Cornwall councillor suggests authority paid £2m for Oracle licences that no one used on contract originally worth £4m
(2020/07/15)
- Reference: 1594807267
- News link: https://www.theregister.co.uk/2020/07/15/cornwall_council_2m_oracle_licences/
- Source link:
The local government of England's westernmost county, Cornwall, has become embroiled in a row about an apparent overpayment of licences to the tune of £2m on an Oracle Cloud ERP migration worth around £4m to the vendor when the contract was signed in 2017.
Cornwall Council, headquartered in Truro, has been running Oracle E-Business Suite R12 for finance, HR and payroll since around 2011. Three years ago, it began an upgrade to Oracle Cloud ERP, a project that has been mired in delays and shot over budget by £3.2m, according to council documents
Examining audit committee documents, Simon Elliott, a local IT teacher and Conservative councillor, began asking about the licensing terms with Oracle, the [2]Cornish Stuff website said.
'Poor procurement controls'
Cornwall councillor and responsible portfolio holder Mike Eathorne-Gibbons responded by saying that since the beginning of the project and the April 2020 go-live, there were unused licences worth £2,082,347.30. However, he pointed out that this was down to the council's arrangement with Oracle.
"During this time Cornwall Council was paying for Cloud licences for a system that was not live, [and] therefore licences exceeded users. It was a requirement that the Council was licensed for Oracle Cloud throughout development and implementation phases, and this is standard practice," he said.
He added that the project team had completed a contract review and after go-live the council was only paying for the Oracle Cloud licences that were required, avoiding approximately £370,000 of licensing costs for the remainder of the contract.
Cllr Simon Elliot weighed in, saying that amounted to a wasted overspend on licences.
"This reply highlights the acceptance by this administration that their poor procurement controls led to the [council] signing a contract that allowed £2,082,347 to be wasted in unused licences," he told Cornish Stuff. "This is made doubly clear by the need for the recent 'contract review and rebalancing exercise' that is now ensuring proper licensing controls."
But is there any merit to the council's claim that it is "standard practice" to pay for the total number of users while in development? Maybe, maybe not.
Speaking to The Register , licensing expert Dave Welch, chief evangelist with House of Brick Technologies, said it would depend on the module in question and the contract. Something like order-entry could be available under a per-user licence, but organisation-wide software like payroll or ERP was often dependent on the size of organisation, and that would be payable from when the customer started using the software, regardless of whether users were actually accessing it during development.
Any Oracle users in this situation should refer back to the terms of the contract, not Big Red itself. "Oracle has a reputation of being less than forthcoming in its representations of contractual terms," Welch opined.
Cornwall Council is run by a coalition of Liberal Democrats and independents. Regardless of the merits of the opposition councillor's claims of licence overpayment, the ERP upgrade has clearly struggled at times.
In June 2019, a Council Performance report
The Register has asked Oracle and Cornwall Council to comment. ®
Get our [5]Tech Resources
[1] https://www.cornwall.gov.uk/media/38786687/council-performance-report-year-end-2018-19-cabinet-report.pdf
[2] https://cornishstuff.com/2020/07/13/2m-for-unused-it-licences-at-cornwall-council/
[3] https://www.cornwall.gov.uk/media/38786687/council-performance-report-year-end-2018-19-cabinet-report.pdf
[4] https://procontract.due-north.com/ContractsRegister/ViewContractDetails?contractId=66e0d088-4cd4-e711-80e6-005056b64545
[5] https://whitepapers.theregister.com/
Cornwall Council, headquartered in Truro, has been running Oracle E-Business Suite R12 for finance, HR and payroll since around 2011. Three years ago, it began an upgrade to Oracle Cloud ERP, a project that has been mired in delays and shot over budget by £3.2m, according to council documents
[1]PDF
.Examining audit committee documents, Simon Elliott, a local IT teacher and Conservative councillor, began asking about the licensing terms with Oracle, the [2]Cornish Stuff website said.
'Poor procurement controls'
Cornwall councillor and responsible portfolio holder Mike Eathorne-Gibbons responded by saying that since the beginning of the project and the April 2020 go-live, there were unused licences worth £2,082,347.30. However, he pointed out that this was down to the council's arrangement with Oracle.
"During this time Cornwall Council was paying for Cloud licences for a system that was not live, [and] therefore licences exceeded users. It was a requirement that the Council was licensed for Oracle Cloud throughout development and implementation phases, and this is standard practice," he said.
He added that the project team had completed a contract review and after go-live the council was only paying for the Oracle Cloud licences that were required, avoiding approximately £370,000 of licensing costs for the remainder of the contract.
Cllr Simon Elliot weighed in, saying that amounted to a wasted overspend on licences.
"This reply highlights the acceptance by this administration that their poor procurement controls led to the [council] signing a contract that allowed £2,082,347 to be wasted in unused licences," he told Cornish Stuff. "This is made doubly clear by the need for the recent 'contract review and rebalancing exercise' that is now ensuring proper licensing controls."
But is there any merit to the council's claim that it is "standard practice" to pay for the total number of users while in development? Maybe, maybe not.
Speaking to The Register , licensing expert Dave Welch, chief evangelist with House of Brick Technologies, said it would depend on the module in question and the contract. Something like order-entry could be available under a per-user licence, but organisation-wide software like payroll or ERP was often dependent on the size of organisation, and that would be payable from when the customer started using the software, regardless of whether users were actually accessing it during development.
Any Oracle users in this situation should refer back to the terms of the contract, not Big Red itself. "Oracle has a reputation of being less than forthcoming in its representations of contractual terms," Welch opined.
Cornwall Council is run by a coalition of Liberal Democrats and independents. Regardless of the merits of the opposition councillor's claims of licence overpayment, the ERP upgrade has clearly struggled at times.
In June 2019, a Council Performance report
[3]PDF
said that the authority entered into a new contract worth £2.3m with the implementation partner and found additional internal resourcing of £900,000, hence the overspend. The original [4]five-year contract with Oracle was set to be worth £4m .The Register has asked Oracle and Cornwall Council to comment. ®
Get our [5]Tech Resources
[1] https://www.cornwall.gov.uk/media/38786687/council-performance-report-year-end-2018-19-cabinet-report.pdf
[2] https://cornishstuff.com/2020/07/13/2m-for-unused-it-licences-at-cornwall-council/
[3] https://www.cornwall.gov.uk/media/38786687/council-performance-report-year-end-2018-19-cabinet-report.pdf
[4] https://procontract.due-north.com/ContractsRegister/ViewContractDetails?contractId=66e0d088-4cd4-e711-80e6-005056b64545
[5] https://whitepapers.theregister.com/
Cheaper option
trevorde
Than wrangling with Oracle's licencing team :-(
Oracle and SAP should be banned in the public sector
Anonymous Coward
When have they *ever* delivered value for money...?
Byzantine Oracle licensing
Scott 29
Trying to figure out exactly what licenses you need to buy is a good way to give yourself a headache, when it comes to Oracle licensing.
Information and Experience Asymmetry
This happens regularly for large and complex procurements:
Veteran seller who has been playing the game for years and sold complex solutions in the red corner vs. the newly promoted customer representative on their first complex technology procurement in the blue corner.
Hardly a fair fight.
And that is how you get situations like this one.
(Disclaimer - I don't know the details of this case and they may well be different from the above scenario)