: So what are you working on these days?
DeMarco: I’ve got a new book coming out called Slack. It’s about the loss of slack in the workday. It explores what it means to have a workday where you’re just chasing yourself all day every day. What does it cost the company to keep you running that fast?

Freedman: Without a moment to reflect…
DeMarco: Yes. What’s the cost of not having time to reflect? What’s the cost of laying off 20 percent of the workforce in the early 1990s and laying all their work on the shoulders of the remaining 80 percent? It’s left many great companies without a clue how to reinvent themselves. Look at IBM—they bought Lotus Notes and basically became “The Lotus Company.” That part of the company has some vitality, but the rest of it just can’t reinvent itself.

Freedman: What about all the innovation that’s coming out of the Internet revolution, where folks are working 16-hour days and still inventing new industries?
DeMarco: All the innovation comes from start-ups. The innovation coming out of established companies is pretty slim. Name me some established companies that went through this loss of slack and are coming up with innovations. You could mention Nokia—a paper company that decided it didn’t want to be a paper company anymore and got together and decided to become a telecommunications company.

Most of the innovation comes from people who’ve made their own slack: They’re out of work or break out of an existing company and say, “Let’s go start a new company,” and they’re not driven by anybody or anything [but that].

Freedman: Are you still doing any consulting?
DeMarco: I do a great deal of consulting, for some reason mostly in Europe….Much of the consulting I do is focused on litigation. Litigation is the fastest growing segment of the IT economy.

The litigation trend
Freedman: I saw your comments on litigation in IT, and you noted that litigation is approaching 10 to 15 percent of overall IT budgets. I found that surprising.
DeMarco: That’s a component that you don’t see. We had to scrape to get those numbers, because legal costs don’t come out of the IT budget. It’s a greater cost than that of actually constructing software. I work with companies, large systems integrators, and it’s not uncommon for them to have 50 to 100 litigations going on at one time.

Freedman: You can see why outsourcers and other external IT providers could get into litigious situations. I’ve seen many IT services companies make extravagant claims and promises during the sales cycle that they are then very hard-pressed to deliver.
DeMarco: That’s true, but I think it’s also true in any kind of business. I don’t really see that there’s anything intrinsic to software that explains all the litigation. My theory is this: People are taking these courses…that teach a philosophy of negotiation that says, “You’re not done until the other guy is screwed. The only acceptable outcome is ‘you win, he loses.’” If you’re following that philosophy, you’re trying to get the other guy to sign something he doesn’t want to sign, to put him in a position where he has to take a bath on the contract. It’s not surprising that a lot of these companies end up in litigation.

Freedman: It’s the farthest thing from a win-win situation.
DeMarco: It becomes very adversarial. IT services companies are desperate to grow, and growing has always been equated with growing the top line, the revenue, not the bottom line of profit. Salesmen come in, underbid the project, collect their commissions, and move on. That’s the second cause of litigation. And people use litigation as a way of deferring the act of working out conflicts. They say, “We’ll take 'em to court,” knowing that it’ll be four, five years before they get to court, and by then they say, “The court didn’t agree with us, they agreed with them,” and they never had to work through their issues.

Freedman: It’s a way of avoiding personal responsibility for working through and resolving conflicts.
DeMarco: Exactly. In the software-development field, I’d like to see someone do a study asking the questions, “What additional costs did the client incur because they tried to take a project that should have been bid for two years and was bid at one year? How much extra cost did the client incur that they might not have if they had set a realistic schedule? When we work on litigations with clients and start to ask these kinds of questions, a lot of people are unhappy…but eventually they understand that starting a two-year project off with a one-year schedule is a cause of the litigation we have at hand.

Rick Freedman is the founder of Consulting Strategies Inc., a training firm that advises and mentors IT professional services firms in fundamental IT project management and consulting skills. He is author of The IT Consultant: A Commonsense Framework for Managing the Client Relationship, and two upcoming works: The e-Consultant and Building the IT Consulting Practice, both scheduled for publication in 2001.

As a supplement to his “Consultant Master Class” column, Freedman periodically interviews a leading executive, practice manager, or consultant from the top IT professional service firms. If you have a question for Rick, e-mail us.


Rick Freedman is the author of three books on IT consulting, including "The IT Consultant." Rick is an independent consultant and trainer, working, through his company Consulting Strategies Inc., to help agile teams and organizations understand agile...

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