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The Moondust deal behind DXC Connect’s top-tier exodus

The Moondust deal behind DXC Connect’s top-tier exodus

How an alleged disagreement over a multimillion-dollar IT deal named "Moondust" may have led to a major leadership shake-up and legal case

The exodus of employees from DXC Technology’s Connect business that has led to a high-stakes court case was allegedly triggered by disagreements over a major project named Moondust, according to allegations made in documents submitted to the Supreme Court of NSW.

DXC Technology launched the legal action in early August against several members of its leadership ranks in Australia who, it is understood, may have been in a position to allegedly migrate, potentially en masse, to fellow systems integrator, Data#3.

The several defendants named in the case are largely from DXC Technology’s Connect business’s leadership and upper management ranks.

As reported by ARN in early September, the case proceedings saw former general manager of DXC technology’s Connect business, Rob McCabe, hit with legal action over alleged confidentiality breaches.

Among those at the receiving end of the case, which was brought by DXC Technology in the NSW Supreme Court, is former national solutions manager of the Connect business – formerly UXC Connect – Stephen Deibe, along with McCabe.

McCabe, like many other DXC Connect personnel, was with the business since before its acquisition by CSC in early 2016.

The organisation was then folded into the DXC Technology brand when CSC merged with Hewlett Packard Enterprise’s (HPE) Enterprise Services business in April, creating IT services powerhouse, DXC Technology.

A judgement handed down on 31 August by the NSW Supreme Court’s Justice Ashley Black, granted DXC Technology an interlocutory injunction restraining McCabe from disclosing or using DXC's “specified information” belonging to the integrator, and that an order be made in terms of the restraint clause in the employment contract between "those parties".

In October, the court also made a ruling associated with damages related to court costs, ordering that a "significant discount was necessary to the costs that should be ordered in favour of DXC" in respect of its application for interlocutory relief, calling for McCabe to pay 60 per cent of DXC's costs in that particular matter.

According to DXC's legal claim and associated affidavits presented to Justice Black, McCabe allegedly met with Data#3 CEO, Laurence Baynham, on or about 1 June 2017, and subsequently spoke to several other senior executives of DXC about the possibility of joining another business “similar to DXC”.

While McCabe’s legal team disputes many of the allegations made against the integrator’s former employee, who resigned in or around late June from the company, it appears to be fairly well established that a number of high-level departures from Connect did occur earlier this year.

Claims in a different affidavit, this one by McCabe, and laid out in court documents by his legal team, allege that the top-tier exodus at Connect was triggered by the fallout of a disagreement over a major contract with the Australian Government, dubbed the “Moondust Defence Deal”.

Specifically, it is understood that the alleged failure of a substantial incentive payout to the Connect team by parent company, DXC Technology, in relation to the Moondust project preceded the multiple departures that are understood to have occurred earlier this year.

According to the affidavit submitted to the court by McCabe's legal team, the Moondust Defence Deal -- which, it is understood, Connect played a major role in securing -- was allegedly recognised under a CSC Defence contract on the CSC financial system, and could not be billed on the DXC Connect financial system.

As such, a “normalisation” process was allegedly employed to work out the appropriate revenue and profit margin from the project with which to calculate the short-term incentive (STI) payments to Connect employees.

It is alleged in the court documents that DXC Technology’s leadership had previously agreed to a system that should have seen the Connect team receive a certain share of the profits for their part in securing the Moondust deal.

ARN understands that the Moondust Defence Deal was worth around $43 million over five years.

It is alleged by McCabe that, under the accrual process in the DXC Connect financial system and the failure to recognise so-called “normalised” results as previously agreed, the incentive pool for Connect staff was reduced by approximately $800,000 -- or about 33 per cent of what was expected under the incentive plan.

However, sources familiar with the matter suggest that McCabe's claim is untrue, and that the Connect employees who were involved in the deal received the incentive payments they were owed under the agreed-upon arrangements.

Regardless, it appears that the alleged Moondust discussions came at the tail end of a period of increased dissatisfaction among the Connect team.

Sources indicate that much of this discontent stemmed from structural changes that arose as a result of DXC Technology’s merger with HPE’s SE business, although this too is contested by other sources.

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Tags MoondustLaurence BaynhamData#3Seelan NayagamDXC Connectlegal courtRob McCabe

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