Oracle at Europe's largest council didn't foresee bankruptcy Birmingham City Council turned off security features on its Oracle ERP system, meaning auditors have been unable to sign off the accounts for Europe's largest local government body, which effectively went bankrupt earlier this year. Earlier this month, The Register reported that the £3.4 billion ($4.3 billion) revenue …
And no matter how much money you offer that will still be the case.So the result of 3/4 of the industry offering top quartile salaries is that half the industry is paying top quartile salaries for non-top quartile people, and executive salaries ratchet endlessly upwards.
At which point did someone join:
"We need to save money"
with
"Let's move to Oracle"?
12,453 employees. £100 million to manage them.
That's £8000+ per employee.
To do what? "for financial, HR and procurement processes".
That's a ludicrous number.
Throw it in the bin, go back to what you had, then sack yourselves.
Why limit to local authorities? Hard to find any anywhere
Still remember when started out in IT, long long long ago (pre 2000 is only thing willing to admit to) first company worked for in an IT role was doing an migration to oracle financials as system they used before had gone bust.
It was scheduled to take a year, and cost about £12 million, they started 6 months before I arrived (I was working on different project)
When I left nearly 2 years later, it was still not live, had cost 3 times budget already.
When I last spoke to someone from there, about 2 years after that, it was only rolled out to one department (and that had gone horribly wrong) and when i asked him how over budget they were now the answer was " we dont actually know anymore, we lost track"
It was probably never finished as about a year they were taken over after having "financial difficulties ", always wondered if the oracle project was major contributor to that (not just in costs but not having the functionality it should have provided for so long)
We are entering year 7 of a "two year SAP implementation project" and still not properly live.
Always these things start with good intentions. But every stakeholder in these things ends up battling the system and timeline. Responsibilities, laziness, lack of understanding, the consultants eating up and promoting every daft upgrade "to help avoid risk and confirm compliance" and the inevitable crapshow when the system is launched and nobody really knows what they are doing anymore.
Then...the fun begins when they realise that all the old-hands who knew how to get things done in the old system, can no longer be bothered to learn how to grind things through the new system.
Don't think I've seen a successful computer transition, outside of perhaps companies that went into a Google Drive/SalesForce type thing where the system is already up and running.
Councils.....absolute s$$$-show for any IT project. However the government does have a habit of over-spending, but occasionally delivering a useful website.
"Don't think I've seen a successful computer transition, outside of perhaps companies that went into a Google Drive/SalesForce type thing where the system is already up and running."
Isn't it about fitting the processes you use to what the software provides? So a startup type company just uses a bog standard salesforce setup with defaults - like shrinkwrap packages back in the stand-alone PC days.
The way I've always read them is that the council essentially went bust because of project cost overruns. Granted I'm betting it's not the ONLY cause, but it would be hard to imagine any single larger contributing factor. If this project were not so far into the red, they would have all those resources to cover the other shortfalls. I mean 80m+ pounds would go a long ways to covering all the other random unexpected expenses that may crop up.
Overall, I've seen reports that two factors are in play as reasons why the council was insolvent:
An equal pay legal bill, amounting to £760m or so of unexpected expense, and...
Oracle's f'up, amounting to £80m over budget.
Obviously, the core of the problem is the former. But Oracle isn't helping much!
Well, 2 main reasons they went bust, the "equal pay" thing (I'm not sure exactly what the details are there), for which they were on the hook for £700+ million, and the Oracle cost overrun at about £80 million more than originally projected. So the article is putting it the wrong way when it says it's because of Oracle with 'another reason' being equal pay. The equal pay bit is the main reason. The Oracle fiasco seems to be, as it were, the straw that broke the camels back. But I understand as an IT site here the focus is on the Oracle thing. And as I said, don't know about whether the council could have done anything regarding equal pay but they certainly could have done something different with ERP. Simply staying with SAP for a start.
The equal pay issue was caused by women employed in certain roles being paid less than men in other roles.
At some point, a pay tribunal stated that the women's roles had equivalence to the ones men were in, and should have been paid at the same level, meaning that a large number of female employees had been effectively underpaid for many years,
The tribunal told BCC to rectify the situation, and also pay back pay to the women for a significant number of years, and may also have told them to pay interest on the outstanding amounts (I can't remember the full details)
This was a sudden unplanned shock to BCCs finances (although once the tribunal started investigating, I would have thought it prudent to start working out how they would pay it if they lost), which became a millstone around the neck of the council.
I would challenge pretty much any public sector organisation to be able to absorb a bill of this size without causing "financial distress". A commercial organization would appeal to share holders, go to the market to try and borrow the money, or just declare full bankruptcy. A council does not have any of these options. They still have to provide services to their residents, some of which are statutory requirements.
Sometimes I feel people misrepresent what actually happened in those equal pay claims.
There were some trades that involved an element of danger and/or night work/overtime, where workers who were technically on the same pay-grade could earn substantially more if they were working longer hours in dangerous situations. A bonus scheme was in place.
From recollection, the two main complaints were that binmen and road maintenance workers qualified for bonuses that were not available to traditionally female roles, like dinner ladies and office cleaners. Arguably the core job is of a similar pay grade, but frankly I would have to sympathise with the council for a variety of reasons.
Namely, people who are routinely expected to work outside during heat/cold/winter/snow in an environment where the majority of workplace accidents/deaths occur should reasonably expect to be paid more, plus they were routinely offered early morning and evening work, within a controlled and hazardous safety environment.
I do cringe somewhat that the default mindset among legal claims lawyers is that because women traditionally do not choose dangerous workplaces, that office jobs should be paid the same as a hazardous location simply because they are populated by women.
All you are really saying there is "Things which men traditionally do are worth more than things that women traditionally do" with some handwaving about bad weather to justify it.
"The BBC have reported that at the time that these women were working for Birmingham City Council, the annual salary of a female manual grade 2 worker was £11,127, while the equivalent male salary was £30,599, plus an additional bonus of up to £15,000 per year." (here
Your point is factual, but boils down to:
Part time office workers earning less than outdoors full-time workers working overtime - who on earth could have foreseen this disparity?
Because from what I recall, most of the bigger bonuses were for working significant overtime shifts (road workers, bin collectors, grave diggers etc.), which wasn't particularly available to office cleaners.
I'll grant that they could possibly have run things in a more fair manner. But focussing on annual salaries, when comparing part-time vs full-time overtime shift workers, is just unethically stupid to compare.
The BBC article is from 2012 and is misquoted.
The original report says:
"The salaries were the same - the women did earn between £10,000 and £15,000 a year while the men got the same - but on top of that they were offered bonuses of up to £15,000 that the women weren't entitled to and never received.
https://www.bbc.co.uk/news/uk-england-birmingham-20054049
As far as I can see the bonuses were being given as a workaround for having two different payscales for what were essentially different roles? Sloppy HR??
Kind of inclined to agree here. Big Red just charging lots of money for stuff and threatening audit does not cause this sort of mess
What I am not sure about is if the blame is more with the muppets at the council who bought a massive, expensive, complex and critical IT system based on the fact that they would change all their processes (unrealistic dreaming tbh) and then changed their mind that they would bash the SaaS system WAY beyond any sensible degree of customisation
OR
The integration teams that allowed this to happen, did not see this as a red flag and just spent millions on resources building shite customisations that would never work. This is the definition of a clusterfuck.
I'm currently working at a company in the middle of migrating to SAP from some ERP most people have probably never heard of. Saying it's been a dumpster fire would be to significantly undersell it. The thing that gets me is they paid some consulting company, who is a SAP partner, to do the setup. Again, dumpster fire doesn't begin to do it justice. Some of that can maybe be blamed on the company as with the previous ERP system they just gave everyone Admin rights and so people just made little changes here and there to get whatever they needed to pass through the system, so the data they have to load into SAP is not exactly very clean. To the company's credit, with SAP they're looking to make a clean break with bad practices of the past, but it's not going well.
Still, not all of it can be down to just the company having bad data. A lot of the Fiori tiles/apps/whatever come back with SQL errors that make it clear the consultants didn't set things up correctly, and there's a lot of other hints that the consulting company just hired a bunch of people who probably have no business doing this kind of work and tossed them into the meat grinder. What really gets me, is that the consulting company basically gets to just walk away from this whole mess at the end of the month. That's after the company extended the "hypercare" contract at least twice. Seems to me that they should be on the hook to stick around until the company has a working SAP implementation no matter how long it takes and no matter how big a bath they may take on the contract. Must be a great gig where you can come in, turn a company completely upside down, leave them in a barely functional state, and laugh all the way to the bank. FFS, they haven't (to the best of my knowledge) even handed over any kind of document describing all the changes they made to the generic image, which should be like a bog standard deliverable that should have been ready by the time the first "hypercare" period ended. I've seen no evidence to suggest such a document even exists, or that the consultants have been documenting their work at all.
So, I can empathize with the Birmingham folks. The people just looking to do their job got royally hosed by a few people who were bribed by Oracle reps into going with them. Despite the fact that it's a pretty well known fact that SAP and Oracle both deliberately make it as painful as possible to migrate away from their products. May not have been a literal bribe, like money changing hands, but no doubt they were wined and dined extensively by Oracle reps, and given all kinds of rosy predictions about how great things will be. They'll set up a demo and bring in their best people to run it, and of course those people will not be working on the actual project, instead just throw bodies at the problem in the form of people so green they need mowing who muck everything up and are then usually discarded after that client's contract is done.
turn a company completely upside down, leave them in a barely functional state, and laugh all the way to the bank
You've just described a vulture venture capitalist..
(Lets not insult vultures. They perform a useful role in removing decaying corpses. So, El Reg - there TWIX over there - do your stuff!)
" the consulting company just hired a bunch of people who probably have no business doing this kind of work and tossed them into the meat grinder"
That's what consulting companies do! Win contracts with their top consultants doing the demos, then get the latest green hires to do the work. Plus, people consistently underestimate, by orders of magnitude, the complexity of migrating an ERP system. And the lawyers setting up the contracts often have no idea of all the things that could go wrong to safeguard against in the contracts
You would think, and I realize literally all evidence seems to point to the contrary, that this has been done enough corporate lawyers would have started demanding some kind of clause that the contract is not fulfilled until the client has a functional ERP, and the provider/consultant is on the hook to stick around for however long it takes, but the client will only be paying for whatever's in the contract. Making it in the interest of the consultant to have at least some competent people in key roles to make sure things keep rolling. Obviously the consultant's lawyers would balk at such a thing, but really it seems only fair. The essence of the contract is that the client pays the consultant to set them up with a shiny new ERP. The obvious assumption is that it will be functional at the end of the process. Maybe not perfect, but it should at least be self-sustaining and then the client's staffers can fine tune it. Being left with something that is less than say 80% complete, IMO (for whatever it's not worth), should be grounds for a breach of contract claim.
This isn't limited to ERP products it's anywhere where you put your faith in a large consultancy who sell you a dream and then dump people on it who are just training to operate keyboards. Seen it everywhere. I can't believe the people who make these decisions are so green, easily bought or that gullible. Worse than that even. Never held to account.
Also an interesting point. In the case of my current employer they did have some good reasons for wanting to go with SAP over their old ERP, but dear lord are some of the consultants just useless. There are at least two of them who do really know their stuff in their particular area, but they are at the higher levels. It's the basis level people who are just a disaster. I caught one of them duplicating some work scheduling profile values, which would have been perfectly fine, had they not forgotten to update the corresponding value that gets passed to another module. So, half the profile values were exactly the same despite being intended for very different parts of the overall process to build a finished product.
About two months past the "go live" date and I think the status today is they still haven't been able to make a single finished product using SAP yet. And at the end of the month the consultants all basically pack up and bugger off to the next poor sap (happy coincidence) who hired their firm.
Quote: "...the council could not ... produce a set of accounts for the most recent financial year..."
Just as well really........the ORACLE bills must have been gigantic.....
....and all that "cost saving".....well.....really mysterious that they could not "produce a set of accounts"....
Perhaps a look at the bank statements might help........Oh!.....sorry......we've lost those as well..................
> Costs ballooned from £20 million to around £100 million
That's about normal where government money is involved. In a tender for a project, provide an unrealistic minimum amount to get the project. Half way through the project, multiply by three and add another dollop on top and re-tender. At which point the project can't be cancelled and the tender amount can't be recovered as no one can admit fault.
"We have no insight into what's happened within the core IT security systems because there's no record"
I don't believe it, just check the change log.
What is a change log?: "A change log is a record of all changes made to a system."
"The original implementation partner for the Oracle Fusion rollout was Indian systems integrator Evosys"
Integrating disparate systems that were never originally designed to work with one-another is generally a hack or kludge. For instance in a C app, the difference between making an external system.call to a SQL database or including a SQL library and running such functionality internally. The compiler, static analysis and other utils would pick-up a lot of errors.
Trying to not be nit-picky here, but there is a difference between central government and local government, so you shouldn't really treat them as one.
Yes, they're all run badly, but the type of badness and the consequences are often very different.
One of the problems here is a difference between the way that the Labour run council operates compared to the way that the Conservative government would want them to run. Having the central government intervene to keep the local services operating will give a huge lever to change the direction of the council in ways which may upset local democracy (after all, the Birmingham City councillors were elected), which will probably have ongoing consequences which will run for decades.
But BCC has, over past decades, upset governments of all colour with their policies.
@Peter Gathercole
I take the point up to a certain extent.
The other section 114 councils include a number with Conservative administrations and some with NOC.
It is also worth pointing out that the origin of BCCs main liability for the equal pay claims was in the previous Conservative administration, although that does not excuse the failure to do any kind of mitigation of subsequent liabilities.
I suspect that our current 'central government' has little idea of what they want councils to do, other than spend less.
I was not commenting on the other councils. Many of their problems are of a completely different nature, often because they didn't raise council tax as much as they were allowed, mainly to keep the voters happy.
For BCC, although Labour were not in control between 2004 and 2012, this period was one in which the control of the council was in limbo, with no party in overall control. The council leader may have been Conservative at some point during this time, but they were in a minority, so it is a bit strong to call it a Conservative administration at any time.
Some of the other councils appear to have invested in commercial property as an income generator, and are being hurt by the current economic conditions, and the fact that they are now having to try to sell property in a difficult market to be able to call on the reserves invested into this property.
Council finances are hugely problematic at the moment, because they've been required to cover things that have become incredibly expensive or have increased in demand much more than would have been expected when the budgets were set each year. I do understand that there may be many more councils in financial distress, and I don't have the remotest idea how these problems will be resolved.
Successive governments of all flavours have pushed problems down from central control to local government without the required funding to cover all of their new responsibilities, in the name of local accountabillity, but in reality, to get the cost off the Government balence sheets.
"Successive governments of all flavours have pushed problems down from central control to local government without the required funding to cover all of their new responsibilities, in the name of local accountabillity, but in reality, to get the cost off the Government [balance] sheets."
Agreed.
We need local government that is sustainable, able to provide continuity, and actually really accountable to local population.
"The council leader may have been Conservative at some point during this time, but they were in a minority, so it is a bit strong to call it a Conservative administration at any time."
Will agree to disagree based on my experience as a minor cog in the wheels at the time. Your experience may have been be different.
"The report went on to say: "This is what members gave officers approval for through Cabinet papers in July 2019 and March 2021. However, officers evolved the approach towards adapting the system – meaning that Oracle was customized to meet the council's existing business processes. This shift in emphasis (from adoption to adaptation) has severely impacted upon the council's ability to properly implement the Oracle system.""
Does that mean staff were resistant to change and tried to make the software do 'the old way' when it wasn't designed that way, and the customisation broke things elsewhere? Or did councillors sign off on something that didn't work for the staff's actual needs, and couldn't do so without extensive customisation, which was never going to work within the wider programme? I know which one my money's on.
We may never know, training some users can be impossible (Especially for users like me who go, ah ok thats easy enough and then I immediatly forget what I have just been told).
From experience every ERP project I have heard of where I work wants to use standard functionality, but that always ends up with bits being adapted.
Pareto - standard functionality does 80% of the job for 20% of the cost.
But the problem is that the other 20% still has to be done. And as I often said, "its the detail where you fail". Every strategy plan looks just fine - and probably is until you hit the exceptions and the problematic cases.
costs for the Oracle project ballooned from £20 million to around £100 million ($125.5 million) with the implementation of its replacement for an SAP ERP system still in trouble. A bill of up to £760 million ($954 million) to settle equal pay claims also contributed to the effective bankruptcy.
Hmmm, this is public money well spent! Who is responsible for that?
The original implementation partner for the Oracle Fusion rollout was Indian systems integrator Evosys, now merged with Mastek
Oh, working with the lowest bidder turned ugly? What a surprise!
What will be the consequences of this scandal, if there are any? I mean, except for the subordinate to blame, of course.
... an ERP supplier tells the potential client what it will cost to satisfy all of the requirements. Potential customer realises that huge amount would never get board agreement. So a compromise is agreed where chunks of requirements are taken out of scope and a much lower initial cost results. Headline news, for example, might be a £20m contract. Next all the descoped functionality is brought back via change control. Costs rocket back to the original figure (albeit maybe not £100m) and inevitably continue to rise. Plus go-live date slips into the distance.
As a retired consultant who worked for (hmmm, 'employed by' might be more accurate) several Oracle systems integrators: been there, done that, got the T-shirt.
Apart from the fact that you never, ever, ever customise these monolith POS ERP systems, there is no way Oracle doesn't have a way to allocate cash across accounts. I know of 3 from our Oracle implementation and I have kept as far away as humanly possible from it, someone with product knowledge would know more.
Its shit, but its not that shit.
Whats the betting the big 3 (EY, PWC, KPMG) have done the majority of the cash hoovering that took it to £100m?
The thing which gets me most about this is the council leader saying that he didn't see this coming, which is why he was on holiday when the CFO - entirely properly - issued the Section 114 notice.
Shouldn't the leader of an organisation of that size, or indeed of a parish council, have a fair idea that it was in some financial trouble?
The data used as evidence that
"women employed in certain roles being paid less than men in other roles"
came from a system that was broken.
So for all we know, it wasn't the case? Same as https://www.theregister.com/2023/10/12/excel_anesthetist_recruitment_blunder/?td=rt-4a !
Can we be confident that systems can tell men and women apart when they can't tell the highly qualified apart from the not at al qualified? I think NOT.
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