Pattern: Unplanned Obsolescence

[Adapted from Patterns in IT Litigation: Systems Failure (1976-2000)]

Summary: The client buys a system from the vendor. Some time later, the client discovers that the system either no longer meet its needs or that the vendor/manufacturer will no longer support it.

Causes: Unplanned obsolescence cases are not the result of a natural flow of upgrades and replacements in IT systems. These cases stem either from a sudden abandonment of a product version or line by the manufacturer/vendor or from some built-in flaw and previously unknown (at least to the client) flaw, such as the Year 2000 issue. The former usually stems from financial issues, with the vendor/manufacturer abandoning an unprofitable line; the latter from software engineering flaws.

Recommendations: Most vendors and manufacturers give sufficient advance notice of such phase-outs, with a migration path for current users and sometimes a support plan (usually expensive) for those clients who wish for whatever reason to continue to use the old version. However, market and other considerations can sometimes constrain such notification.[1] Still, any vendor or manufacturer planning an abrupt retirement of a product or product line had best provide a migration path for customers or be prepared to face exactly these type of lawsuits.

Clients should have contingency plans for migrating off IT technologies they use but do not control. The level of detail should correspond to the size and stability of the company in question, the proprietary nature of the system technology, and its market share. Clients will worry less about products from internationally prominent manufacturers of mainframes, servers, workstations, PCs, and corresponding software. However, the smaller the firm and the more custom or proprietary the software, the greater the risk.

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[1] For example, avoiding the “Osborne effect”, so named for Osborne Computer Company (“OCC”), an early 1980s manufacturer of portable computers. OCC–with just one model on the market–put itself out of business largely by announcing a new and significantly improved model before that new model was ready to ship. OCC’s cash flow dropped to almost zero as customers stopped buying the existing OCC model in anticipation of the new one, and the company-already under great financial pressure-went bankrupt before it could get the new model out.