1 STAFF REPORT
INFORMATION TECHNOLOGY
DEPARTMENT
DATE: June 25, 2024
TO: Justin Hess, City Manager
FROM: Kevin Gray, Chief Information Officer
By: Marina Kernes, Assistant Chief Information Officer
SUBJECT: Approval of a Five-Year Enterprise Licensing Agreement f or Oracle Enterprise Performance Management (EPM) Cloud through Oracle, Inc.
RECOMMENDATION
Approve a new five-year Oracle licensing agreement for its Cloud Enterprise Performance Management ( EPM) product through Oracle’s Enterprise Licensing Agreement administered by Oracle, Inc. (Attachment 1).
BACKGROUND
In 2014, the City of Burbank (City) and Burbank Water and Power (BWP) entered into an Enterprise Agreement (EA) to use Oracle’s onsite EPM platform (Hyperion) for financial recording and reporting. This software allows the City and BWP to create and manage budgets, allocate funds, and provide budget forecasting. The City and BWP have continuously renewed the EA since its inception in 2014. Currently, the City and BWP are on a cycle of one-year EA renewals.
Prior to entering the EA, the Financ ial Services and City Treasurer Departments performed these tasks manually, through copious spreadsheets and hard copies, leading to longer turnover times and higher risk of user errors . In the time since the EA was established, the Hyperion software discontinued support, meaning that the software itself is subject to limited updates and upgrades from Oracle, and the data within the platform is at a higher risk of security instability. The supported, up- to-date version of the EPM software is a cloud version, which not only maintains current financial standards and security requirements, but also offers additional features to streamline many processes that are still done manually as they do not exist in the Hyperion version of the software.
DISCUSSION
Key portions of the City’s core financial processes for budgeting, allocations, payroll, and fund distribution are based on Oracle EPM. Establishing this new EA provides significant functional growth and security and positions the City to benefit from the next generation of Oracle’s EPM software. Th e agreement also ensures that the City has access to
2 Oracle’s latest software technology, allowing IT to maintain current security patches which is imperative given ongoing security threats and compliance requirements . Additionally, moving to cloud software ensures that the City’s EPM instance is always up to date, as it will not require time-intensive upgrade patching that could take lengthy development time and testing. Other benefits of the EA include position budgeting automation, expedited budget book creation, and enhanced financial reporting.
IT reviewed the following options prior to determining its recommendation of establishing a new EA:
Option 1: Continue with the City’s existing EA for Hyperion; the City would not receive benefits, including ongoing software security patches and version upgrades, without contracting third-party software development vendors for multi- month projects to implement these patches and upgrades that could lead to days of downtime for the system. Additionally, there would be no cost protections for the City when paying for continued service or new licenses, as the City can only renew Hyperion for contracts longer than one year and Oracle support costs would bill at a rate increasing in cost by at least 6% year -over-year. Finally, the onsite version incurs hardware, server, and system administration costs. The total for 5 years of Hyperion support from Oracle, including additional costs incurr ed from hardware upgrades, software upgrades, and third-party system administrator and managed services costs, would be over $1,241,451.54.
Option 2: Establish a new EA for EPM cloud, which includes simplified version updating and automatic patching with no downtime, plus five-year cost protections to prevent rate increases. Additionally, the cloud version does not have any onsite hardware or maintenance costs. The total for 5 years of the cloud application, which only incurs annual subscription and managed service costs, would be $860,000.00.
By proceeding with option 2, the initial cost avoidance is calculated at approximately $381,451.54 over a five- year period. Long- term savings would prove to be much more significant given the lack of physical hardware upkeep and all hardware being maintained and updated by Oracle as part of the subscription cost. Additional reductions could be found in the elimination of third-party vendor support incurred by making manual software upgrades.
Some less tangible but no less vital improvements with the new EA for EPM cloud include the increase in security granted by the cloud version, which guards against system infiltration. A lack of downtime between updates and a more expedient workflow to keep the system current ensure optimal system performance and accuracy of all application features. The cloud option reduces the risk of the City falling out of version support due to easier updates and upgrades, ensuring better support from Oracle.
As managed services are provided by non- Oracle vendors, a targeted cost comparison for core services would be approximately $641,451.54 for option 1 (Hyperion software, hardware upgrade, and system administrator) and $560,000.00 for option 2 (EPM cloud subscription) over 5 years, a savings of $81,451.54.
3 ENVIRONMENTAL REVIEW
This a pproval has no potential for resulting in either a direct physical change in the environment, or a reasonably foreseeable indirect physical change in the environment, and as such, is not a “project” subject to the requirements of the California Environmental Quality Act (CEQA) 14 Cal. Code Regs Section 15378.
FISCAL IMPACT
The fiscal impact of establishing the EA is $112,000.00 per year to be paid annually over the five-year term, totaling $560,000.00 . The totals do not include any new purchases that may be made during the term of the renewed EA. Funding for year one of the Hyperion EPM Cloud implementation licenses have been budgeted in Fiscal Year (FY) 2024-25 annual budget the Internal Service Fund 537 (Computer Equipment Replacement Fund) Account number 537.IT 04B.15112.0000.24992.00000. Ongoing software as a service (SaaS) maintenance for subsequent renewal periods will also be collected in Fund 537.
CONCLUSION
Staff recommends Council authorize the establishment of a new EA with Oracle in the amount of $560,000.00 for a five-year term effective July 1, 2024, through June 30, 2029.
ATTACHMENTS
Attachment 1 – Oracle Ordering Document
Attachment 2 – Oracle Cloud Services Agreement
Attachment 3 – Oracle Cloud Services Agreement Amendment 1 Attachment 4 – Oracle Cloud Services Agreement Amendment 2