Titans square off

In the past few months, a great number of Government Service Insurance System (GSIS) members had to wait a long time to avail of loans with which to pay their children’s tuition fees and other obligations. With the GSIS computer software having crashed, it was impossible to process their applications quickly, and information technology specialists were at their wits’ end figuring out how they could download applicants’ names and records. The system had crashed several times earlier, resulting in the state pension fund stakeholders’ — including lowly employees, teachers and street sweepers — worrying if their retirement funds would be lost forever; in GSIS’s filing a civil case for tort and breach of contract against New York-based International Business Machines (IBM) Corporation,   manufacturer of IBM products, IBM Phils., distributor of IT products and services, including computer software owned by IBM Corporation, and Questronix Corporation, an IBM business partner and authorized distributor of IBM products in the Philippines — and in turn, IBM Phils’ filing a libel case against GSIS.

It’s a legal battle now between GSIS which has 1.5 million members, and IBM, a giant multinational business corporation.

For a fair presentation of facts about this case, this columnist secured copies of the complaints filed by GSIS and IBM Phils.

The story begins with the plaintiff (GSIS) deciding in 2006 to implement several projects to enhance its IT (Information Technology) system. Among these projects is the ILMAAAMS (Integrated Loans, Membership, Acquired Assets and Accounts Management System) intended to provide an end-to-end software package solution that will handle all information and processing requirements of membership, loans origination and administration, acquired assets and accounts management. This project, with a total contract price of P80 million, was awarded to Questronix Corporation as main contractor and lead integrator, in joint venture with Team Synergia, Inc. and Tera System Inc. The contract was signed on Sept. 22, 2006.

In its complaint filed with the Pasay City Regional Trial Court, plaintiff GSIS said Questronix and its partners used a computer software system referred to as “SAP/DB2”. “SAP” refers to a computer application software owned by SAP Corporation of Germany. “DB2,” on the other hand, refers to a database management system software (specifically the software’s version known as DB2 ver. 8.1) owned by defendant IBM Corporation. Both the SAP and DB2 software products were duly licensed for the use of GSIS.

On March 30, 2009, plaintiff’s ILMAAAMS system grinded to a halt because of the unexpected crash of the GSIS database being “managed” by IBM’s DB2 software. About 90 percent of the GSIS’s operations were adversely affected. Thousands of loans and claims of GSIS members could not be processed, membership records could not be updated, transactions could not be recorded, and a sizable data in the GSIS database were either corrupted or lost.

When the database crashed again on April 2, 2009, Questronix was immediately informed of the crisis. SAP was likewise informed of the database crash, which, in turn, alerted the IBM information technology (IT) experts. According to GSIS, weeks passed but no one was able to explain the cause of the crash, much less provide a solution.

In the meantime, GSIS attempted to restore its systems several times, but the database kept on crashing. Up to this writing, I believe defendants have not been able to provide a permanent solution to the problem.    

GSIS sent a demand letter to IBM Phils. and Questronix as well as to SAP Philippines, Team Synergia, Inc. and Tera System Inc., threatening legal action if GSIS’s database crashes remained unsolved within three days from receipt of the demand.

To make a long story short, in its report, Questronix cited information provided by SAP/IBM Laboratory team and DB2 experts from IBM Solutions Delivery (a domestic corporation about 30 percent owned by IBM Philippines), pointing to the DB2 database management system of defendant IBM as the cause of the crash. Questronix said that as a final solution to the problem, IBM Laboratory Toronto, Canada would provide a “special build,” or fix, for plaintiff GSIS. Essentially, this meant that the DB2 software would be modified to avoid another database crash in the future.

As stated in plaintiff GSIS’s complaint, IBM did not reveal the design flaw in its software. As such, defendants should be made liable to plaintiff for the damages caused by the malfunction or defect in their software. GSIS claimed that as a result of the crash, it lost up to P5 billion, but it only asked for P100 million in damages, to include litigation expenses and attorney’s fees.

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Poblador Bautista & Reyes, counsel for IBM Phils. filed a complaint against GSIS with the Quezon City Regional Trial Court, admitting that IBM Phils. is the marketing and distribution arm of IBM Corporation’s products in the Philippines, and that since 1937, the company “has built a solid reputation as a distributor of high-quality hardware and software products, and a provider of excellent services to its customers.”

It said that it is IBM Phils’ “understanding that GSIS acquired its ILMAAAMS from a joint venture composed of Questronix Corporation, Team Synergia, Inc. and Tera Systems, Inc.” But, it stressed, “IBM Phils. was not a party to the joint venture and was not involved in the design, supply, installation and maintenance of the ILMAAAMS.”

But GSIS would not settle for what appears to be IBM Phils.’ washing its hands of the problem.

It then issued a press statement and an open letter to its members and pensioners which were published and picked up by newspaper columnists, publicly accusing IBM as the party at fault in the ILMAAAMS’ crash.

The Poblador firm’s complaint cited libel as the first cause of action, saying that the statements publicly made by GSIS “constituted public and malicious imputation of a vice or defect, real or imaginary, or an act or omission tending to cause the dishonor, discredit, or contempt of IBM Phils.” The suit called for compensation of P150 million for moral damages, P50-million for exemplary damages, and P5 million for attorney’s fees.

As of this writing, GSIS’s data software goes on and off, and still neither IBM Phil. nor Questronix have admitted responsibility for the GSIS’s computer problems.

The courts will have the final say on who is responsible for the fiasco, who should pay for or replace the defective systems, and whether GSIS, the aggrieved party, should be penalized for printing and causing to print, scurrilous statements against IBM Phils.

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