NCC Group takes £6.9m hit for ‘failed SAP implementation’

NCC Group, the provider of escrow and assurance technologies, has had to revert to an old group-wide IT system after suffering problems implementing an upgrade.

As a result, the company has had to write off £6.9 million in the final year to 31 May 2012, which includes the expected £900,000 cash cost of reverting back to the old system over the next three months.

Citing legal reasons, NCC declined to reveal details about the suppliers for both the old and the new system. It also refused to comment on the systems integrator. However, on 7 July 2011, in its preliminary results for the year to 31 May that year, the company reported:

“Capital expenditure remained tightly controlled at £4.5 million, which predominantly relates to the upgrade of the group’s core IT systems to SAP.

“The project, which has been beset with problems, is now due to go live in November 2011, over a year late. The rollout will complete during 2012, with a further £1 million capital costs required to complete the project.”

A spokesperson for NCC said that the company could not confirm or deny if the new system was from SAP, and said that the one the company has reverted to “has been used for many years” and was “tried and tested”.

In its announcement today, NCC said that it had selected a technology supplier to specify, install and implement a fully-integrated solution across the whole business in 2009. The new system was intended to provide a complete integrated solution for all the group’s business processes, as well as a systems backbone for NCC as it grew in Europe and North America.

The new system was implemented in NCC’s UK escrow business and its finance department in March 2012, “following a protracted period of extensive testing”. A pilot project was also introduced into a small part of its assurance division.

“Since going live, the new system has caused significant disruption across the whole group that, unless addressed, was going to impair business efficiency, despite comprehensive efforts to make the solution work,” the company said.

“Furthermore, there is now no prospect of an integrated solution being delivered for the assurance division to meet its essential resource scheduling requirements.”

Consequently, NCC has reverted back to its previous IT system “while it determines whether the issues can be satisfactorily remedied”.

Rob Cotton, NCC’s group chief executive, said: “This is a very frustrating position to be in. We have invested considerable amounts of time and resource into the new system but have had to take the hard decision to revert to our old system as the new simply wasn’t measuring up to our needs.”

In January 2010, NCC said in its interim results for the six months to 30 November 2009 that the implementation of SAP was expected to complete in October 2010.

This completion date was then moved to November 2010, as NCC reported on 5 July 2010, in its annual results for the year ended 31 May 2010, that the system was due to go live in November 2010, with the rollout scheduled to complete in January 2011 “on time and budget”.

However, as mentioned above, the SAP implementation has been “beset” with problems, with the rollout delayed yet again, to 2012.

TechMarketView analyst Angela Eager noted that it is not known whether the problem is due to the software or the implementation process.

“In these situations, the answers are never clear-cut,” Eager said.

“If we hear of NCC going down the legal route in the coming month it will tell us more. No action could be equally informative.”

She added: “We noted in the statement that NCC says there is ‘no prospect of an integrated solution being delivered for the assurance division to meet its essential resource scheduling requirements’.

“Assurance is a growth area and NCC has struggled with staff retention so this is the last thing NCC needs now that it is getting into shape.”

Copyright © 2012 IDG Communications, Inc.

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