How Much Too Long Did Lands' End Wait For Its Payroll Upgrade? Maybe A Million Dollars Too Long

Lands' End has landed in a nasty fight over software licensing. On January 17, the Sears mail-order and online subsidiary sued the supplier of its HR and payroll software, Genesys Software Systems, which wants Lands' End to either pay for a new million-dollar license or pull the plug on the software immediately.

The lawsuit has the tactical advantage of freezing the situation, giving Lands' End a little more time (very little more time) to find a new home for its payroll system. But it's also an object lesson in software end-of-life issues—that lesson being, "when a vendor has you over a barrel, it doesn't have to play nice."

Lands' End's complaint—technically, a request for the court to declare that the license doesn't expire until October 2013—was filed after months of negotiations broke down this month. Lands' End has been bargaining since last August for a short-term license extension while the retailer moved to different HR software.

According to the complaint, Genesys Director of Finance Colin Macdonald sent a January 9 E-mail message to Lands' End IT Director Andree Fredrick that read: "Thanks for your time today. As a point of clarification, I was in error when I mentioned the 20-year license. We no longer offer term licenses, but our perpetual license is currently priced at $999,950.00. I have escalated this to David Fiacco, our COO, and would ask that you reach out directly to him to schedule a call. As you are aware, your license expires on January 19th, 2013. We will be sending a representative to Land's End on the 19th to certify the de-installation of the software."

Lands' End argues that, although it signed the 20-year license in January 1993, the retailer paid for "a non-exclusive and non-transferable right to use the software described in the Agreement for a term of twenty years," in the words of the license. But the retailer says it wasn't able to actually use the software until Genesys finished installing and configuring it on a Lands' End mainframe (originally MVS/ESA using a VSAM database—why would Lands' End want to move off that?) the following October.

Thus, Lands' End says, it should get the full 20 years of use it paid for, and the license should terminate in October 2013.

That argument is a stretch, said StorefrontBacktalk Legal Columnist Mark Rasch. "On the facts, I think Lands' End loses," Rasch said. "The license term starts on the day you sign the contract. They have the right to use it for 20 years from that date. Just because they can't use it doesn't affect their right to use it."

Ultimately, that will be for a U.S. District Judge in Wisconsin to decide. But it's already clear that Lands' End waited too long to start moving off the old HR system—and then put too much trust in a vendor who clearly wasn't going to keep the retailer as a customer. When a vendor's executives break off negotiations and say, "Gimme a million dollars," they're not being polite—but they must figure they have nothing to lose.