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Channel struggles to deal with legal threat

Channel struggles to deal with legal threat

Despite massive investments of time, money and training resources, the channel is still battling to avoid the negative practical and legal ramifications likely to result from the Y2K issue.

And finding support to meet that goal is no simple task.

"It's not easy as a reseller to get help," David Ford, managing director of Manning Computers & Technology, said last week.

"People have said that if anyone wanted to sue me for not meeting Y2K compliance, I wouldn't have a leg to stand on and that's the scary thing.

"I'm supposed to be giving my customers the right information but there is nobody out there saying what you should do or where you should go for the resources you need."

As a leading reseller in the north-eastern region of NSW, Ford claims to have spent a "considerable amount" just getting the legal advice required to provide adequate contracts to his customers and suppliers.

Further investments of time and money have also been made to ensure internal Y2K compliance and to develop and implement business processes minimising the risks for customers and Manning Computers itself.

"We've solicited help from government sites, but they didn't have the information required so we've had to spend a lot of man hours finding resources and tailoring them," Ford said. "But to put that all together is a hard thing to do."

One of the key processes Manning Computers has adopted is that staff must have all Y2K guarantees to customers approved by management beforehand. Those approvals will only be forthcoming if they can be backed up by the written literature of a supplier.

Similar staff practices have also been embraced by major local integrators like Senteq Information Systems and ComTech and, just as importantly, the message is getting through to the grass roots of the channel as well.

Jim Willis, director of Canberra-based reseller Approved Systems, said it is now embedded in his company's quality control procedures to check all quotes for possible Y2K concerns including "any statements that over-enthusiastic sales reps might have made".

But the crucial program Approved Systems - like most resellers and integrators - has established is a stated refusal to pass on any guarantees of compliance for onsold products except those provided by suppliers.

However, there are other legal aspects for value-added resellers and system integrators to worry about, according to Tim Hughes, technology lawyer at Gilbert & Tobin.

While emphasising the legal complexity of the issue, Hughes told ARN there are three components of Y2K performance for which the channel may be liable: the hardware or software being resold; the value-add or customisation by the reseller; and the integration of those two elements in the customer's existing operating environment.

Hughes advises his clients to address each element independently in their Y2K compliance documentation for customers, rather than providing one all-encompassing statement.

He also recommends that clients' contracts exempt them from being held liable for their customers' "consequential losses" from the Y2K problem - such as loss of profits or loss of data.

However, because Australian law does not recognise consequential losses, the exemptions need to be specified.

But the channel is still at risk of being held liable for "direct damages", which may include lost production if a system brings down a network and may also cover issues such as damage to tangible property - for example, the cost of setting up a temporary replacement network.

Section 52 of the Trade Practices Act (TPA) also presents a potential legal landmine for the channel. It states that "a corporation shall not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead".

Although untested in relation to the Y2K issue, it cannot be excluded by contract.

According to Hughes, the only thing that VARs and systems integrators can do is to minimise the ability of the customer to claim reliance on any representations made.

He warns that issuing a disclaimer is not an absolute defence for the TPA clause.

Consistent statement

So the key is to ensure that throughout the entire sales process, a consistent statement of Y2K compliance is maintained.

ComTech has utilised its strength in education to train staff to deliver that consistency to customers, but it's a long process, according to Andrew Coulsen, the group's chief financial officer.

"One of the things we've had to do across the whole business is to make sure our staff understand what ComTech can and can't do [in relation to guaranteeing Y2K compliance] and that's been an education process," he said. "It's not a hard message, but we've had to work on developing a fairly comprehensive set of rules across the business and there's no question that's been a significant investment for us.

"But if it only makes one customer happier with ComTech and our service, it's been worthwhile."

And that seems to be the attitude of the channel in general - the measures employed to address the Y2K issue may simply reduce the backlash from customers, rather than avoid it.

"At the end of the day, all of us in the supply chain have to work to minimise the problems for customers," Greg Austin, Senteq's marketing director, said.


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