Southwark Council has lost its court battle against IBM after making claims the firm installed a system "unfit for purpose" at its offices.
The Council installed the Master Data Management system from Big Blue in late 2006 but claimed it had a number of flaws, from reporting through to message integration.
It ditched the system midway through 2007, claiming the system was not what it had signed up for and launched a court case in late 2009 to try and squeeze 2.5 million out of IBM for breach of contract.
However, Mr Justice Akenhead, who presided over the case, ruled there was no proof of these claims and the Council knew the capabilities of the software purchase when they made it.
A spokesperson for Southwark said the council was unhappy with the ruling but was not going to launch an appeal, which was estimated to have cost 700,000.
"This case refers to the acquisition of software back in 2006 which, in our view, was not fit for purpose," the spokesperson told The Guardian.
"We're disappointed with the judgement but we took this action because we believed we had been missold a product. Our duty is to have IT systems that work and that save the council and the council taxpayer money."
IBM said it was "pleased" with the judgement.
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