Birmingham City Council – Europe’s largest local authority – is facing ‘bankruptcy’ after monstrous rising costs relating, in no small part, to its Oracle ERP systems.
On Tuesday 5 September, The Council issued a Section 114 notice meaning it can no longer make new spending commitments and must meet within 21 days to discuss what to do next.
Back in May, The Register reported that Birmingham City Council had racked up costs of up to £100million relating to a ‘disastrous’ Oracle ERP project.
The project – dubbed Financial and People – aimed at replacing SAP for its core finance and HR functions, was originally planned to cost just £19million, but costs quickly ballooned to over five times the original projection.
Its decision to transition to Oracle Fusion has come under much criticism.
One insider told The Register back in May that, “[Oracle Fusion] is not a product that is suitable for local authorities, because it’s very much geared towards a manufacturing/trading organization.”
With SAP’s announcement that it will no longer support Business Suite 7 and ECC 6 past 2027, this appeared to be the route Birmingham City Council were taking to remain supported.
So, what could Birmingham City Council have done differently? We suggest two things to consider during your transition, and how you can avoid making the same mistakes…
Managing the cost of Birmingham City Council’s transition from SAP to Oracle Fusion has been a challenge for The Council since the project started back in 2018.
One big hurdle with large-scale transitions such as this, is trying to recreate customisations from old SAP systems on the new Oracle Fusion system.
The issue here is that a highly customised SAP system is not going to easily fit a standard Oracle Cloud system; it’s like trying to put a square peg in a round hole.
This becomes even more complicated when your organisation has heavily customised its systems over multiple decades and software versions.
Your organisation could be running many heavily customised applications that you no longer need. This causes software bloat and prolongs the project timeline eating up more budget.
Recreating these (sometimes decade-old customisations) in your new Cloud system is an unnecessary time and budget drain.
Large transition projects are complicated anyway. If they’re not managed tightly, requirements become misunderstood, and costs start to soar.
Before beginning your software transition you’ll want to ensure you have an airtight transition roadmap that includes a list of all customisations you want to include, leaving out those that are now redundant.
Your multi-year transition to a new system could cost you millions. This is before considering any delays that might push your expenditure even higher and your deadline further back.
And once you’ve sunk so much money into a transition project, it’s very hard to turn your back on it, especially if it’s gone well over budget.
It’s important you don’t get tied into a sunk-cost fallacy where you’re reluctant to abandon the project because of the money you’ve already invested, even if it looks like the benefits no longer outweigh the negatives.
Hoping that you can save a failing project by pouring more money into it is a highly risky strategy. Like a gambler at a blackjack table, knowing when to quit is sometimes half the battle.
Birmingham City Council is a prime example. From 2018, it reviewed the cost of its implementation every year, where, by 2021, the cost had almost doubled to nearly £39million.
You can understand the predicament to some degree. It would now require twice the amount of public funds to complete a project designed to save The Council money. Now this may have been a wise decision had the story ended there, but after the project cost continued to soar into the nine-figure territory, cutting its losses would have been the smarter move in hindsight.
So, how could Birmingham City Council have avoided a costly software transition going five times over budget, and remove the urgency of SAP’s 2027 transition deadline?
What’s more, if you’re looking to eventually upgrade to the latest on-premise or Cloud software, you can move your support to Support Revolution temporarily and give yourself breathing room to prepare your transition roadmap without needing to do so by a specific date. You’ll continue to receive security patches and updates from Support Revolution to replace those that you would have received from the vendor.
Our support service for all software versions removes the urgency of SAP’s 2027 S/4HANA transition deadline; you can stay on your current version until you’re ready.
That’s the (hundred) million-dollar question.
Senior members of The Council have already left as early as May (“no one gets fired for buying Oracle” ringing less true than ever).
A central government bailout will likely follow suit with a rescue plan with the ERP implementation potentially abandoned.
Needing its SAP systems supported for the foreseeable future will require a support provider that will allow organisations to stay on their old software for as long as they need while they consider their next move. A change they could have made years, and a million pounds, ago.