Bank of America: When software relationships turn sour

Tibco has filed a lawsuit with the California North District Court alleging the Merrill Lynch division of Bank of America illegally used $300m of its software for a major IT project.

The case highlights a catastrophic breakdown in supplier relationships, which could lead to Bank of America being exposed to a potential risk of no longer being able to run software that uses Tibco.

It also shows what can happen when software subscriptions run out. How does the supplier know that the software is no longer deployed?

Tibco’s platforms are heavily used in investment banking. For instance, Société Générale is using Tibco for centralised data gathering across applications, while BNP Paribas Securities Services is using Tibco’s Spotfire software for decision support.

Given the company’s focus on middleware and business process management, Tibco is often embedded into core business processes, which raises the question of why the relationship with Bank of America has deteriorated.

"Too often software publishers put landmines in their terms and conditions that customers can walk into," said Mark Flynn, managing director of the Campaign for Clear Licensing (CCL). "Bank of America would not knowingly have put itself at risk. It’s a big customer and would not have deliberately used unlicensed software."

In the lawsuit, Tibco claimed that although the bank purchased its software, it carried on using it at Merrill Lynch after the licence expired in February 2013.

Tibco is seeking an injunction to prevent the bank from use its software and has asked for compensation. It has also asked the court to impound the unauthorised software.

In a blog post on the Seeking Alpha website, Don Dion, chief investment officer of DRD Investments, wrote: "Although the licence allowed for extended use, it also had specific restrictions in place that limited how the bank could use its software."

Such a decision could have a serious impact on the bank's ongoing Tibco-based software projects and could potentially cost millions to redevelop, during which time Bank of America will be unable to run the systems it developed on Tibco.

"This is a relationship that has gone bad. It is very rare to get this kind of escalation," said Neil Ward-Dutton, research director at MWD Advisors. "Part of the way to maintain revenue is by enforcing audits, but normally if the [customer] has been using software outside the agreement, you negotiate and come to a compromise."

This is a relationship that has gone bad. It is very rare to get this kind of escalation

Neil Ward-Dutton, research director, MWD Advisor

Commenting on the challenges Bank of America could face if the Tibco software it uses is “impounded”, he said: "If Bank of America has fairly well-defined projects, then migrating modern middleware should not require much recoding, since the applications would use standard coding. But there is always some vendor proprietary tools, which may need workarounds."

However, he added: "Normally, when an organisation makes a strategic decision to move away from a middleware platform such as Tibco, it would run the old and new systems in parallel by creating a shadow implementation. But impounding the software means Bank of America will not be able to do this, so the middleware migration could be far riskier."