Last month, Surrey County Council announced the award to Unit4 of a full ERP, HR and procurement contract with a projected value of some £30 million over 15 years. Normally, we don't cover these types of story as they speak of futures but in this case, there are interesting aspects of the deal process worth exploring.
First, this is a replacement of an SAP system that's been running since 2004 with a server refresh in 2011 that is well past its initial five year planned lifespan. It's safe to say that the SAP system is embedded into the working of the Council and so a full rip and replace is a serious undertaking. To put this in context, the organization has an annual operating budget of £1.2 billion, counts 6,500 full time employees and delivers an HR and Payroll bureau service to approximately 36,000 external users including schools and teachers.
The problem and options
The background to the deal is largely contained in the dry language of a report to the Council's Cabinet. Early on, the report notes that:
The current system will no longer be supported by the supplier, SAP Plc, beyond 2025 and the existing server hardware is now beginning to show its age with more performance issues arising. The current system will also not enable the council to achieve its transformational ambitions to drive service transformation, improve management decision making through easily accessible data and insight, and to have a flexible and mobile workforce.
This refers to what was initially the announced end of life for SAP ECC systems but which has since been extended to 2030. Clearly the memo didn't reach Surrey in time for them to change their minds. More important, the alternatives would need to support a range of strategic objectives as follows:
the drive to implement robust, resilient and effective financial management;
drive to exploit the benefits of digital technology to drive service transformation;
improving management decision making through easily accessible data and insight;
and having a flexible and mobile workforce where the majority of staff are able to work anywhere and at any time supported by the right technology.
Reading the report Surrey considered alternatives in the form of either a 'brownfield' or 'greenfield' deployment of S/4 HANA and decided those wouldn't cut the mustard. Specifically, the report points to a brownfield implementation as incremental to existing and, by implication, incapable of delivering what Surrey wants, i.e. transformational value. Even a greenfield implementation was considered unsuitable, whether that came from SAP or, as implied in the document, Oracle. In Surrey's view, Tier 1 solutions are no longer appropriate for their operations. Of course it wasn't cut and dried. An interesting wrinkle in the decision making process turned up in words that described barriers to a direct procurement from SAP:
...was discounted because they required identification of a route to market offering direct award whilst remaining compliant under the Public Contract Regulations 2015, which has not been possible. Furthermore, a lack of market competition is unlikely to deliver best value for money and mean the council is unable to fully evaluate its solution options and ensure best fit with its business and technical requirements.
There was another option on the table that would see Surrey collaborate with East Sussex County Council and Brighton & Hove Council in what;'s termed a 'framework' approach. You can think of this as shared services with a degree of de-risking involved but with time of the essence, and practical issues at stake, it was discounted.
What happened and why?
I wanted to get a sense of the project and spoke with Leigh Whitehouse, executive director for resources at Surrey CC. He has a finance background, exclusively in local government organizations. He will be presenting at the upcoming Unit4 Experience4U event so consider this a primer for what he shares.
During 2018, Surrey CC recruited a fresh executive team since, in Whitehouse's words, the council was 'failing' in a variety of areas that included a report of the finance function from CIPFA (Chartered Institute of Public Finance Accountants,) where finance was characterized as competent but not adding value. Unsurprisingly, this caused relationship issues with council members and some directorates where finance was chanarcterized as gatekeepers and not much else. Improvements have been made but there were inbuilt impediments which Whitehouse sees as being rectified by a combination of organizational change and process improvement, aided by technology.
The organizational culture work that we kicked off identified a number of things about how how we worked at the time and how that was misaligned with organizational strategy. And a lot of that was around the ability to make decisions quickly, it was around a tendency for there to be a sort of accretion of process in the in the council. And some of the processes we've got in SAP are reflective of that. They are cumbersome. So it's not just the technology being outdated, they're tied into it some really inefficient processes. This gives us a chance to trigger a really significant change in the way we do things and to adopt the best practice out of the box as far as possible. And then it also ties into a desire to move into being what we term a more agile organization that's genuinely responsive to needs.
This is an ambitious program. Whitehouse acknowledged there has been a lot of change over the last two years, but he is confident that keeping the momentum going over the next 15 months (the planned implementation period) will not be as difficult as it might sound because the project has a flavor of looking forward rather than one of fixing what was broken.
We have a very strong team where leadership is not only enthusiastic about the job in hand but is focused. The plan is solid and even though we're all coping with the impact of the pandemic, Microsoft Teams is proving its worth. They've got a sense of self, rather than just being a bunch of people who are seconded from other areas of the organization for a period of time. We've established some really strong and trusted relationships with senior managers across the organization. So finance is seen as a proactive force for good, rather than being on the sidelines.
As we wound down the conversation, I could readily understand the ambition behind the project which will see Surrey take on a cloud based system that has the potential to reach many more users than is currently possible with the existing on-premises way of working. It means, for example, that field managers of essential services - child services is one such example - will get off spreadsheets which basically don't work - and onto analytical systems that help decision making.
There's a lot to look forward to but it is relatively early in the project. The essential organizational change work is ongoing as is data clean up but the design work won't be complete until early 2021, with a further 6-9 months of implementation and testing before they hit the final 'go' button. This is one I'd like to check into from time to time, especially given that the changes envisaged moving from a 16-year old system to a modern ERP will likely throw out some surprises.