Hospital Chain Sues Lawson Software Over Retiring ERP Apps

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A Kansas-based nonprofit hospital chain has filed a breach-of-contract lawsuit against Lawson Software, saying its agreement with the ERP (enterprise resource planning) vendor requires Lawson to provide -- for just a small fee -- replacements for two software modules that will be decommissioned next year.

Sisters of Charity of Leavenworth Health System licensed "a broad range" of business applications from Lawson in 2001, paying an initial price of US$1.4 million, as well as ongoing maintenance fees, according to the complaint filed last month in U.S. District Court for the District of Kansas.

Lawson has told SCLHS that as of May 2010, it will no longer support a pair of applications in the suite, the document states. One application is used to track employee vacation time and sick leave, while the other is for managing medical supply inventory, according to the filing.

Both applications are "critical" to SCLHS' operations, the filing states.

A clause in SCHLS' original agreement with Lawson says that during the product suite's support period, SCHLS could exchange applications for other Lawson products with similar features and functions "as reasonably determined by Lawson" and pay only a nominal fee, according to the filing.

Lawson has two newer applications that are similar to the older ones but also have other functions, according to the filing.

"Accordingly, rather than comply [with the clause], Lawson insists that SCHLS must pay an additional license fee of $155,450 in license fees plus new annual maintenance fees to license its 'new' applications that are 'most like' [the ones being discontinued]," the filing states.

Patrick Kuehl Jr., an attorney for SCHLS, declined to comment at length in an interview Friday, saying the organization is awaiting Lawson's official response to the complaint.

"We have our view of what that [clause] means and they've taken a different position," he said. "All I can really tell you right now is it's a contract interpretation issue."

A Lawson spokesman could not immediately provide comment. The company is due to file a response to SCHLS' complaint on or before Feb. 24, according to another filing.

Lawson undoubtedly has its own perspective on the dispute, but overall the suit underscores the importance of adding "functionality replacement" clauses like the one at issue to software contracts, said Forrester Research analyst Ray Wang.

Forrester commonly uses the technique when at the bargaining table for clients, although customers usually are required to stay up to date on the vendor's platform releases, he said.

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