SAP go-live leaves 18,000 unpaid bills at Europe's largest local authority - what went wrong

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- The lead for Birmingham City Council's IT-based transformation programme said of the unpaid invoices after go-live with a SAP-based financial system:


"What has led to a larger backlog than we originally anticipated is a combination of all these factors. We probably anticipated every one of them but what we didn’t take into account was the cumulative effect."

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The lead for an IT transformation scheme at Europe’s largest local authority, Birmingham City Council, has expressed “regret” after the troubled go-live of a SAP-based system left a backlog of more than 18,000 unpaid invoices.

Baliffs have been called to at least one Birmingham City Council site, some suppliers have withdrawn goods and services, and employees claim that staff have used their own money to buy food and other supplies for children in their care.

Only last month [January 2008] the Prime Minister Gordon Brown praised winners of the Cabinet Office’s e-government awards which included Birmingham City Council for its IT transformation programme. The SAP-based implementation is one of nine schemes that forms part of the council’s transformation programme. Councillors and officials hope the transformation scheme will save £1bn over 10 years.

IT systems for the council are run by a joint venture organisation, Service Birmingham, in which supplier Capita has 68% and the council 32%. Service Birmingham has brought in extra staff to clear a backlog of invoices which employees were unable to tackle in earnest until about two weeks ago because of pressure of work.

The council concedes that the cost of sorting out the problems will reduce the profits of Service Birmingham.

When the SAP financial system – covering general ledger, accounts payable and accounts receivable - went live on 29 October last year, council officers expected teething problems.

But the lead for the IT transformation Programme Glyn Evans told Computer Weekly that the council expected the backlog of unpaid invoices to have been cleared by the end of December 2007.

He said:

“For individual suppliers some of them have gone through some pain. I regret that. Of course I do.”

He said the backlog of unpaid invoices needs to be put into the context of the size and scale of Birmingham City Council’s operations – it has a turnover of £3bn, pays about £1bn a year for goods and services and settles about 700, 000 invoices annually. The backlog of unpaid invoices will be cleared by the end of February, he said. He added that he was aware of bailiffs being called to only one site.

Difficulties after go-live included the partial failure of plans to install automatically SAP software on about 5,000 PCs. The “remote” installation worked on only some PCs, which left software specialists having to visit the rest.

Staff without the SAP system on their desktop were unable to pay invoices; and when business users called the helpdesk some were unable to obtain help for 48 hours.

Evans said:

“Has the implementation gone as well as we had hoped? No. I would have preferred there to be no backlog at this point in time…Has it gone as badly as I’d feared? No it hasn’t because we will have cleared the backlog by the end of February.”

He said that the SAP-based “Voyager” system has paid 216,000 invoices successfully to about 20,000 suppliers.

When SAP announced its role in Birmingham’s IT transformation programme in 2006 it described it as the “the biggest software deal ever in UK Local Government”

The council’s Liberal-Democrat Deputy Leader Paul Tilsley defended the go-live. “He said there had been “some problems for us” but “we still paid 216,000 invoices worth £327m and the world in Birmingham has not ground to a halt”.

He added: “We would like to have had no complaints. The fact that we have had some shows that we did not get it right but we are working to get it right.”

Birmingham Liberal-Democrat MP John Hemming has defended the system by writing to a campaigning local blogger, The Stirrer, after council employees used a forum on the website to complain about Voyager.

He said on the The Stirrer: “There is a backlog which is being cleared. The place where the bailiffs were sent in was one involving someone being paid three days late.”

He said that the council processes around 30,000 invoices a month. “So a backlog of 18,000 is just over a fortnight.” This is not the full story, however. The backlog is in addition to usual number of day-to-day invoices that have to be checked and paid. So clearing the back log requires extra staff. And the backlog includes a rump of invoices that have proved difficult to clear because of queries.

In addition the SAP system is still “learning” VAT numbers for suppliers. So when staff scan in invoices, the supplier is sometimes not recognised.

Evans said:

“It is an automated process, so you put an invoice into the scanner and it looks for things like a VAT number, to tie it back to a particular supplier so it can pre-populate the electronic authorisation form with full details of the supplier…

“It is sensible but there is a learning curve to have to go through for the system to know those VAT numbers and historically we have not held them…

“Once the scanner recognises the number it automatically feeds through to the next stage. If it can’t recognise that invoice and link it back to a supplier it stops and says: ‘Needs manual input’. So what will in time be an automated process is a manual process initially.”


Evans said this was recognised as a problem before go-live.

“We did write out to all our suppliers saying we were introducing this new system and we did inform them there would be some teething troubles. We have always been very upfront about that. You cannot bring in a system on this scale, in an organisation of this size, without there being teething problems.

“What has led to a larger backlog than we originally anticipated is a combination of all these factors. We probably anticipated every one of them but what we didn’t take into account was the cumulative effect [my emphasis].”

Some staff who needed training didn’t receive it and others thought that training would be irrelevant for them and so did not attend.

Evans said:

“We have put a huge effort into training but did we train everybody? No we didn’t, so that’s one issue. Some people slipped through the net for a variety of reasons. Some people thought [the training] wasn’t applicable to them. With some people we didn’t have enough information about who did what in departments so there were lots and lots of issues of identifying the right people.”

Potentially he said some suppliers might have been waiting months for payment, instead of the usual 28 days. At one point the backlog of work was about 30,000 invoices. Now the backlog is down to about 18,000 invoices but, said Evans, “some of that backlog isn’t necessarily related to the last two weeks”.

He added: “Some of it has been outstanding for a while because of potentially particular issues with an individual invoice. Some of those suppliers are very small and have a cash flow issue if we haven’t paid them as quickly as we normally do…

“The message has not got through as far as the supplier community and business managers within the council that we have urgency procedures in place. If someone is suffering a cash flow issue then we have a process they can flag that they need payment urgently we can expedite that.”

The cost of clearing the backlog may be met in part by the “supply chain” including consultants.

"We have a supply chain behind Service Birmingham. Service Birmingham will have backed off some or all the risk onto that supply chain.”

What lessons have been learned?

Evans said:

“I would manage internal expectations better and I would brief the press better and I would probably make sure we were not just reacting to bad news but make sure people were aware of the good news… I would have resourced the helpline with more capacity. We did end up with business users being frustrated that they were logging service desk calls that weren’t being addressed in a reasonable timeframe. Getting a response 48 hours later is not particularly helpful. That’s a lesson learned.

“Looking to the future I cannot think of any other programme that [we] are going to do a Big Bang approach that we had to do with this one. We had to move to a new financial system on a set day. Customer First [another part of the transformation programme] will be on a service by service basis.”

Comment:

At first we had trouble getting any information at all from Birmingham City Council. It gave the impression it was one of those defensive, reticent public authorities that react to a project failure by trying to switch off all the lights in the hope nobody will see them.

Then we spoke to Glyn Evans who is assistant to the Chief Executive on transformation at Birmingham City Council. He has identified quickly what has gone wrong - and he has being open and candid in saying what happened.

Some private companies and public authorities will say nothing after a failure so the lessons are not disseminated or learned. Or their communications directors will play with words, hoping that outsiders including MPs and the media will not get the right end of the stick. Indeed some officials regard the statements they issue after a failure as a triumph of insinuation. Glyn Evans had called a spade and spade - would that there were more like him in the public and private sectors.

And he'd probably be a good man to run any large IT project. Better to have someone who has experienced failure, and been humbled by it, than someone who has learnt nothing because he hasn't had the benefit of getting it wrong.

Links

The Stirrer blog - many comments from staff at Birmingham City Council about the SAP-based "Voyager" system

Birmingham City Council's bills unpaid as SAP project falters - Computer Weekly article

Birmingham Council's IT transformation project

Gordon Brown refers to government's £10bn IT spend - click on You Tube video

30,000 unpaid paids as computer fails - Birmingham Post

Birmingham Council's Glyn Evans wins public sector award

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