Outsourcing Is The Source Of Another Lawsuit

It's not L.A. Law, but it could be a gripping courtroom drama for software buyers. Electronic Data Systems, General Motors' computer-services unit, has sued mainframe-software giant Computer Associates International, alleging that CA has refused to maintain software on EDS computers, even while it demands payment for such services. CA says EDS is "covering up" its own wrongdoing and hints at a countersuit.

The clash evidently stems from the fast-growing businessof outsourcing, in which EDS, among others, takes over a company's data processing, often by transferring it to an EDS computer. Observers note that by consolidating data processing on fewer mainframes, outsourcing could limit CA's market. CA has been fighting back by enforcing the fine print in its licensing contracts, which specify that software is for use only on a particular machine at a particular location. But if EDS fights CA on that issue, it could cite a promising precedent: Last year, an Oregon circuit court granted an injunction against CA after it stopped servicing CA packages at Emery Worldwide, which had moved its computer center cross-country to Oregon.

    Before it's here, it's on the Bloomberg Terminal. LEARN MORE