JBA hit by $18m claim
Software Clothes manufacturer files complaint about 'unreliable' System 21 ERP package.
JBA Holdings, the software manufacturer and IBM AS/400 reseller, isstem 21 ERP package. being sued by a US customer for more than $18 million, after it had to scrap a system it bought from the UK firm, claiming it arrived too late and was unreliable.
Hartmarx, a Chicago clothes manufacturer, disclosed last week that it has started legal action against JBA International and its holding company, claiming compensation for damages plus costs related to the development of the project.
The clothes manufacturer claimed that the implementation of the System 21 ERP package it purchased from JBA had to be terminated, forcing it to incur a non-cash, after-tax charge of $6.9 million, to reflect a writedown of capitalised development costs of the project. The charge led to a net loss of $5.8 million in the second quarter ended 31 May.
Elbert Hand, chief executive of Hartmax, said: 'The company intends to pursue all legal avenues to ensure the recovery of its development project expenditures and to seek compensation for damages.'
The complaint, filed against JBA in the Illinois State Court, maintained that the software was found to be 'significantly unreliable, resulting in severe operational difficulties'. Also JBA 'did not deliver contracted-for enhancements on a timely basis'.
In a statement, JBA said it was 'surprised by the action taken by Hartmarx, as it has been working in close collaboration with Hartmarx and its advisor'.
But JBA vowed to 'vigorously and strenuously defend the legal claim' and deny any liability as alleged by Hartmarx.
'JBA is seeking appropriate legal advice in anticipation of filing a defence and counter claim and will issue a further statement regarding this matter in due course,' the statement added.
In a separate move, JBA will restructure its organisation into four units - product, marketing, finance, as well as geographics operating units.
The company will now concentrate on selling its systems into the clothes and footwear; food and drink; car components; and electronics sectors.
Ken Briddon, chief executive of JBA, said: 'These four sectors account for 60 per cent of the business at present, we expect to raise that to 80 per cent over the next three years. To achieve that goal we need to refocus our business back on these key sectors and restructure the organisation to fit that new focus.'
The restructure will mean a reduction in headcount of eight per cent, with a one-off cost implementation of £800,000. This will be achieved by canning non-relevant projects and merging sales and marketing into smaller teams.
The company claimed that the restructure will save it £5 million per year.