In addition to €180,000 already paid, software developer Tieto must come up with an additional €270,000 in damages for the failure of the SKAIS2 information system development. The company will also have to finish outstanding projects and service the software for a year, the social ministry, Tieto, and Icefire agreed on Friday.
“Execution of the SKAIS2 project has been complicated, and it is sensible to end cooperation in recent volume. Strenuous negotiations culminated in a result that allows us to do so,” said deputy secretary general of the ministry Ain Aaviksoo.
He added that development of the information system will be taken forward based on work done so far. “The social insurance board will pay out all social benefits and the new maintenance allowance based on the SKAIS2 system.”
The compromise will see Tieto pay the state a total of €450,000, €180,000 of which was paid in December and €270,000 will be paid upon the entry into force of the agreement.
This means the state has reduced its original claim by almost half a million euros. The ministry filed a claim of €936,212.94 against the company once work on the system had virtually ground to a halt and has reduced the sum on several occasions since then.
The compromise will see Tieto Estonia perform outstanding services worth €124,476 that will ensure payment of support and benefits.
“A rational compromise is the best solution for all SKAIS2 participants. The agreement, signed on Friday, will see Tieto continue to service and develop critical aspects of SKAIS2. The state can continue developing the system on new footing,” said CEO of Tieto Estonia Anneli Heinsoo.
The state has paid software developers a total of €5.22 million for the SKAIS2 system nearly €933,000 of which has come from European structure funds. The ministry will keep the information system, software, copyright and licenses.
Estonia’s most extensive IT development project has called for major expenses by Tieto that reported a loss of €50,000 last year.
CEO Anneli Heinsoo said in August that the company had 45 people working on the project on average and was forced to hire another 25 people in spring of last year. Tieto hired a total of more than 80 people last year that hiked the company’s salary expenses by 64 percent to €5.6 million. Even though Tieto’s turnover grew by more than 30 percent to reach €11.7 million, spiking labor costs resulted in the company’s first loss in years.
Heinsoo emphasized that the developer tried to offer the best service. “For us, this means realistic forecasts and taking responsibility for what we do. We did all that – hired more specialists, worked very long hours in the conditions of short deadlines and a changeable environment – to ensure the best possible result,” the CEO said.
Tieto started the SKAIS2 development in July of 2014. The system, that was to serve as the foundation for Estonia’s capacity for work reform, was meant to be completed by January of this year; the deadline was extended until July of 2018.