Europe's Largest Local Authority Settles On ERP Budget 5x Original Estimate

Europe's largest local authority has settled on a £108 million ($137 million) bill for its disastrous replacement of SAP with Oracle until 2026, five times the sum initially predicted and five years late.

Birmingham City Council has been struggling to implement an Oracle Fusion HR and finance system, in a project that has left the council unable to file auditable accounts or detect fraud. The project was "the poorest ERP deployment" government commissioners have seen.

In a written response to a councilor's question, the local authority said the total spend on the Oracle implementation from 2018 to 2023-24 was £63.4 million ($80 million). Due to catastrophic failures as the system went live in April 2022, the council has been struggling to make the current system – which includes a series of customizations – "safe and compliant" and plans to reimplement Oracle out of the box in the next two years, with a further £45 million ($57 million) dedicated to that project allocated to the next two years to 2026.

It was all so different back in 2019, when the council wrote its business case for the migration away from SAP, which it first implemented in 1999. Before it met the unforgiving reality of large-scale enterprise application projects, the plan said the estimated total implementation cost for the new ERP would be £19.965 million ($25 million) and offered the assurance of accuracy down to the last thousand pounds. It said the project would run within the financial years 2018/19 to 2020/21.

As it turned out, the initial implementation went live a year late and was so bad the council was forced to spend £61,300 ($78,000) per week on manual workarounds for its bank reconciliation service and other interventions. The council plans to procure and implement third-party bank reconciliation software.

The council might be assured that the total estimated cost of the initial project and reimplementation has come down.

Earlier this year, the council estimated it might spend up to £131 million ($167 million) on the project in total. Documents released in February said the council allocated an additional £45 million ($57 million) to the reimplementation across the next two years' budget, in addition to the £86 million ($108 million) budget already approved.

Slicing £23 million off the estimate might seem like a victory, if a Pyrrhic one, but in May the council significantly de-scoped the project by taking out schools.

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"The view of the expert programme team and the Oracle Commissioner is that the Oracle system is not suited to providing these services to schools in the long run. Post-reimplementation, any Oracle-based solution for schools would be comparatively expensive and inefficient and the relevant costs would have to be borne by schools through trading charges, which would not represent good value for money for schools," the report to the council said.

In September last year, the council became effectively bankrupt due to outstanding equal pay claims and the Oracle implementation.

Last month, a report from "best value commissioners" appointed by central government to investigate struggling councils said that following the Oracle implementation, "a serious lack of trust had developed between members and officers driven by the failed implementation and subsequent lack of progress to resolve the situation."

A council review had "identified a lack of effective governance and control of the Oracle program, a severe lack of Oracle skills, experience and capabilities across the council, with a lack of direction and ineffective leadership compounding the problems," it said. ®