Europe's biggest city council faces £100M bill in Oracle ERP project disaster

Birmingham City Council is set to pay up to £100 million ($123 million) for its Oracle ERP system - potentially a four-fold increase on initial estimated expenses - in a project suffering from delays, cost over-runs and a lack of controls.

Newly appointed council leader John Cotton told regional news outlet the Birmingham Mail: "My priority in coming in as leader has been to get an immediate sense of where we are with the issues around Oracle, what the problem is and how are we going to fix it."

The council - the largest local authority in Europe by population - accrues £3.4 billion ($4.2 billion) in revenue per annum and has been grappling with the project to replace SAP for core HR and finance functions since 2018. The ERP project was reviewed in 2019, 2020, and again in 2021, when the total implementation cost for the project was put at £38.7 million ($47.8 million), "doubling the cost," Robert Alden, Conservative leader, told the council in April.

In a statement to The Register, a council spokesperson said it had developed a plan focused on "initially stabilizing the situation and then optimising the implementation of Oracle."

"Significant resources will be required to arrive at a position where the system can be fully implemented. We estimate that the final costs of this will be in the region of £80 million to £100 million [$99 million to $123 million]. This will be over three years," the spokesperson said.

The project, dubbed Financial and People, was "crucial to an organisation of Birmingham City Council's size," the spokesperson said.

Cotton reckons the problems with the ERP project have not had a direct effect on frontline services or on whether the council pays its bills and pays its way.

"But we do know that there is an issue with how the system is then tracking our financial transactions and HR transactions issues as well. That's got to be fixed," he said.

However, one insider told The Register that Oracle Fusion, the cloud-based ERP system the council is moving to, "is not a product that is suitable for local authorities, because it's very much geared towards a manufacturing/trading organization."

"Standard SAP is the same, but BCC customized SAP to get it working really well and apart from some minor annoyances, SAP was a good product that should never have been ditched," the insider said.

Rebecca Hellard, the council's strategic director of council management, has left her post, according to the Birmingham Mail. She has been replaced by Fiona Greenway, who is now the council's interim director of finance and section 151 officer, a statutory role responsible for the council's finances.

Meanwhile, councillors have criticized a decision to hear a report into Oracle ERP project behind closed doors.

As well as an eye-watering increase in costs, the project is promising less in savings than the original figure of £26.9 million ($33.5 million). In 2021, the Council cut £16 million ($19.7 million) from its savings projections.

In his interview with the Birmingham Mail, Cotton promised that the increase in ERP costs would not affect front-line services, which include schools, local road maintenance and social care.

In 2021, Oracle founder and CTO Larry Ellison said Birmingham City Council was one of a number of successful wins to migrate very large SAP ERP customers to Oracle Fusion. He also mentioned West Sussex County Council, whose migration is also delayed.

We asked Oracle to comment but it has yet to reply. ®