“The value for this is $35,000 for licensing components,” ITS Director Keith Durbin told the Budget and Finance Committee. Michelle Hernandez-Lane leaned over and whispered ”$35 million” and Durbin corrected himself. “…$35 million for licensing components for five years.”
NASHVILLE, TN –Metro’s Information Technology Services (ITS) has let the Oracle software company gouge the city for at least $5 million in a $65.5 million deal to do a makeover of the city’s computer-based information and accounting system.
ITS Director, Keith Durbin, declined to be interviewed about the Oracle R12 software package the City bought from Mythics, Inc. last year for $35 million. It was a sole-source contract. Metro has signed other Oracle contracts totaling $30 million and a $500,000 contract for Oracle consultants.
Sources tell the Tribune that the new software, Oracle R12.2, doesn’t work as easily or as well as the old JD Powers EnterpriseOne system (EBS). Oracle owns both those products and won’t support the EBS system after December 2019.
Oracle is ending technical support for a key feature of the EBS system that Metro needs to process W-2 and 1099 forms of its 24,000 employees. And in doing so, Oracle forced Metro to spend more money. This is an example of planned obsolescence: designing a product with an artificially limited useful life, so that it becomes obsolete after a certain period of time.
Once Metro became a captive Oracle client, it was forced to buy new. Except it isn’t even new. Oracle’s R-12.2 system went on the market in 2013. It’s 7 years old. Oracle’s latest software version is 12.2.9. We asked Durbin for a copy of the old EBS contract and if Metro will get free upgrades under the new contract. He did not respond by press time.
“We haven’t done it on Oracle this time that I’m aware of but we do it on other major systems.” ITS Director Keith Durbin
No Due Diligence
According to Katie Lentile, Cooper’s Director of Communications, Metro will get software upgrades but have to pay for them. She provided the Tribune with a history that listed the benefits of the R12 software. What she didn’t tell us is that Metro had no choice but to buy from Oracle because Durbin didn’t shop around. That’s kind of like signing up with Comcast even though you don’t like their service.
The 5-year $10 million hosting contract with Oracle was a renewal of the previous one, also for five years, that only cost $5 million. If that happened to your average Comcast customer, they’d be over with AT&T in a New York minute.
The Oracle R12 system is not supposed to require any new employees. But MNPS has already hired two people and HR will put on additional workers, too.
Durbin didn’t tell the Council Budget and Finance Committee that and he didn’t provide a price list on the details of the contract either. Those details are key to understanding how Oracle monetizes its products by selling licenses, software updates, and support for its suite of products.
Oracle charges for how many times or how many people use its software. It’s not like buying MS Word, then typing an unlimited number of letters and getting free upgrades forever. Oracle has ways to make money from everything you do with their software. In this sense, Oracle makes you pay twice.
On October 1, 2018, Durbin told the Committee that Mythics, the Oracle reseller, was one of the few companies that could meet Metro’s software needs across all city departments, schools, and the courts. He didn’t mention any other resellers or any other software systems like Oracle’s R12 that would fit the bill. Oracle has many competitors like IBM, Microsoft, and Teradata.
Denver is paying one-third what Nashville is paying for basically the same services.
Workday, Inc. is a software company based in Pleasanton, CA, not far from Oracle. Workday’s contract with the City of Denver runs five years and is worth $10 million. The software package includes payroll, Human Resource, financials, and cloud services. It includes training, too. Denver and Nashville are about the same size and both have Metropolitan governments.
In for a Penny, In for a Pound
At Large Councilman John Cooper asked Durbin how much money Metro departments had already invested in the Oracle platform. Durbin estimated the amount to be tens of millions. His message was: in for a penny, in for a pound.
District 34 Councilwoman Angie Henderson then asked Durbin and Finance’s Michelle Hernandez-Lane if they had checked with other cities to make sure Metro was getting the best possible price.
“We haven’t done it on Oracle this time that I’m aware of but we do it on other major systems,” Durbin said. Cooper asked Durbin if the Oracle contract was the largest Metro software contract. “I would say the answer to that would be ‘yes’,” Durbin said.
So Durbin didn’t bother to check prices on the city’s largest software contract. We don’t know if he checked with any of Oracle’s many competitors, like Workday, Inc. to see what they could offer. He has not responded to numerous queries about the Oracle deal.
The Mythics (Oracle) contract Metro officials signed is 65 pages long. The pricing section, Exhibit C, consists of a single page without any prices listed.
Cooper’s office said that those costs and license fees were provided in Oracle’s bid quote. So Procurement knew but didn’t share the information with the City Council that approved a $35 million contract without knowing what the city was buying and with no other offers to compare it to.
Budget Meetings Are Pro Forma
At the October 2018 budget meeting, Hernandez-Lane told the committee they would do some research and get back to Henderson with comps. They never did.
The council approved the contract the very next day and Mayor David Briley signed it a day later. And just like that Metro dropped $35 million on software, when similar software could be bought from Workday at a much better price.
Durbin was derelict to withhold information and he was negligent for not doing due diligence to shop around.
Durbin decided to stick with Oracle as early as 2015-16. The 2017 contract with CSS International, Inc. was a $20 million buy to install Oracle’s software and migrate data and operations from EBS to R12 and Metro paid for that. Durbin should have made the $35 million contract conditional on Oracle doing the migration on their dime—or tell them to take a hike.
Instead, he convinced Metro officials that it was a good deal. Those contracts have a 30-day exit clause. Metro Council should vote to exercise it before Oracle doubles its prices again or starts charging for things we’ve already paid for. If they do, Durbin can’t be trusted to sound the alarm.
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The Mayor’s office, Metro Clerk Macy Hill, and Finance’s Sean McGuire provided invaluable help and insight for this article.
