The council is investing £15m in an Oracle-based financial ledger and procurement system that will allow the council's main suppliers to receive orders and send invoices over the internet.
The system, which is expected to go live in April next year, will also link 25 mainly Unix-based legacy systems used by the council to manage everything from the payroll to council tax.
It will provide managers with detailed analyses of their budgets and spending through the council intranet, eliminating the need for managers to request reports from the council's accounts department.
"It will allow us to become a more intelligent purchaser. We can aggregate procurement better and look for better deals with our suppliers. It will automate a lot of financial processes from procurement right through to payment," said Andrew Unsworth, head of e-government at the council.
Edinburgh plans to provide its top 100 suppliers, which are responsible for 80% of the council's purchases, with access to the financial system over a secure internet connection. The council plans to protect the site using RSA secure tokens, which generate one-time access codes.
The council expects to make 80% of the savings by aggregating orders for goods from 500 premises in Edinburgh and using the bulk purchases to negotiate better deals with suppliers. The rest will come from improved efficiency and reducing central support staff.
Edinburgh chose Oracle's e-business suite after ruling out SAP and PeopleSoft, following a detailed analysis of the options with the council's systems integration partner, BT Syntegra. The suite, due to go through acceptance testing in September, runs on an Oracle database on a Sun E10k server.
The biggest technical challenge will be developing the interfaces between the e-business suite and the council's legacy systems, said Unsworth. BT Syntegra will develop the interfaces using Oracle's application integration engine.
"A lot of the people with the knowledge about legacy systems and how they were created have left. We are having to work from scratch. Our ledger system has been around for 10 years," he said.
Staff were asked for feedback on the system design and will be involved in acceptance testing later in the year, said Unsworth.