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 [PDF].
Examining audit committee documents, Simon Elliott, a local IT teacher and Conservative councillor, began asking about the licensing terms with Oracle, the 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 [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 five-year contract with Oracle was set to be worth £4m.
The Register has asked Oracle and Cornwall Council to comment. ®