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Abcam faces shareholder anger over botched $165m ERP software project

The digital transformation project has run massively over budget, and the business founder is calling for accountability.

By Matthew Gooding

The founder of UK life science supplier Abcam is calling for an EGM and changes to the company’s board after the implementation of an ERP software system ran $130m over budget. Jonathan Milner says this is indicative of the company’s board having “lost focus on governance, execution, and cost control”.

Abcam provides antibodies and other materials to the life science industry. (Photo by BSIP/Universal Images Group via Getty Images)

Milner holds 6.3% of the company’s shares, and this week wrote an open letter to other stockholders calling for an EGM where he would propose to step in as the company’s executive chairman to “help restore Abcam’s financial and operational performance and create shareholder value by giving the company more effective board-level leadership”.

Abcam is a supplier of antibodies, proteins and other cells and materials to the life science industry. Headquartered in Cambridge, it is listed on Nasdaq and has a market cap of just under $3.7bn.

Abcam’s botched ERP implementation

In his letter to shareholders, Milner outlines how he believes the company he founded in 1998 as the “Amazon of antibodies” has lost its way in recent years. Chief among his complaints is the implementation of the ERP system, which he says has cost the company time and money.

He writes: “In 2015, Abcam aimed to implement an ERP software solution to manage planning and process integration. The original estimate of the ERP integration was £23-29m and was expected to go live in 2017.”

Abcam told shareholders in its 2016 annual report that it had chosen to use Oracle’s cloud-based Fusion ERP software, with IBM Consulting working as implementation partner.

But in the company’s latest annual report, for the year to the end of December 2022, CEO Alan Hirzel explains that when the system went live in September it caused “disruption to our ability to serve and invoice customers”. Hirzel said: “During that period, our primary focus was to do everything we could to support customers whilst resolving data, software, and design issues that were compromising performance. We have apologised to those affected and we appreciate their understanding of the one-off nature of this change.”

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Hirzel added that he believes the disruption is “largely behind” Abcam, and said: “As with any process, we will seek to make further improvements to delivery on promise and invoicing as we learn to utilise and refine our new systems.”

But Milner argues the ERP integration remains incomplete and ineffective, and has cost Abcam more than $165m. “This is an overspend of more than $130m under the current management team,” he said.

Milner also writes that for two consecutive years the ERP system “has failed and resulted in lost revenues, customers, and market share”. He says: “If elected, I will lead a thorough review of the ERP system, its inflated costs and failed execution. This analysis will lead to an action plan which will further restore Abcam’s financial performance.”

Tech Monitor has approached Abcam for comment. The company said in a statement on 30 May that its board had met with Milner “in good faith over the past few weeks to discuss how his expertise can be used at the board, and continues to seek a resolution that would benefit all shareholders and avoid an unnecessary and distracting EGM at a significant cost to the company and its shareholders”. It said Milner was offered a non-executive role on the board, which he declined.

Digital transformation at Abcam

Abcam has significantly grown its IT team over recent years, and when CTO Dan Phelps spoke to Tech Monitor in 2021, it had assembled a digital division of more than 160 people, with staff in the UK, US and Holland, where the company has a digital hub.

Explaining the company’s digital transformation challenges, Phelps said: “The business was effectively run on two monolithic applications; there was the whole front end, our e-commerce site, which was one big block. And then everything else in the business was running on in-house ERP.

“The challenge for us was how to convert a traditional IT department to a digital team and then how do we evangelise digital in the rest of the business.”

The company had moved to a new distributed architecture, Phelps said, with “micro front ends for different parts of the web experience”. Among the other digital innovations introduced by the team was an API layer with more than 50 APIs designed to allow easy integration of the company’s different systems.

Read more: Waitrose IT problem causes empty shelves at supermarkets

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