Revlon: shut down by a billing dispute with a vendor

In February 1989 the cosmetics manufacturer Revlon purchased a customized information system for real-time processing of customer orders and matching inventory to orders. The vendor was Logisticon, a software firm with 16 years of experience building such systems. The $1.2 million system was to be delivered in two phases, starting in January 1990. Bugs and delays led to a dispute between Revlon and Logisticon. Revlon claimed that bugs prevented them from generating accurate inventory receipts. Logisticon said that software-related bugs had been fixed and that the remaining problems involved Revlon's computer hardware.

On October 9, 1990, Revlon sent a letter to Logisticon stating that it was withholding a $180,000 payment for the first phase and canceling the second phase. Logisticon responded on October 16 by "repossessing" the software by disabling it using a telephone dial-in system. Workers at two Revlon distribution centers stayed home for 3 days because the distribution centers needed this software to operate. After 3 days Logisticon reactivated the software pending further discussions. Revlon sued Logisticon for extortion, stating that disabling the software prevented shipping orders worth $20 million. Three months later, the lawsuit was settled out of court. Revlon and Logisticon refused to comment on the settlement.

Questions:

1. Use the WCA framework to organize your understanding of this case and to identify important topics that are not mentioned.

2. Explain how this case is related to the choice among different system life cycle approaches.

Sources: Davis, Fred. "Could the Repo Man Grab Your Invaluable Software? PC Week, Nov. 12, 1990, p. 266;
"Revlon Settles Contract Suit Against Logisticon, Inc." Wall Street Journal, Jan. 8, 1991.

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