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As of 2024, Birmingham City Council is one of a number of local authorities facing a financial crisis. Local services are being cut and council taxes are being hiked. None of this is good news for the communities and residents who rely on these services, or those households struggling with ever-increasing bill payments.
In Birmingham, the financial issues it faces is being compounded by a failure to implement an Oracle cloud-based enterprise resource planning (ERP) and HCM (human capital management) system. These replace a highly customised SAP implementation that was originally deployed in 1999.
Like many long-term SAP customers, the city council had a choice: either engage with SAP to work out a migration plan to the latest S/4Hana cloud ERP system, or move to an entirely different platform. It chose the latter, and selected Evosys to implement a new Oracle Cloud ERP and HCM system.
Since going live in 2022, the Oracle system has required manual remediation to fix accounting issues. The council’s 2024 financial report shows a budget of £5.3m for continued support and manual intervention on the troubled Oracle system.
What came before Oracle Cloud?
In the late 1990s, Birmingham City Council began the implementation of an SAP system, to transform local government services. It was once claimed to be the world’s largest local authority SAP implementation, and by 2010, the council embarked on a major overhaul of IT, which required SAP applications to replace a significant number of internal systems. This implementation included a change to a shared-service delivery model and a new integrated application suite model based on the SAP software suite to support the council’s financial, procurement and operational performance management process.
The implementation was completed on time, to budget and according to an executive briefing. At the time, there were expectations it would deliver business benefits to Birmingham of £100m in savings and a 15% increase in productivity over a five-year period.
Birmingham City University also got involved, collaborating with SAP on an MSc Enterprise Systems Management course, designed around SAP certification. At the time, deputy leader of Birmingham City Council, Paul Tilsley, said: “This will be an invaluable local resource to support the development of our digital economy and reinforce the depth of ICT skills necessary to support modern local public services. I also believe this is a blueprint for future collaborations between business, academia and the public sector.”
The council’s 2016/17 accounts show that £5.5m was set aside for SAP system technical and software updates between 2016/17 and 2018/19. These upgrades were justified to ensure the system remained current and aligned to the strategic direction of the council, and the downsizing of support services.
How Birmingham prepared for the ERP migration
By 2018, Birmingham decided to review its future requirements of finance, procurement, human resources and payroll systems. It hired Socitm Advisory as part of the process to help it procure a new cloud-based ERP system.
The contract was awarded to Insight Direct (UK) Ltd, in partnership with Evosys, on the basis that the pair would deliver what Birmingham City Council’s Report to Cabinet in 2021, described as “a new solution” based on the Oracle Cloud ERP.
The project appears to be a new implementation. Birmingham recognised the pitfalls of adapting the new enterprise software rather than adopting the best practices built into the new Oracle systems it was implementing. It also acknowledged that regulatory issues in logical government would mean that data from the old SAP system would need to be made available to external auditors, which would potentially mean it would have to keep the old system running for a lot longer once Oracle went live.
Among the business benefits of moving to the cloud is that day-to-day operations and technical issues are managed by the cloud provider, which meant Birmingham would need a team of SAP admins.
The financial business case for the upgrade, as of 2021, showed that the SAP system, which was being run by Capita, was costing the council £5.1m per year. Over the nine years between 2022/2023 and 2031/2032, this would amount to £46m. For the same period, the Oracle system was meant to save £563k in 2022/23 and £788k in 2023/2024, with the savings accumulating over the nine years to £10.9m.
There are reports that suggest the council had originally planned to change its existing business processes to fit the new Oracle system. But it was changed, and Oracle was customised to support Birmingham’s existing business processes.
The issues facing the Oracle Cloud deployment
This shift in emphasis from adopting Oracle business processes out of the box would have required a business transformation, adapting the Oracle system to the council’s existing business processes. It’s believed this decision severely impacted the council’s ability to properly implement the Oracle system, and resulted in delays and additional costs.
Oracle eventually went live in 2022, but the council has faced configuration issues since it was deployed.
In April 2023, city council leader John Cotton gave an interview to the Birmingham Mail, in which he described the “disastrous” Oracle system that has left taxpayers with a £100m bill. The ERP and HCM replacement, which was originally earmarked to cost in the region of £19m, has now cost the council well over £100m.
Since going live, the Oracle system has been plagued by problems. For instance, Birmingham City Council has needed to stabilise and improve the operations of the software. In particular, the ERP system posted transactions incorrectly, which meant that significant manual work was required to maintain the accuracy of the council’s finance system.
There were also delays in the implementation of system modules that would have enabled budget holders to view and forecast their budget spend more easily.
By the start of 2024, the council reported that a further £45m would be needed to fix the problems, which is on top of the £85m it had already spent.
This inability to get accurate financial data led to an additional six-month delay in closing the prior year accounts, as the finance team needed to manually adjust inaccuracies. Its 2024 financial report showed the council experienced a deterioration in bad debts of £12.5m. While this shortfall is due, in part, to the cost-of-living crisis, the report states that “issues with the implementation of the Oracle ERP finance and HR system also delayed enforcement action.
What went wrong with Birmingham’s Oracle Cloud?
Birmingham City Council’s Report to Cabinet in 2021 discussed the problems the council faced implementing the new Oracle Cloud ERP system at the time.
The report illustrates the challenges in migrating from an older version of an ERP system to a rival product. It highlights staff turnover issues, which impacted the level of Oracle knowledge available, and shows deficiencies in the programme delivery processes, which resulted in an Ernst & Young-led assurance review that called for changes to governance.
It also points to the delays to the Oracle go-live date. This meant the council needed to migrate the old SAP system to newer hardware and software, and pay a further £1.1m to SAP for continued maintenance and support.
Overall, it would seem the council underestimated the work required to implement the new Oracle system in the way it wanted.
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