UK tax collector inks £366M in ERP deals to get systems into cloud

SAP and Deloitte winners in transition from legacy software to SaaS, which includes housing and transport ministries

The UK's tax collector has awarded contracts worth up to £366 million ($461 million) in an effort to move a cluster of central government departments' ERP, HR and finance systems to the cloud and upgrade legacy software.

His Majesty's Customs & Revenue has handed SAP a £246 million ($310 million) agreement to provide software as a service in the cloud for 10 years, while global consultancy Deloitte has won a five-year deal worth up to £120 million ($151 million) for the same project.

HMRC has awarded the contract to support the so-called Unity cluster, which will see three Whitehall departments and their arms-length bodies move from on-prem legacy SAP ERP software (ECC 6.0) to the vendor's most recent platform in the cloud.

The Department for Transport (DfT), the Ministry of Housing, Communities and Local Government (MHCLG) join HMRC in the Unity program, which aims to design and operate a centralized finance, procurement, HR and payroll shared service function, according to a contract award notice.

Unity will also operate "a standard set of processes that are fit for the purposes of all Unity departments" as well as "design, build, deploy and operate a standard, single set of systems that are scaled to the future and that deliver performant services underpinning the business processes," the notice said.

It is a sizeable undertaking: HMRC alone employs around 66,000 people. Deloitte has won the contract for technical professional services that are required to enable the technical transformation of the Unity cluster including systems integration services.

SAP has won the deal for software: a combined single instance SaaS platform to ensure the delivery of "high quality, value for money, shared finance, procurement, HR and payroll services which meet the needs of service users."

Earlier this year, Jim Harra, HMRC chief executive, wrote that the Unity departments' core corporate systems rely on SAP ECC 6.0. SAP is set to end mainstream support for ECC 6.0 in 2027, and will close the lid on "extended support" in 2030.

"SAP expect all their customers to move onto new cloud-based SaaS systems," Harra said.

If departments bid separately to upgrade their existing platforms, "the cost of buying additional support for the current systems would be expensive and would delay the inevitable need to move to cloud-based SaaS systems, such as SAP's S/4HANA product," Harra said [PDF].

In the senior accounting officer document published in February, the senior civil servant said the Unity Programme business case was "better value for money to move as a cluster than separately as independent departments, saving approximately £90 million" ($113 million).

Harra added: "Once re-engineered shared services are fully operational, cashable, and non-cashable benefits of circa £585 million [$738 million] over the 15-year lifecycle are estimated. There is a positive return on investment.”

The procurement for the Unity project began in December last year, after the Infrastructure and Project Authority (IPA) judged the project was at "red" level risk, saying that "the program lacks a number of critical skills and dedicated resources, which further puts progress at risk."

The IPA — a joint unit of the Cabinet Office and the Treasury — is set to be merged with the National Infrastructure Commission (NIC) to form a single new infrastructure body, the National Infrastructure and Service Transformation Authority (NISTA). The IPA's annual report for 2023-24 is yet to appear. ®