ScanSource Sues Avanade, Alleging Fraud, More

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Distributor ScanSource Inc. is suing a software company for a project it says has run two years over schedule and $49 million over budget.

In 2009, ScanSource contracted with Avanade Inc., a joint venture between Accenture and Microsoft, to install Microsoft Dynamics AX. The initial estimate amounted to 11 months and $17 million. Three years later, the enterprise resource planning system for ScanSource's internal operations still is not live and costs have increased to almost $66 million, ScanSource said this week.

In its lawsuit, ScanSource alleges that Avanade engaged in fraud and breach of contract. It also said Avanade knew it could not handle the Microsoft Dynamics AX implementation and misrepresented its abilities and employees' expertise to land the deal. As a result, ScanSource said, the project has remained incomplete, required extensive remedial work and will run far over budget to finish. The North Carolina-based communications equipment distributor is seeking tens of millions of dollars in damages. ScanSource has contracted with a new vendor to complete its Microsoft Dynamics AX implementation.

An Avanade spokesman said the company does not comment on pending litigation. However, he said, "we can tell you that we believe the allegations are without merit. We intend to defend our position."

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