Birmingham City Council's £144M Oracle ERP disaster spirals as system still fails to deliver

Birmingham City Council's Oracle ERP implementation has become one of the UK's most expensive IT failures, with costs now reaching £144.4 million - more than seven times the original £19 million estimate - while the system remains unable to perform basic financial functions five years after its planned go-live date.

The council's SAP-to-Oracle migration, which began in 2018, was initially budgeted at £19 million with a £1 million contingency. By 2024, the total budget had already ballooned to £131 million across financial years 2018/19 to 2025/26. The latest figures, released in a written response to the council meeting this week, show the forecast cost has now reached £144.4 million through the 2027/28 financial year.

What went wrong?

The project's problems began almost immediately. The council planned to move away from its legacy R/3 SAP system to Oracle Fusion, with an initial go-live date of December 2020 for finance and procurement, and February 2021 for HR and payroll. This was later revised to April 2022 for both functions.

However, the implementation quickly descended into chaos. Despite planning to implement Oracle "out-of-the-box," the council created several customizations, including a banking reconciliation system that failed to function properly. This left the authority unable to understand its cash position and produce auditable accounts.

The consequences were severe. The council turned off fraud detection audits for more than 18 months, allocated £2 billion in transactions to the wrong year, and has spent over £5 million on manual workaround labor to keep basic financial operations running.

Financial impact and bankruptcy

The Oracle implementation, combined with poor management of equal pay cases, led to Birmingham City Council becoming effectively bankrupt in 2023. The financial toll has been staggering:

• Initial project had banked expected savings in the millions from the 2022 go-live date
• Anticipated savings of £69 million in 2023/24 were written off
• Total money lost estimated at £216.5 million in 2024, potentially rising to £225 million
• This equates to approximately £200 per person within the council's boundaries

The council has now purchased a third-party solution to cover the banking reconciliation function and is reimplementing Oracle from scratch. This new implementation, originally due to go live in April, has been delayed by several months.

Scope changes and hidden costs

The ballooning costs don't reflect the full picture. Schools have been removed from the project's scope, which might have led to reduced costs. Additionally, the initial project had anticipated significant savings that have now been written off entirely.

The scale of this failure is particularly notable given that Birmingham is Europe's largest local authority, managing £3 billion in taxpayer revenue and a multibillion-pound spending budget. The inability to properly manage these funds has had severe consequences for the city's financial stability.

Lessons from the disaster

This case highlights several critical lessons for large-scale ERP implementations:

1. Customization risks: Moving away from "out-of-the-box" implementations can introduce significant complexity and failure points
2. Project governance: The lack of proper oversight allowed costs to spiral and basic financial controls to be suspended
3. Risk management: The decision to turn off fraud detection for 18 months represents a catastrophic failure in risk management
4. Realistic planning: The sevenfold cost increase suggests fundamental flaws in initial project planning and estimation

As Birmingham City Council continues to struggle with its Oracle implementation, the case serves as a cautionary tale for other organizations considering major ERP migrations. The combination of technical failures, poor project management, and inadequate governance has created what may be one of the UK's most expensive IT failures in local government history.