When Major IT Projects Go Wrong – Abcam Results

Abcam (ABC) published their full year results this morning. I have commented negatively on this company as a holder of the shares in the past, particularly after the last AGM in which I expressed concerns about the cost and delays to the major Oracle ERP system which they were building to replace legacy systems. Clearly over budget and running late. I was also not impressed by the failure to answer questions by the Chairman.

Now we see the real outcome – namely a write-off of £12.8 million on the ERP project. That is actually for work on the new Oracle cloud ERP system “following a detailed review of this programme undertaken during the year”. This is what they also said in the announcement:

“With the installation of the latest modules of our global ERP system, we have concluded the programme that initiated in 2015/16 to provide more scalable back-office systems at Abcam. Many global functional areas have been improved by the programme including process and data management in Human Resources, Customer Experience, Finance, and non-stock Procurement. We are already seeing benefits to scale, better data and better controls from these changes.

Manufacturing and Warehouse Management remain functional areas not yet addressed by this IT upgrade programme. Following an extensive review of business requirements and the current state of Oracle Cloud software as well as other best-in-class software providers, we have decided to make some changes to the approach and software used in these areas.”

This looks to be putting a positive gloss on a very negative result. Clearly the failure to implement Oracle for manufacturing and warehouse management including a write-off of work put in on that project, or so it appears, is a major and costly failure. They are now back at square one.

The overall financial results show that revenue is up 9.2% but profits are down by 28% on the reported figures. Even after the write-down mentioned above, the intangible assets on the balance sheet increased slightly and £22.7 million of cash was spent on the purchase of intangible assets, i.e. software development expenditure capitalised no doubt.

This looks to be a typical example of a “big-bang” approach to IT project development failing to deliver the goods, particularly in critical areas of the company’s operations. At least the company seems to have finally accepted that this project was misconceived and needed a major rethink.

Roger Lawson (Twitter: https://twitter.com/RogerWLawson )

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