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Fe)
FUJITSU
THE POSSIBILITIES ARE INFINITE
Proposal to Post Office Limited
For
Extension of
the Horizon Contract
18 September 2002
Prepared By Liam Foley Tony Oppenheim Martin Riddell
Clive Underhill Tony Drahota
Version: 1
Document Reference: BD/PRP/008
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Table of Contents
1 MANAGEMENT SUMMARY...
1.1 Post OFFICE REQUIREMENTS.
1.2 Fusirsu RESPON'
1.3. THE PROPOSAL...
1.4. REVENUE UPSIDE
1.5 NEXT STEPS.
2 THE NEW WAY.
2.1 GOVERNANCE.
2.2 END TO END SOLUTION...
2.3 FUJITSU SERVICES DOMAIN CHANGES..... .
2.4 CHANGES OUTSIDE THE FUJITSU SERVICES DOMAIN......... . 13
2.5 NEW OPPORTUNITIES..........
2.6 THE WAY WE WORK TOGETHER R (LANDSCAPE)...
2.7 OPERATIONAL SERVICE
3. THE PROGRAMME...
3.1 INTRODUCTION...
3.2. TACTICAL STREAMLINING OF CURRENT HORIZON........ - . 22
3.3. TARGET ARCHITECTURE..........0.0-- . ane co nen sesetetetssssssereeees 20
3.4 MIGRATION TO TARGET ARCHITECTUE JRE. 34
3.5 NEW CAPABILITIES.
3.6 HORIZON MAINTENANCE........
3.7 ROADMAP PLAN...
3.8 GOVERNANCE / PRO
4 CONTRACT APPROACH
4.1 PRINCIPLES.
4.2. APPROACH TO SERVICE DELIVERY.
4.3. CHANGES TO TERMS AND CONDITIONS.
4.4 KEY ASSUMPTIONG.........
4.5 SPECIAL DISCOUNTS AND BI
5 OPERATIONAL SERVICE
5.1 INTRODUCTION. 52
5.2. KEY ASSUMPTIONS. 52
5.3. ACHIEVING COST REDUCTIONS.......0:c00c000
5.4 SERVICE VOLUMES...
6 SIAND APPLICATIONS SERVICE.
6.1 INTRODUCTION...
6.2. KEY ASSUMPTIONS.
6.3. ACHIEVING CosT REDUCTION.
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6.4 CHARGING FOR SI SERVICES.
6.5 SI SERVICE MANAGEMENT.
6.6 RESOURCE FORECASTS.......
7 FINANCIAL SUMMARY...
7.1 INTRODUCTION...
7.2. OPERATIONS CHARGES
7.3 INFRASTRUCTURE CHARC
7.4 SI CHARGES...
7.5 SPECIAL DISCOUNT AND OTHER CHARGES/ CREDITS
APPENDIX 1 — LIFECYCLE PROCESS.
8.1 INTRODUCTION...
AVAILABILITY
8.6 WORK PACKAGE REQUIREMENT SPECIFICATION RELATIONSHIPS. sess 89
8.7. PROCESS MODEL CONSTRUCTION..... . ssussnese sssstnesstntces 91
APPENDIX 2 - GOVERNANCE.
9.1 INTRODUCTION. 94
9.2 PROPOSED GROUPS.......:ccsssssstssistnniststiststieisisiiststisisiieisintisistiiistsistsietseseieeneses 94
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Accuracy: Fujitsu Services endeavours to ensure that the information contained in this
document is correct but, whilst every effort is made to ensure the accuracy of such
information, it accepts no liability for any loss (however caused) sustained as a result
of any error or omission in the same.
Prices: Fujitsu Services reserves the right to vary these prices dependent on further
analysis and impacts, in the event that Fujitsu Services undertakes this work under a
contract with Post Office.
Copyright: © Fujitsu Services Limited 2002. All rights reserved. No part of this
document may be reproduced, stored or transmitted in any form without the prior
written permission of Fujitsu Services.
'™ indicates registered trademark.
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1 Management Summary
Post Office is experiencing a major change in its operating and commercial environment.
It must transform its cost base, processes and behaviours to meet the challenge. It
requires its strategic partners to recognise this customer need and has invited Fujitsu
Services to engage in effecting this turnaround.
Fujitsu Services thanks Post Office for the opportunity to submit a proposal for the on-
going operation of the counter automation across the UK network.
Following many discussions with Post Office over the past months, it has been readily
agreed that if we are to have a mutually beneficial longer-term relationship, then change
is a must. Post Office business plans demand radical action to turn the business round
and see a return to profitability.
Currently Post Office spend on IS exceeds 23% of revenue. This is against industry
yardsticks of 3-7% for retail and 10-16% for banking. While Post Office does not
naturally fit neatly into either sector, rather it is more unique, the key point is that
current IS costs are too high and more than the business can afford. Hence Post Office
has spent a considerable time reviewing its overall cost base and not only taking internal
steps to enable cost reduction but exercising each of its suppliers to do likewise.
Fujitsu Services has clearly recognised the need to respond to Post Office requirements.
However, there are clearly two ways to address cost imbalance — either take cost out or
increase revenue. This proposal aims to address both.
Horizon is now installed across all 17,500 UK post offices. The current service runs very
effectively and serves the need of the customer, the postmaster and Post Office and their
clients. Many aspects of the service were defined when there was a different purpose for
automation: that of securely paying benefit to 19 million benefit customers. The decision
in 1999 to move to benefit payment via ACT has changed that and accordingly, many of
the stringent aspects of the current service could be deemed to be no longer necessary.
The clear challenge has been, therefore, to identify the possible changes to be made, to
assess the savings arising from these changes and to estimate the costs and timescales of
moving to a new regime for the future.
Equally important, when making these changes is the need to arrive at a service that is
more responsive to change. Currently, changes to the existing service are lengthy and
expensive due to the need to embed complex processes and to undertake full regression
testing. We are aiming through this proposal to arrive at a more flexible platform,
capable of change, with reduced operating charges and with clearly defined operational
boundaries.
1.1 Post Office requirements
We have identified the following as the key drivers governing change:
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Qa Lower operational charges year on year
Post Office wish to see a reduction in operating charges year on year from 2002/03
towards a level of spend more commensurate with similar industry types.
a Flexibility of contract — unbundling
A clear requirement has been expressed to see the separate parts of the contract
charged for on an individual basis. Currently, there is a single operational service
charge for Horizon. Unbundling allows Post Office to see clearly the price paid for
individual components of the overall service.
Q Minimum System Integration (STI) commitment
Post Office has expressed a clear requirement that they do not wish to contract for a
significant Systems Integration element in advance of clear requirements being
known. Post Office also wishes to have the flexibility to have other suppliers bid for
development business. Fujitsu Services understand this wish and support it.
a Speedy Implementation of new services
Post Office needs to respond to market pressures in a way not seen in the past. This
will necessitate a faster response to new market opportunities and the requirement to
achieve faster product automation on Horizon.
a Changed terms and conditions
Post Office has signaled an intent to implement changes to levels of liability and to
Service Level Agreements if this helps to reduce the overall operational and
development cost of Horizon.
1.2 Fujitsu Response
This proposal is our detailed response to the above requirements. Our financial proposal
can be summarized as follows:
a A 30% reduction in operating charges over the life of the revised contract
a A clear split between operate and systems support with a breakdown showing the
cost for major service elements
a A commitment to a level of investment in re-architecture within the Fujitsu Services
domain
a Acommitment to a fixed level of support
a No change to the availability fees.
If the current contract were to be extended as is, the expected charges (exc. VAT) over
the period to 2010 would amount to £840million.
This revised approach requires an overall investment of £750million but provides the
following additional benefits:
a Re-architecture of internal systems to allow lower operational support charges
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a A reduction in the Customer Service headcount while maintaining a high service
level
a_ A reducing core support team from the current level of 150 staff ending up with a
core team of 90
Up front discount of £30million in the first two years
An allocation of spare Systems Integration capacity of £40million from the fixed
support level over the contract term
The summary financial picture is as follows:
FROM JANUARY 2003
TOTAL 02/03 03/04 04/05 05/06 06/07 07/08 08/09 ‘09/10
TOTAL OPERATE 531 117 74 65 60 57 54 53 52
TOTAL SI Commit 141 6 25 24 16 16 16 #16 = «21
NWB to go 6 4 1 0 0 0 0 0 0
Impl. SI & Architecture 13 1 3 7 2 0 0 0 0
Availability fee 88 38131 27siOO 0 0 0 0
DISCOUNT -30 Gs" 10 0 OO 0
TOTAL REV (new pricing) 750 145 #119 113 87 73 71 70 73
TOTAL REV (old pricing) 840 159 128 119 90 88 86 85 84
DIFFERENCE 90 14«10—~Ct—i*d 30 15 15 0 160 11
Spare SI capacity available Foc -40 2 7 7 5 -5 5 5 5
Note: 2002/03 Operate figure is for full year
1.3. The Proposal
The structure of this proposal is as follows:
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Section 2: The New Way outlines, at a summary level our approach to a new way of
working, proposing new governance structures, outlining the changes to operational
service, proposing a fresh approach to end to end systems design and detailing a number
of new business opportunities
Section 3: Programme Plan details our approach to re-architecture and proposes
timescales in which change may be affected.
Section 4: Contract Terms details the key assumptions regarding changes to terms and
conditions
Section 5: Operational Services details the principal areas within the current services
operation within which changes can be effected. Some of these changes over time will
come about as a result of re-architecture. Many others arise because of proposed
changes to liabilities and SLAs.
Section 6: Systems Integration Services details our approach to development and
integration projects in the future. This encompasses the proposal of core services
reducing over time and the new concept of spare core resource being available to Post
Office for new projects.
Section 7: Financial Summary details the revised financial proposal taking the contract
term up to March 2010. It also breaks down the operational costs into work package
breakdowns so that a clear price of the constituent services can be seen.
Appendices:
Appendix 1 contains detailed descriptions of the new Landscape processes that are
proposed in order to make our on-going relationship more effective.
Appendix 2 contains jointly agreed proposals for new governance groups between Post
Office and Fujitsu Services.
1.4 Revenue upside
We have in section 2.5 outlined a number of new opportunities that will create new
revenue streams for Post Office. These proposals are not simply related to new products
on the Horizon platform but span other areas such as expanded use of the
communications network.
In its last proposal, Fujitsu Services proposed a revenue/cost saving sharing approach to
new opportunities. Fujitsu Services is supportive of a risk/reward approach being put
into place. This provides encouragement to both companies to accelerate process within
each company to achieve faster time to market from idea creation to product
deployment.
We propose that should we undertake development in pursuit of clear cost savings, then
Fujitsu Services are prepared to undertake development at cost in return for a 10% share
of the cost savings.
For new product development we propose a similar approach of development at cost, in
return for a 5% share of the new business revenues.
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1.5 Next steps
a We propose that we move towards signature of a formal heads of agreement by end
October
We work together to agree a new contract by 31 December
Post Office grant an Authority to Proceed covering the immediate costs of the
agreed steps in this proposal
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2 The New Way
It has been widely recognised by both Post Office and Fujitsu Services that the current
way of doing business is ineffective and draws out behaviours from both parties that are
not in line with best practice and do not help to get the best out of each other. Rather,
they get in the way of speedy, smooth progress. This is in neither company’s best
interests.
We have both agreed that this must change if we are to have a mutually beneficial future
relationship. Fujitsu Services is fully committed to helping Post Office achieve marked
reductions in operating expenditure. This proposal focuses on a new approach to
delivering IS/IT services with significantly lower cost, higher productivity and speed of
delivery.
We are proposing that key changes must be made in the following areas:
Governance
End to End Solution
The Approach to New Opportunities and to Risk and Reward
The Working Processes between our two companies
Operational Service
o oo O Oo O
Commercial Terms and Conditions
2.1 Governance
The joint work previously undertaken highlighted the need for better governance.
Governance is defined as the direction, control and measurement of activity towards
business goals. Both Post Office and Fujitsu Services support this. Governance starts at
the top and works its way down through both organisations.
Key working relationships must also be examined. The best working practices are where
there is clear joint working where respective positions are understood and there is a
clear goal to work towards. The "Your Guide" programme was a clear example of what
can be achieved through this way of working. More recently, there have been more
examples of this type of approach with the evaluation of the 16 requirements and
separately with the architecture work.
We are proposing that the following groups meet on a regular basis to ensure maximum
return from our future relationship. A full description of each group is given in Appendix
2.
a Board to Board
An annual meeting between the boards of both companies to share ideas on future
direction and enable direct relationships to be built at board level.
a Executive Forum
This group is principally responsible for defining strategic direction and vision and
aligning business objectives and direction. This group must meet regularly to
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maintain momentum and ensure that direction is being given and is consistent with
the direction of Post Office business.
a New Business Forum
Responsible for generating and scoping ideas and opportunities to achieve joint
business objectives and ensure continuous business improvement. Fujitsu Services
proposes that there be significantly greater involvement at the business level than
heretofore. Joint scooping of business opportunities can lead to earlier engagement
and faster initialisation of an automated solution.
a Joint Architecture Forum
Responsible for requirements analysis, solutions visualisation and migration planning
Qa Release Planning Forum
Responsible for agreeing high level planning assumptions for future developments of
services
a Projects Board(s)
Responsible for individual management of larger projects or specific releases
a Service Management Forum
Responsible for reviewing performance against contracted service levels, resolution
of operational issues, release authorisation and ensuring continuous service
improvement.
a Commercial Forum
Responsible for the commercial and contractual governance of the business.
2.2 End to End Solution
The principal aims for evolving the Horizon Architecture are:
a Reduction in cost of ownership of the solution (lower operational development and
support costs)
a Greater potential for change (supporting rapid introduction of new or changed
products)
a Reduction in complexity to reduce development & testing costs
a Minimal disruption in the outlets.
We have examined each area of potential re-engineering of the current architecture. Our
proposal is that areas clearly within the Fujitsu Services domain should be tackled
straightaway in order to release costs. Fujitsu Services is proposing that the following be
addressed within the overall operational costs of the Horizon service:
a Elimination of Dynix systems
a Introduction of ADSL
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Refocusing of existing data warehouse onto business information reporting
Relocation of the current data centres
Updating of counter software platforms to Windows 2000 and, subsequently, to
Web Riposte Essential
Areas that lie outside the Fujitsu Services domain (OPTIP, Cash Account) must be
reviewed, planned and actioned accordingly following detailed discussions with Post
Office. Fujitsu Services continues to believe that major savings are available through end
to end re-engineering but this work is clearly dependent on business decisions within
Post Office.
2.3 Fujitsu Services Domain changes
Our proposal will necessitate changes in the following areas:
2.3.1 Host Platforms
We propose that the content of the existing Sequent servers will be migrated to more
powerful but less expensive servers running under Solaris. These have substantially
lower running and support costs, and avoid potential problems caused by the increasing
lack of support for Dynix-based third party products.
The Data Warehouse, which at present is used primarily to process SLA calculations,
will be re-oriented towards a business support MIS. It will retain the current transaction
feed from the Host, but a wide variety of analyses will be provided to support Post
Office's business processes. The model for this will be the MIS reports introduced for
NBS and DCS.
2.3.2. Counter Hardware enhancements
We have given close attention to the need to undertake a complete technology refresh.
On balance, we deem this not to be necessary but cannot rule out the need to
increasingly review this over time. However, in order to take advantage of new
technologies, e.g. ADSL, there are hardware upgrades envisaged in support of the
various initiatives and new business opportunities.
To enable introduction of ADSL, we will need to install a DSL card in the Gateway PC
at selected Outlets.
Synchronizing upgrade activities and hence eliminating unnecessary engineering visits
can achieve significant savings. The schedule of upgrades will be refined once the Post
Office business plan is finalized and understanding of approved new developments is
gained.
2.3.3, Data Centre Changes
We are proposing to move from the current dual Data Centre configuration to a single
new Data Centre. This will be enabled by modifications to the recently enhanced fail-
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over mechanisms, to ensure a smooth migration with minimal risk. It should be noted
that the new Data Centre will retain systems resilience, but disaster standby capability
will rely on redeployment of Fujitsu Services test rig configurations to provide the on-
line services should a total disaster strike the Data Centre.
2.3.4 Counter Changes
There are two key enhancements to the software environment of the Counters proposed:
a The introduction of new counter applications (based on WebRiposte Essential ™,
together with new application components)
a An upgrade to Windows 2000 (or later) to exploit the latest Microsoft workstation
technology
These two approaches ensure that we are taking full advantage of the latest technology
and overall improving our ability to intercept standard application packages and
minimise the cost and time needed to introduce new products.
2.4 Changes outside the Fujitsu Services Domain
There are a number of significant areas of possible change that either exists outside the
current Horizon domain or span domains creating unnecessary boundaries. Re-
engineering of these systems will lead to significant savings in Post Office's end-to-end
processes. For example, the potential saving through eliminating current back end
systems on the Post Office side has been estimated at some £40million per annum.
2.4.1 Removal of OpTIP
OpTIP currently receives a full detail of transactions carried out on Horizon, acting as a
router of the required information to other internal Post Office systems (e.g. CBDB). By
customising the Horizon feeds for the consuming systems and routing these new feeds
directly, the majority of OpTIP functionality would no longer be required. The remaining
functionality can be provided by other means, facilitating a significant saving by
elimination of the whole OpTIP system.
To realise maximum savings, it is suggested that Post Office should immediately initiate
a design study to assess the work required within Horizon to enable OpTIP to be
eliminated as soon as possible.
2.4.2 Improved processing of Reference Data
There are several systems within Post Office and Fujitsu Services that act as master
sources for various items of reference data. The process for changing and evolving
reference data is cumbersome and contributes to delays in introduction of new products
as well as adding to costs.
It is proposed that a new facility is developed which straddles the Post Office — Fujitsu
Services boundary and provides a more efficient, user-friendly and accurate support for
creating, validating and approving change to reference data.
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2.4.3, External Links
Current client links from Horizon are top heavy, both in terms of security and SLAs. We
are proposing a simpler web based service where the client will ‘pull’ his data down
rather than we ‘push’ it down as now. This will enable a more cost effective approach to
new clients, taking away the need for expensive up front investment in new hardware
and network links. Options exist on the precise implementation of this service, mainly
around whether use can be made of existing Consignia links or whether it makes more
operational and control sense to deliver the service from within the Horizon domain.
2.4.4 Network Banking Engine
Consideration should be given to elimination of the current NBE. Basically, the NBE
operates as a switch between the Horizon domain and Link, CAPO and potentially the
banks. It is worth considering whether this additional link needs to be in place and
whether the current costs can be saved. Again, the decision to have an NBE was made
for requirements that no longer exist.
2.4.5 MIS
Currently, there are two MIS developments, one on the Post Office side and one within
Fujitsu Services. Each is dependent on the same single source of data. We propose that
consideration be given to at least placing the running of these systems within the same
domain. Separately, we should examine the true purpose of having two separate MIS
systems.
2.4.6 Switching Streamline interface to IP from X25
Streamline, the Merchant Acquirer adopted for the Debit Card service, currently only
support X25 communications. However, it is their stated intention to support TCP/IP,
which would facilitate the adoption of a cheaper network solution for the Debit Card
Service.
2.4.7 Security & Risk Management rationalisation
An urgent review of threats for which Post Office needs to develop counter-measures is
required. Based on the outcome, a re-appraisal of Horizon security arrangements should
be conducted to determine the levels of security features and associated operational
processes that need to be retained. In particular, the amounts of audit, encryption and
digital signing of messages needs to be assessed.
2.5 New Opportunities
Post Office is committed to the expansion of its business through the introduction of
new products, either with clients or through innovation with suppliers. Fujitsu Services
can play a major part in this through working closely with Post Office in formulating
future client strategies or by developing and taking to Post Office innovative ideas that
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will generate new revenue streams or cause cost saving through better use of
technology.
Fujitsu Services is keen to explore ways of joint risk/reward sharing in relation to the
products identified below. This could take the form of Fujitsu Services bearing a
proportion of the development cost in exchange for a share of the down stream revenues
based, for example, on a charge per transaction.
2.5.1 New Revenue Streams
Examples of new revenue streams are:
aE Top-ups
The on line charging of mobile phones through all post office outlets. Not only does
this bring additional revenues to Post Office, it also potentially draws in a much
younger customer than is the norm, thus giving the opportunity for other product
sales to a new customer base.
A further approach to this could be to follow the An Post example and offer a top up
service through other retail channels outside of the Post Office network.
Consideration must also be given to enabling out of hours activity where many of the
current Post Office transactions are restricted by only being offered within the post
office opening hours.
a Talexus
With British Gas aiming to be the supplier of choice for pre-paid metering, Post
Office is in a unique position to take the lion’s share of this market as a service
provider to British Gas. Fujitsu Services can work with Post Office to maximise the
service offered and bring the product to market at a speedy pace.
a Entitlement Card
The Home Office has started the consultation process for entitlement cards in the
UK, due for completion 10" January 2003. The scope of the document is wide
ranging and covers many aspects of identity and authentication based on a plastic
card. The document does not propose any specific solutions but does demonstrate a
Government intention to introduce measures to reduce fraud and increase certainty
of identity as a service for Government and for industry, probably based on a smart
card. Government’s own figures suggest a cost of £3Bn for the service; this breaks
down into £136m for IT set-up costs, IT infrastructure costs of £363m, additional
staff costs of £62m, costs of processing applications of £608m, and the significant
additional costs for card production and maintenance. This represents a significant
sales opportunity for both Post Office and Fujitsu Services.
A joint approach to this opportunity brings a combination of technical skills,
government contacts and retail reach to this major opportunity.
a Loyalty Card
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28 million people per week come into a post office. This gives Post Office a massive
opportunity to develop a loyalty programme that will help ensure customer loyalty
but also help to increase product sales through better understanding of the customer
base, their needs and wants.
Escher already has a loyalty product deployed in other postal authorities, which
could be adapted to suit the specific needs of the UK.
2.5.2 Other Revenue Generating Proposals
In addition to the above revenue streams, there are further opportunities for synergistic
approaches to exploitation of the nationwide network. Some ideas that have arisen from
discussions between Fujitsu Services and Energis that should be explored further are:
a Home Highway Deployment
Currently, whenever a Post Office location changes, a new set of lines is installed.
This churn rate has been up to 10% per annum but under the Network Re-invention
project beginning next year this churn could rise to 15%.
It is proposed that instead of deploying the current infrastructure, a Home Highway
or Business Highway connection is implemented, still providing access to ISDN, but
also providing twin analogue lines at the same price. This would represent cost
reductions for Post Office Limited, and (potentially) increased revenues for Fujitsu
from the calls traversing the Energis Network.
a Lottery
The ISDN lines installed at UK Post Offices currently have an unused B-channel. As
a result, Camelot terminals could be deployed in these locations (possibly by Fujitsu)
without any network installation overhead. This could be established in such a way
as to utilise the existing well proven Pathway support arrangement.
Alternatively the ISDN D-channel could be used, although this may be financially
less viable as it would require a terminal equipment change or the addition of a
router per site.
a CCTV over IP
Traditional PAL/VHS CCTV systems are often proprietary, expensive and difficult
to network. CCTV systems are installed in some post offices but could be deployed
at more sites if the cost and technology were not prohibitive
There are a number of inexpensive CCTV cameras available today which output
video streams using standard IP and LAN technology. Many of the currently
available CCTV via IP systems are wireless compatible and the hardware often
retails at prices of the order of £50.
The cost of networking has previously prevented a centralised storage model, as
have bandwidth requirements. However, the bandwidth to serve CCTV is now of the
order of 32-64Kbits/s. In addition, the wider deployment of DSL makes higher speed
video more attractive as a security solution.
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Those post offices defined as being at risk of theft or vandalism (or requiring CCTV
monitoring for other reasons) could be equipped with CCTV IP devices allowing the
stored video to be centrally held in either Fujitsu Services or Energis data centres.
This will reduce the cost base of existing CCTV schemes and permit a wider take up
of CCTV solutions.
Q Wireless Post Office
In addition to the current estate of circa/about 17,500 post offices, there are
approximately 3,500 delivery offices around the UK. Often these are co-resident in
the same building, or literally next-door to a post office. Typically, a delivery office
is equipped with an ISDN line and one or more analogue phone lines, similar to the
post offices themselves. In the future, some post offices may be equipped with a
“Your Guide” terminal.
There may be some opportunity to rationalise the number of phone lines serving
these sites and services, generating cost reductions for Post Office and potentially
increasing services and revenues for Fujitsu Services and Energis.
In terms of an enabling technology, today’s Wireless LAN solutions can provide a
IMbit/sdata rate across a range of approximately 100 metres.
In addition to the above, BT have announced they will deploy a 4000-site radio ‘Hot
Spot’ network, allowing mobile users to log on to the internet using wireless
PCMCIA cards in laptops. BT judge that the time is now right to introduce this
facility and capability, and that there is a latent market that can be nurtured and
tapped.
These PCMCIA cards are becoming more prevalent as hot-desking workers are
equipped with these devices by their employers - the retail price for a private
purchase has dropped below the £99 barrier.
In addition, there has been a growth in the number of wireless devices appearing in
the market to take advantage of the ‘802.11b’ wireless standards, such as wireless
CCTV cameras.
By implementing a wireless network where the post office is near the delivery office,
the delivery office can share the post office’s Horizon communications links, using
either the spare ‘B’-channel of the ISDN line or a portion of a DSL or IP Select
service.
2.6 The Way we work together (Landscape)
Significant impact on costs currently incurred by Post Office and Fujitsu Services can be
achieved by streamlining the process of change, new developments, service monitoring
and management. At the same time, a more agile process will speed up the introduction
of new capabilities and improve Post Office’s position with its clients and with Post
Masters.
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Post Office introduced the Landscape model as a new approach to managing the
development and on-going operation of Horizon. Fujitsu Services supports that
approach, albeit with modifications. The proposed process incorporates the new Post
Office processes, as documented in the “Landscape Model”, and introduces clearly
delineated set of roles and responsibilities, which are reflected in the Governance
structure.
Appendix 2 contains the more detailed presentation of the process and the
responsibilities of the parties.
2.6.1 Agile Process and organisation
In conjunction with Post Office, Fujitsu Services will adopt significantly improved
process for planning, defining, designing, delivering and operating the solution. This
process blends the requirements of both organisations to conform to their respective
corporate policies, whilst maximising co-operation and overall agility to respond to new
needs and reduce overall running costs.
The new process combines the clear definition and delineation of roles and
responsibilities, which provide the backbone of an clear accountable management
structure, with a number of new working practices, which will improve trust, and
productivity, across the interface between Post Office and Fujitsu Services.
The principal innovations being proposed are:
a Co-operative working in areas of Planning (incl. New releases), Requirements
Analysis, Design and Testing
a Architecture Lab, to facilitate early understanding of requirements and proposed
solutions, and joint visibility of technology evaluations
a Common requirements and technical documentation, to eliminate duplication and
inconsistencies.
2.6.1.1 Co-operative working
Much closer co-operation is envisaged between the Post Office teams and Fujitsu
Services. In particular, requirements analysis and design activities will be bound closer
together by both parties being closely involved in each other’s activities, by exploitation
of the Architecture Lab and by sharing of early documents and joint reviews. This style
of working, whilst not changing in any way the responsibilities and ownership of outputs
by Post Office or Fujitsu Services, will ensure that any issues are identified early, that the
combined knowledge and experience of both organisations is brought to bear early and
that a common understanding exists through all stages of development and service
delivery.
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2.6.1.2 The Architecture Lab
The Architecture Lab provides an environment for shared exploration of new processes,
new application and infrastructure architectures and new technologies and uses of that
technology.
The early exploration of the implications of change ensures that dead ends are
discovered as early as possible, while the potential available can be visualised before
committing to a complete analysis and design. The knowledge obtained in the
exploration phase is expected to reduce time to market and visualisation of possible new
solutions will help to identify benefits and further opportunities.
The independent nature of the research capability ensures that new opportunities can be
explored without impacting committed programmes
2.6.1.3. Shared Design Document Set
There are many outputs (documents) identified in the end-to-end process that pass
between the organisations and either form the basis of subsequent developments or
confirm that the developments meet requirements. It is proposed that such documents
are visible to both organisations during development, not just on completion, to short-
circuit any modification and enhancements that otherwise tend to occur late in the
production process incurring rework effort.
2.7 Operational Service
Operational service has been identified as a key area for potential savings. Fujitsu
Services is justifiably proud of the service quality of the Horizon service. Care must
therefore be given to any unilateral approach to simply reduce the service quality by
taking costs out. Fujitsu Services, in discussions with Post Office have, however
identified a number of areas where alleviation of limited liability and/or some reduction
in SLAs will allow costs to be taken out without a major impact on service quality. The
following areas have been identified and Section 5 provides the detailed approach in
each area:
2.7.1 Help Desk
We are assuming the implementation of SPOC 2 (Single Point of Contact). In addition,
we are proposing that the Help Desk service levels is reduced in areas, which we believe
will not adversely affect the business of Post Office.
We are also proposing the introduction of the Technical Service Desk (TSD) which will
be responsible for the monitoring and control of all calls relating to Network Banking,
whatever domain the calls come from.
2.7.2: System Service (Outlets)
Fujitsu Services have identified a number of service changes, which if implemented will
allow a reduction in headcount for system service. We have assumed no technical
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refresh. However, we do reserve the right to monitor MTBF figures and if an increase
can be shown to be related to the age of the equipment, then we may need to revisit
technical refresh.
2.7.3 Service Management
A robust audit of the existing service is proposed to eliminate activities that are either
duplicated or of marginal benefit.
2.7.4 Problem Management/Field Service Management
Currently seven field service managers are employed to handle problems arising in post
office outlets. This resource is geographically based and we are proposing to replace
these resources with a single problem manager who will then liaise with Post Office staff
to handle problem situations.
2.7.5 Management Information Service
This service is run from the data warehouse. One of our proposals is the elimination of
excessive periodic SLA monitoring and reporting. Some staff is currently employed to
monitor SLA performance and report on exceptions. It is proposed that we re-engineer
this service finding a more cost- effective way of providing the necessary level of
reporting.
2.7.6 Reconciliation Services
A number of reductions in the scope of the reconciliation service are proposed, none of
which should have a detrimental effect on Post Office business. The reduction in scope
will allow a reduction in the staffing level associated with this service.
2.7.7 Non-Polled Outlet Management
This service proactively monitors the outlet network and manages the restoration of
communications. It is an important service that underpins the successful operation of
Horizon but our analysis has revealed that detailed changes to the current service and
associated SLAs would yield significant savings.
2.7.8 Transaction Benchmarking
This service provides a post-release analysis of transaction response times against
defined benchmarks using the PADS methodology. This involves use of specialised
video equipment and analysis of video film to provide highly precise measurement.
It is proposed to cease provision of this service and to agree a less resource and time-
intensive mode of working.
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2.7.9 Data Centre Operations and Network Management
The current Horizon data centre sites are sited within facilities owned and used by
Alliance & Leicester. There is no commitment to provide the facilities beyond the end of
2006. We are recommending that the current twin data centres should be consolidated
onto a single secure site with appropriate physical resilience (dual power,
communications, fire and flood separation).
In addition to this site move, Fujitsu Services proposes significant further changes
through the re-architecting programme to make data centre operations more cost
effective.
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3 The Programme
3.1 Introduction
The proposals described in this document are based on a three-pronged approach to
evolving the Horizon solution and reducing the associated costs to the business:
a A number of “tactical” developments will be carried out on the existing Horizon (and
Post Office) systems to deliver quick cost reductions (i.e. projects that deliver return
on investment within a very short time).
a The more strategic changes, involving business process re-engineering and dramatic
streamlining of back-office systems and processes, will be tackled by a new
development project, which will deliver a counter-to-corporate resource
management systems (i.e. including the replacements for the existing CBDB suite).
a Both parties will adopt a streamlined cooperative development process to deliver
new capabilities and manage the deployed solution will be adopted to reduce costs
and reduce delivery timescales.
The proposed timetable and the individual elements of the programme are described in
this section. It is important to note that the timescales, and therefore the financial profile
of the proposal, are dependent on achievement of all the key milestones, including the
definition and deployment by Post Office of new business processes.
The following sections describe the tactical changes, the target architecture and the
approach to evolution of the systems. Technical descriptions are provided at an
overview level to impart understanding of the direction adopted and the essence of the
changes being proposed. Detailed definitions are expected to emerge from an on-going
co-operative process of requirement refinement and solution design, which will run in
parallel with commercial negotiations for contract extension.
3.2 Tactical Streamlining of Current Horizon
A number of developments are proposed, which improve the characteristics of Horizon,
in terms of cost of ownership and potential for change, with little or no impact on Post
Office — these are described below as “Internal Re-Architecting”.
There are also tactical opportunities to realise cost savings which do require some
change to Post Office Ltd ’s operational processes and systems, but which do not alter
fundamental business processes — these are described below as “Joint Re-Architecting”.
It is proposed that all of these developments be undertaken if full cost-benefit analysis
confirms positive return within the currently envisaged lifetime of the components being
affected.
The proposed tactical i
follows:
atives, which are outlined in the following subsections, are as
a Simplification of central platforms (Internal Re-architecting project)
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Transmission of AP client data via a central hub (Joint Re-architecting project)
Exploitation of ADSL (Internal Re-architecting project)
Switching Streamline interface from X.25 to IP (Internal re-architecting project)
Removal of OpTIP (Joint Re-architecting project)
Improved processing of reference data (Joint Re-architecting project)
Security and risk management rationalisation (Joint study)
ooooocdo oO
Elimination of the Network Banking Engine (NBE) — (Joint study)
3.2.1 Simplification of Central Platforms
The Host Central Servers form a key part of the current Horizon architecture. There are
two servers in each Campus. Each is a Sequent NUMA-Q server with its own local disks
and access to a number of Oracle databases stored on the Campus’s EMC Disk Array.
At any one time, one server (that in Bootle) is running the live service, with the other (in
Wigan) acting as a warm standby.
As well as the Host Central Servers, the same platform type is used for the Data
Warehouse. Again, there is one Data Warehouse server per Campus, with the principal
Oracle database stored on EMC disks. The Wigan server acts as a warm standby in case
of failure of the Bootle server or site.
Both servers run under Dynix 4.4.10. Dynix is Sequent’s tweaked version of UNIX, and
was produced in the days when such tweaks were necessary to produce the maximum
throughput in database applications such as Oracle. The choice of Sequent/Dynix and
Oracle provided the maximum available performance for RDBMS applications at the
time when it was made.
EMC’s SRDF facilities are used to replicate data between the two Campuses, so that in
the event of server or site fail-over, it is possible to restart the service on the other site
with minimal delays
The deployed environment demands that Fujitsu maintain a body of skills for the various
technologies. The Dynix equipment and software are increasingly becoming exotic and
carry high maintenance and support costs. This is particularly significant when
considering the full estate, with testing rigs adding significant numbers of platforms
(Note that there are 31 Host servers spread throughout the live and test estates, and 12
Data Warehouse servers, including Sequent SE30 servers that are used in the test rigs).
Three options have been considered:
a Migrate the Host servers to Solaris platforms supplied by Fujitsu Siemens
a Migrate the Host databases to NT platforms
a Migrate the Host databases to SQL Server applications running on NT
The first option is relatively straightforward and over an extended Horizon contract
period delivers significant financial benefit.
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Early migration of all the applications to SQL Server carries significant conversion costs
and is also judged to carry too high a risk associated with performance, although this
may reduce as Microsoft evolve their RDBMS in the next 2-3 years.
It is possible to move all the Host applications to NT servers. Fujitsu Services normal
approach to NT (one task per box) would indicate that each application would be moved
to a separate server; however Oracle licensing is per box rather than per database, and
this would increase license costs. It would also increase the number of servers in the test
rigs quite considerably. Further analysis of this option will be carried out, but initial
assessment suggests that benefits would be marginal and risks would rise.
Therefore, it is proposed to adopt the first option immediately, and track the evolution
of Microsoft software, to determine when conversion from Unix, and perhaps Oracle,
will present a clearly beneficial case.
3.2.2. Transmission of AP Client Data via Hub
Currently, APS supports a large number (about 500) of clients. A few of these are
supported by direct FTMS links to their sites, but the majority are supported by sending
their data to a single client (Girobank) that acts as a “proxy”. Consignia already have a
mechanism where clients can connect in to pick up information from a Web Service, and
initial assessment suggests that this could be exploited. Alternatively it may make sense
for Fujitsu Services to operate a web service from which clients pick up their data
directly.
3.2.3 Exploitation of ADSL
Currently almost every Post Office outlet has a 64K dial-up ISDN line provided under
the Horizon contract and a separate telephone line supplied by the Post Master. For cost
reasons, the ISDN service is not permanently connected.
ADSL is a new “broadband internet” technology, which could provide low cost high
performance permanently connected communications to a large number of outlets via
the existing BT telephone wiring. The standard bandwidth is 288Kbits/s upstream (outlet
to data centre) and 576Kbits/s downstream (data centre to outlets).
To use ADSL, the following changes would need to be made at the outlet:
a Install the ADSL line
a Convert the gateway PC to support ADSL
There are two ADSL migration options that could be followed:
a Fujitsu Services to provide a PSTN line in place of the existing ISDN Line.
a The outlet's existing PSTN line to be converted to ADSL and the existing ISDN line
discontinued,
Due to BT’s technical constraints, the ADSL upgrade could not be affected universally.
Outlets that are too far from BT exchanges (or outside BT’s target segments for ADSL)
will have to remain on ISDN; nevertheless, 50-80% of outlets should benefit. Clearly the
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minority of Post Offices, which are satellite connected (around 250) or mobile outlets
(around 200) are not included in the consideration of this opportunity.
The deployment of ADSL, requiring a hardware upgrade at the outlet, should be, as far
as possible, coordinated with any other initiatives to deploy new devices to the outlets
(i.e. engineering visits), thus minimising deployment costs.
In order to cost this change, the following assumptions were made:
a ADSL tariffs will decline by 6%
a ADSL coverage is 80% of outlet network
a Published domestic tariffs apply
3.2.4 Switching Streamline interface to IP from X25
Streamline, the Merchant Acquirer adopted for the Debit Card system, currently only
supports X25 communications. However, it is their stated intention to support TCP/IP,
which would facilitate adoption of a cheaper network solution for the Debit Card
System. For the purposes of this proposal, it is assumed that this change can be effected
during 2005.
3.2.5 Removal of OpTIP
OpTIP currently receives full details of transactions carried out on Horizon, routing the
required information to other internal Post Office systems (e.g. CBDB). By customising
the Horizon feeds for the consuming systems and routing these new feeds directly to the
systems, the majority of OpTIP functionality would no longer be required. The
remaining functionality can be provided by other means, facilitating a significant saving
by elimination of the whole OpTIP system.
To realise maximum savings, it is suggested that Post Office should immediately initiate
a design study to assess the work required within Horizon to enable OpTIP to be
eliminated as soon as possible.
3.2.6 Improved Processing of Reference Data
There are several systems within Post Office and Fujitsu Services that act as master
sources for various items of reference data. The process for changing and evolving
reference data is cumbersome and contributes to delays in introduction of new products
as well as adding to costs.
It is proposed that a new facility is developed which straddles the Post Office — Fujitsu
Services boundary and provides a more efficient, user-friendly and accurate support for
creating, validating and approving change to reference data.
3.2.7 Security and Risk Management Rationalisation
An urgent review of threats for which Post Office needs to develop counter-measures is
required. Based on the outcome, a reappraisal of Horizon security arrangements will be
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conducted to determine the levels of security features and associated operational
processes that need to be retained. In particular, the amounts of audit, encryption and
digital signing of messages will be assessed.
3.2.8 Elimination of the Network Banking Engine (NBE) — study
It is proposed that a review of the case for retention of the NBE is carried out. The
possibility of interfacing Horizon directly to Link and to the various banks, which are
required to be supported by the NBE, should be seriously evaluated, as significant
savings could be realised by such a development. Once Debit Card (and e-Top-Ups)
development is completed, Horizon will have the capability to support the interactions
required to interface directly with financial institutions. Extending the range of
supported end-points is technically straightforward, and the cost of the overall service
should be lower than that associated with an independent NBE. Major savings would
accrue from:
a Fewer reconciliation points
Reduced communication costs
Simpler security
Reduction in Data Centre requirements
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Simpler process to manage future changes, with fewer parties involved (e.g.
developments envisaged for National Savings enhancements would be simplified)
3.3 Target Architecture
3.3.1 Key Concepts and Principles
The principal aims for evolving the Horizon Architecture are:
a Reduction in cost of ownership of the solution (lower operational, development and
support costs)
a Greater potential for change (supporting rapid introduction of new or changed
products)
a Reduction in complexity to reduce development & testing costs
a = Minimal disruption in the outlets
The project will re-use existing Horizon assets to minimise cost and timescales where
appropriate. In particular, the project will aim to maximise re-use of expensive items
such as:
a Counter hardware
a Data communications network
a Central hardware and data storage
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a Software components (3" party gateways/interfaces — e.g. NBE link, Streamline link,
Client interface, and relevant elements of the application suite — e.g. DRS)
a System management and operational support systems
3.3.2. Architecture
The key principles embodied within the model are:
Q Minimisation of reconciliation requirements by optimised data flows and creation of
the logical “Single Data Source”
a Auditing implemented at external boundaries
a Elimination of artificial boundaries (e.g. TMS/OpTIP)
a Consolidation of Data Centre facilities
The re-architected solution is based on a “thick client” approach. The “thin client”
option was considered and rejected, because it could not deliver autonomous operation
of the counter (in case of network disconnection) and would require complete redesign
of central systems for on-line working, thus destroying any possibility of reusing past
investment in the new solution.
The re-engineered solution will target the conceptual model shown in Figure 1.
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Business Objects
Reports
Consignia
Clients
(via EDG) AES,
Reports e.9.
mis Postmaster
Remuneration
Accounts Mecalnts
Adraniaton
\Werksaon
Ese
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Manageet
fat
ite ' and Revival
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4 Manegement
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Figure 1 — New Campus Architecture
3.3.3, Components of Solution
a Accounts
The new accounts system will support re-engineered business processes, which
incorporate the simplifications in Cash Account and other beneficial practices that
have been identified by various past studies.
Most of the data required for management accounts will be obtained by aggregating
the transactions by product and outlet. Mechanisms are required to make any
necessary adjustments to transactions (or introduce compensating transactions) as a
result of manual processes. Specifically any discrepancy or suspense transactions that
are received from the outlets and any reconciliation adjustments identified from the
Reconciliation subsystem must be accounted for.
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Settlement with external Clients is also handled via the accounts processes. This will
result in further data feeds from the Clients to indicate the details of settlement,
which will need to be reconciled with the underlying transactions.
The appropriate summaries will be fed to Consignia’s accounting systems when the
accounts for a given period are completed.
a Estate Management
Horizon has comprehensive tools and processes to manage the outlet estate and to
manage changes to the estate such as opening and closing outlets and changes in the
number of counters. Similar facilities exist within the current Back-End systems. The
aim will be to produce an integrated system to reduce administrative overhead and
delay.
a Single Data Source
The main use of transaction data is as the raw data which is aggregated as required
for the other functions being carried out centrally. This includes all remaining
reconciliation processing and reversal handling (see below, AP Client handling)
All transactions will need to be retained at the Data Centre for a period that is
sufficient to complete all of the processes associated with the transaction — say 3
months. During this time, the transactions are available for analysis and, in rare
cases, for amendment as a result of any central processes, which handle manual input
from the outlets.
Although the intention is to eliminate as much paper as possible from the overall
system, it is recognised that it will not be possible to do this completely. Therefore a
mechanism is required to capture data from paper and to feed it into the Single Data
Store in an appropriate way such that it is fed into the accounts.
The simplification of the data flows is illustrated in Figure 2. This proposal re-uses
already developed capabilities (DRS) to reconcile information from separate data
flows. However the reconciliation process is now considerably simplified by
eliminating some independent flows that would otherwise require reconciliation. Any
errors found by reconciliation will require compensating transactions to be generated
within the Accounts process, thus enabling settlement to complete.
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‘Accounts
MActke \
Service Cas,
b> Enhanced DRS
R ~ Reconaliation om ~
Various other
, transaction types
ke
@ Reconciliation point
Counters
Figure 2 — New Reconciliation Model
Note: the C2 flow is optional (i.e. it is not required for Network Banking and won't exist in E-top ups
a AP Client Handling
For each AP Client, an aggregate is required of those transactions carried out on
their behalf.
Transactions for AP Clients will all be sent via Consignia’s EDG, which will be
responsible for the transmission of the data to the Clients. A number of service
levels could be provided, depending upon the requirements of the Client, for
instance:
a A daily or weekly transmission of transactions delimited by End of Day
boundaries with any Reversals “netted out” with the transactions being reversed.
This is the only service currently offered.
a More frequent transmission (e.g. hourly batches of transactions), however in this
case the Client would need to accept that transactions would no longer be
delimited by End of Day boundaries and there would be some Reversals that
could not be “netted out”
a Periodic (e.g. daily) delivery of transactions with no “netting out” of reversals
and no attempt to delineate with business days at the counter.
The preferred service for adoption would be the last since that requires the least
processing by Horizon, but the viability of this solution needs further analysis of
Clients’ capabilities.
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a Management Information System (MIS)
Horizon transactions are available for analysis by a MIS. Various aggregates will be
produced as required to support business and operational analyses, for example
volumes of transactions, basket analysis or performance against key SLAs.
The current Horizon Data Warehouse has, in BI3, been enhanced to provide new
functionality and business reports specified by Post Office, and these will be carried
forward and re-used with other relevant capabilities. It is proposed that the excessive
SLA monitoring, carried forward from the past, will be reviewed against the new
contract and significantly simplified. This will reduce costs currently incurred in
periodic reporting, as well as reduce future development and testing costs.
The Horizon Data Warehouse should evolve into the shared repository of
transactional information from which variety of MIS reports can be produced. It is
proposed that arrangements are made as part of the improved joined-up working to
enable Post Office to commission (from Fujitsu Services or specialist companies)
new reports based on the warehouse-held data and to jointly plan any evolutionary
changes the warehouse needs to undergo.
a System Management
There is a significant investment in System Management facilities and skills, which
are fundamental to the successful operation and development of the Horizon service.
This provides a proven foundation that Fujitsu Services believe will best support the
proposed improvements to the Horizon business service. Fujitsu therefore proposes
to leverage the existing Post Office investment in Systems Management
functionality, skills and process to support the proposed new Horizon service.
Horizon System Management is responsible for managing the Horizon estate
encompassing Post Office outlets, networks and data centres. The System
Management Architecture is summarised in the following diagram - Figure 3.
Figure 3. System Management Architecture
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Support Communities
Tivoli Core Product
Oracle Database
Release Management
Central to the architecture is an inventory database containing details of the managed
estate, boundary network and the campus data centres. In addition, the database
holds an archive of all Horizon system events. This central database is based on
Oracle technology.
This is surrounded by the generic system management capabilities that support
software distribution, event management, distributed monitoring, etc. This layer is
implemented using Tivoli technology
Surrounding the Tivoli core architecture layer, a System Management layer has been
constructed to accommodate Horizon specific service requirements. In particular,
these requirements relate to the unique scale and distribution of the Horizon estate.
Significant investment has been directed towards optimising network
communications and outlet monitoring and support costs, principally in the areas of
software distribution and close integration with support processes. The flexibility of
this Horizon specific layer in the System Management Architecture provides the
essential operational support required to introduce the business changes required to
deliver Fujitsu Services proposed cost savings.
In summary, the combination of Horizon System Management technology, process
and support skills has created a key enabler required to facilitate the business change
presented in this proposal
a Reference Data
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A re-engineered system for management of reference data will be introduced, which
will provide improved validation of changes, workflow for change approvals and
centralised management to avoid inconsistencies in data and assure synchronisation
of changes across the estate. The resulting system will replace the functionality
currently provided by RDMC and RDS, and as a consequence reduce the combined
support costs.
a Counters
The existing counter hardware will be updated and reused. The next generation
counter application will be built based on Escher’s WebRiposte Essential (WRE), to
maintain continuity of user interface and to provide autonomous operation in the
event of outlet network failure. The data driven nature of Web Riposte Essential will
simplify the introduction and change of new functionality. It will use Escher’s Asset
Manager as the accounting model, thus removing the current tie-in to Cash
Accounting, which is a fundamental aspect of the existing EPOSS application. No
attempt will be made to aggregate transactions at the counter — all transactions will
be passed through to the Data Centre and any summarisation / aggregation will be
done there, since this eliminates any need to perform reconciliation of the aggregated
data with the raw data and ensures that the raw data is available for other purposes
(e.g. Management Information).
Each counter will maintain details of the business day under which it is trading and
include this in every transaction. An End-of-day trailer will be written at each
counter to mark the end of counter transactions for that business day.
Detailed rules for how this is to operate will need to be defined. However to allow for
disconnected counters and to keep processes simple, it is probably necessary to have an
EOD marker for each counter rather than each outlet.
Declarations of Stock Levels will be forced at appropriate intervals, with accounting for
any discrepancies arising.
Some transactions will require an on-line interface to a Client (e.g. NBS or DCS). The
key principle is that the final transaction written to the message store needs to reflect the
outcome as seen by the counter.
Intermediate messages (i.e. the [R] and [A] and any [CO] that represent Reversals)
could also be sent through Riposte to agents as at present or could be sent directly. The
pros and cons of these approaches need further evaluation, however the costs of either
are likely to be similar. The benefit of using Riposte is the reuse of existing technology
and the fact that these intermediate messages will all be audited.
a Supply Chain Management
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Supply Chain Management is currently provided by the SAPADS and LFS systems.
At this stage there is no immediate benefit perceived in substantially changing the
way in which this part of the solution operates. However consideration should be
given to an “order request” system to replace the current manual process, although
this is not included in the current proposal costings.
a Audit
A now, System Activity in the Outlets will be recorded in the message store and so
by auditing all messages as they arrive at the Data Centre thus a complete audit trail
of what has occurred on the counters will be maintained. In addition all data that is
transferred across the system boundary defined in Figure 1 (including manually
entered data) is audited.
3.4 Migration To Target Architecture
3.4.1 Overview
Fujitsu Services approach to evolving to the new Horizon architecture is based on
simplification of business process and on exploitation of technological advances that
have occurred since the original Horizon architecture was implemented. It builds upon
Fujitsu’s long experience of successful migration through a number of complex business
and infrastructure enhancements, including CSR+ and the current BI1, BI2 and BI3
enhancements.
The migration option that is proposed here is, on currently available information, judged
to be the best in terms of:
a Resources needed (and hence cost)
a Time to achieve the transformation
a Risk and complexity (ie. alternative schemes would require more complex
transitional arrangements, which introduce further risks)
It is recognised that significant amount of further analysis will need to be carried out
with Post Office. Fujitsu Services propose to do this in two stages:
Q Qualification — taking place once this proposal is accepted. This will confirm the
feasibility of the proposed process from the viewpoint of all stakeholders, and
validate all fundamental assumptions made
a Detailed process and programme design
The migration plan is based on the following principles:
a_ A new suite of central system services will be established, implementing the new
business process and simplified data flows
a Parallel running of current and new services (and the associated business processes)
during transition
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a Fujitsu Services existing Estate Management processes will be used to migrate
outlets to the new services
a When all outlets have been migrated to new services, old services will be
decommissioned
The chosen approach recognises the need to maintain business continuity whilst
implementing business change. In essence, this approach can be viewed as creation of a
new set of central systems, which operate in parallel with the existing systems and over
time acquire connection from all the outlets. An enhanced Reference Data service will be
developed prior to migration to feed both estates. The main advantage of the proposed
migration approach is simplicity and minimisation of links between the old and the new.
The main implications, which need to be further analysed, are:
a Multiple Feeds to external systems (e.g. Clients) — ideally during migration the
external parties should be able to view Post Office as 2 organisations, linked at the
highest levels (e.g. corporate accounts, contracts)
Management of historical transactions — it is proposed that transaction history is not
migrated to the evolved outlets or the central systems that support them and therefore,
any adjustments to such will be handled on the old systems. This will require processes
to be designed, which will operate during the transitional period.
3.4.2. Migration Activities
3.4.2.1 Business Process Analysis and Design
The first step in the migration roadmap is the definition and approval of the business
process enhancements that will facilitate significant operational and system streamlining.
This activity is on the programme’s critical path and its resolution is therefore
fundamental to further progress being made towards the realisation of major cost-
reductions that Post Office seeks. The output from this work is required to quantify the
full impact of the implied Post Office business change and the associated Fujitsu Services
development plans.
Whilst the definition and approval of the business process enhancements are clearly the
responsibility of Post Office, Fujitsu Services propose to provide support in a number of
important areas to assist with early completion of this urgent activity:
a Business process capture workshop facilitation
a Formal business process and information modelling
a Business process design, analysis and performance measurement
a
Support for negotiations with third party IT suppliers to establish optimal process
and technical integration options, e.g. DVLA, National Savings
a Architecture Lab to investigate process automation options and the feasibility of
making greater use of standard product facilities, e.g. reductions in bespoke Post
Office requirements, user interface visualisation
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a Business migration planning and support.
3.4.2.2. Evolution of systems in the Data Centre
The complement of systems will evolve, as described in the Target Architecture.
As Counters are migrated to operate within the new business processes, accounting
information, management information and aggregate data will be built up in the new
system. History will not be migrated from the old systems. The stock management
system SAPADS is expected to be retained and hence this will be shared by both new
and old Counters. SAPADS may need some enhancements to recognise the existence of
two segments of Counters and their association to Accounts Systems.
Other changes will occur as part of the normal maintenance. For example, at BI3, the
new DRS database was implemented using Oracle V8i, and the Reference Data RDMC
and RDDS databases were upgraded to the same version of Oracle. The migration of
the other Host Oracle databases to V8i or later will be carried out in the near future. The
Host hardware will be migrated from Sequent to Fujitsu Siemens technology.
3.4.2.3, Reference Data
The Reference Data Systems will be enhanced to generate Reference Data in the forms
required by the new and old systems (both for Counter and Data Centre Systems)
3.4.2.4 External Links
For each external link, analysis will be carried out to determine whether it can accept
separate feeds to and from the old and new systems. External clients include all AP
Clients, the NBE and other on-line clients that will be in place by the time of migration,
SAPADS (for stock control) and Consignia’s Accounting systems. Where the temporary
existence of dual feeds is not possible to arrange, tools will be designed and
implemented to merge and split the feeds.
3.4.2.5 Move Outlets to the new simpler counter application
As each outlet is migrated to the new counter application it is switched over to interface
to the new Data Centre systems. The minimum of historical data is moved across at the
Outlet to support this (the minimum includes at least the starting position in terms of
stock levels and opening balance data). Specifically, each Counter at a migrated outlet
will start off with a new message store and will no longer have access to reports or data
produced prior to the date of migration.
3.4.2.6 Counter Changes
There are two key enhancements to the software environment of the Counters proposed.
a Introduction of New Counter application (based on WebRiposte Essential ™ (WRE),
together with Fujitsu-supplied application components)
a Upgrade to Windows 2000 (or later) to exploit latest Microsoft workstation
technology
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Investigation of the strengths of WebRiposte Essential is well under way in Fujitsu
Services Architecture Lab. Fujitsu's expectation at present is that WebRiposte Essential
provides an advantageous future direction for the Horizon Counters, but "out of the
box", only caters for a part of the full Post Office requirement. Some applications (such
as Network Banking or Debit Card) require additions to the generic WRE, and other
new business opportunities that follow the same model (for example e-Top Ups) are also
likely to require extensions to the WRE structure. However, through a close
cooperation with Escher, extension to the WRE will be implemented to minimise the
amount of Post Office specific code that Fujitsu will need to integrate with the standard
application.
The WRE assessment is taking place on the standard Counter hardware platform, but
using Windows 2000 as the base operating system. Fujitsu Services will explore the
options for upgrading the Counter operating system to a more up-to-date software level
to gain the functionality and productivity advantages it brings, and implement the
findings of this study. The recent introduction of BI2 across the Horizon Outlet estate
has demonstrated the ability of the systems management infrastructure to manage a
complex Counter upgrade - in this case from NT 4.0 Service Pack 3 to 6a, Internet
Explorer 4 to 5.5, and Riposte to WebRiposte. It is expected that the same mechanisms
can be used to upgrade the Counters further, to Windows 2000 or Windows XP. The
increasing availability of "always on" network access to the Outlets will minimise the
cost of distributing a large upgrade such as a major operating system enhancement.
WRE is substantially different from the existing counter application, and requires a
substantially different set of message store data. Tools will be developed to migrate
relevant information from the current message store (stock levels, closing balances)
across to a new message store partition, and these tools will be employed immediately
prior to the switch to WRE. This migration can be done on an outlet-by-outlet basis.
3.4.2.7 Counter Hardware enhancements
While Fujitsu Services strategy is to avoid a Counter technical refresh, some hardware
upgrades are envisaged in support of the various initiatives and new business
opportunities:
a Installation of a ADSL (high speed communications) card in the Gateway PC at
outlets where ADSL service is available
a If contactless card support is required, the PIN Pad installation will need to be
enhanced
a Peripheral enhancements (e.g. currency exchange boards)
Synchronizing upgrade activities to eliminate unnecessary engineering visits will
minimize labour costs. The schedule of upgrades will be refined once the migration plan
is finalized. It is anticipated that Network Reinvention will make spare counter PC stock
available to facilitate upgrading.
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3.4.1.8 Data Centre Changes
Transition from the current dual-site Data Centre configuration to a single new Data
Centre will be enabled by modifications to the recently enhanced fail-over mechanisms,
to ensure a smooth migration with minimal risk. The new Data Centre will retain
systems resilience, but disaster standby capability. will rely on redeployment of Fujitsu
Services test rig configurations to provide the on-line services should a total disaster
strike the Data Centre. Working with Energis, Fujitsu will identify economic options for
re-establishing communications following disasters. With Post Office, Fujitsu Services
will ensure that processes catering for the eventuality of disasters are defined and ready
to be invoked.
New and retained Data Centre systems will be deployed on the latest reliable software
baselines. Fujitsu Services will seek to simplify the security domain structure used at BI3
by a removal of internal security barriers within the Horizon architecture, and by
adoption of more sophisticated domain support made possible by the use of a later
operating system version.
3.4.1.9 Host Platforms
Following the tactical refresh of the host platforms, Fujitsu Services will continue to
monitor the delivered capabilities of Microsoft enterprise level software (operating
systems and RBDMS) and if appropriate and cost effective will migrate the host
platforms to the lower cost base.
3.5 New Capabilities
A range of developments to introduce new products or enhancements at the outlets have
been identified and are being studied separately. Below are the key items that may form
a basis for a programme of enhancement/development that needs to be melded with the
developments identified in the preceding sections.
a London Congestion Charges (LCC)
This requirement will be satisfied by a two-part solution. The purchase of travel
permits will be supported by a online dialogue to the LCC host, while the payment of
Fixed Penalty Notices will be supported by exploitation of the Enhanced AP Service
described below.
a E-Top-Ups (ETU)
The Electronic Top-Ups solution will follow the RAC model introduced for
Network Banking and will have similar characteristics to the Debit Card system.
The counter application will support the ETU customer token and will allow the
selection of ETU products from a pick-list. These products will be introduced using
the existing Reference Data processes. The counter application will support the
Request / Response to the E-Pay Host system. ETU Refunds will be supported
within a 10-minute window, and will be another on-line dialogue based on the
existing EPOSS reversal process.
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A daily Reconciliation file will be received from E-Pay, the contents of which will be
reconciled with the records from the counter.
a Mails
Mails functionality will be provided at the counter by the Escher Mails product
a MoT Authentication
The solution for MOT Validation will be provided as an incremental development on
top of the generalised data capture facilities provided by the APS Enhancement
solution. The APS counter facility will be enhanced to initiate a look up to the
Vehicle Inspectorate web service to check that the identified vehicle has a valid
certificate.
a Automated Payment Service enhancements
A generalised enhancement will be made to the AP service to enable reference data
driven data capture to take place in addition to the standard data items of token,
amount and method of payment. This will enable the AP counter system to capture
additional data keyed by the clerk or from a barcode. Support will be provided for
address validation using the Post Office preferred PAF facility.
The additional data will be added to the Client records in a single variable length
XML field
a BFPO automation
This requirement will be supported by the implementation of an enhanced version of
the current Horizon system, extended to provide network connectivity to BFPO
locations and to support multiple time zones where this is needed to resolve business
inconsistencies.
a Bureau de Change
New application functionality will be introduced into the Horizon system to support
the sale of foreign currency, both on-demand and pre-order. Where present the
counter will also drive existing currency rate boards.
a EMV compliance
Fujitsu Services is already working with Post Office to identify the requirements for
EMV (“chip & PIN” support) for Debit Card in line with general retail industry
timescales. Once the business rules and standards are agreed, Fujitsu Services will
work with Post Office to implement the necessary enhancements to the PIN Pad
firmware, to the Counter software, and to the Agent processes within the data
centres that communicate with Post Office’s chosen Merchant Acquirer
Q Facilities to support National Savings & Investments products
While the opening of new accounts will be managed by an APS transaction, the
operation of the accounts will be performed by exploitation and extension of the
existing network banking infrastructure.
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3.6 Horizon Maintenance
The deployed system will be updated, from time to time, to fix identified deficiencies, to
modify applications by either code or reference data changes in accordance with change
requests raised by Post Office, or to enhance the system for new workload patterns and
trends. The maintenance activity will also ensure that deployed technologies (esp.
software) are at the optimal product versions, balancing the value of supportability,
performance and features with costs of upgrades.
Additionally, there will be requirements to add functionality, to timetables specified by
Post Office in Change Control Notes, which will achieve compliance with various
regulatory requirements. These are expected to include:
a Welsh Language receipts
a Euro currency
3.7 Roadmap Plan
Earlier this year, a joint “roadmap plan” for Horizon was constructed to summarise the
work that was then envisaged. The joint plan grouped activities into Technical Changes,
Incremental Business Changes, Transformational Business Changes and
Transformational Technical Change, supported by a new Lifecycle Process.
For this proposal Fujitsu Services has used a different structure because it is believed
that it will be easier to understand and also because there are different dependencies in
different areas.
The enclosed plan (see foldout sheet) has six main groups of activity, which are
summarised in Table 1.
Table 1. Summary of Roadmap Plan
Task Group Contents Programme Dependencies
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1. Agreement
Pre-contract essentials
Agreement to move forward
on the basis of this proposal
2. Horizon Internal
Re-Architecting
Dynix elimination
Data warehouse
elimination
Data Centre relocation
Physical counter upgrades
a) New contract.
b) Re-architecting would be
resourced from within the
committed core team.
c) Post Office agreement to
funding costs of additional
Counter software I hardware.
upgrades
3. End to End OpTIP removal a) Commitment from business
Change Reference dataIb) Agreed definition of
rationalisation responsibilities, scope and
BPR related work: work to be carried out.
Automation of key client ©) Agreement to extended
scope for Fujitsu Services and
products . .
to funding for incremental
New accounting system resources and charges for
New stock processes external expenditure.
Rollout of new E2E
processes
4. New Horizon New counter product I a) Commitment and funding
Capabilities developments driven by I for incremental resources.
business need. b) Impact = analysis_~—of
individual products.
5. Horizon Operational service cost I a) Agreement to SLA changes
Operational Service reductions. via new contract
Changes
b) Delivery of internal system
changes by SI work.
6. Horizon Releases
Planned and foreseen
Horizon releases over the
next 18 months.
Release Plan to be agreed
during detailed planning (pre-
contract)
3.8
Governance / Process
Significant reductions in costs currently incurred by Post Office and Fujitsu Services can
be achieved by streamlining the processes of change, new developments, and service
monitoring and management. At the same time, a more agile process will speed up
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introduction of new capabilities and improve Post Office’s position with its clients and
with Post Masters.
The proposed process incorporates the new Post Office processes, as documented in the
“Landscape Model”, and introduces clearly delineated set of roles and responsibilities,
which are reflected in the Governance structure.
The process will be strengthened by a set of new working arrangements, which will
ensure that potentially protracted activities are executed rapidly whilst improving the
understanding between the parties. The key principles being adopted are:
a Elimination of duplication — same documents used by Fujitsu Services and Post
Office wherever commercially possible
a Joint working, where this improves understanding and reduces coordination effort
e.g. requirements analysis, testing/acceptance
a Architecture laboratory to prototype key elements of new capabilities, evaluate new
technologies and visualise requirements
a Improved tooling within Fujitsu (e.g. better modelling within PVCS) to reduce need
for paper documents
Appendix 1 contains the more detailed presentation of the process and the
responsibilities of the parties.
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4 Contract Approach
4.1 Principles
A number of principles set out in the draft Heads of Agreement and discussed over the
past weeks are embedded in this proposal and are reflected in the financial numbers.
In summary, they are:
a Reduced annual charges in return for a simplified and less onerous (more standard)
service with commensurate liabilities and risks;
Improved value for money for extension of term and expansion of scope;
Reduced absolute fixed cost commitment, with greater flexibility to vary resource
levels according to business requirements including affordability;
a Increased transparency through unbundling of charges into separate Operations and
SI services and within each service, giving Post Office more control over service
quality/price trade offs;
a Smoothing of charges to dilute the effect of availability fees near term (to and
beyond March 2005);
New ways of working together including new governance arrangements;
A greater degree of risk and reward sharing to incentivise both parties to achieve
common goals.
Together, these amount to a significant re-profiling of services which were originally
designed to meet different business priorities.
Re-profiling requires a change programme facilitated by a more benign and industry
standard contractual environment. This needs to encourage the achievement of successful
outcomes rather than militate against all change because even minor failure to achieve
onerous contractual criteria can have severe contractual consequences.
4.2 Approach to service delivery
The means by which a significantly cost reduced operational service is to be achieved are
addressed in sections 2, 3 and 7.
This section focuses on the contractual and commercial drivers which set the contractual
context for many of the things we do today and which need to be adjusted to enable the
necessary changes in behaviour and costs.
A number of business, technical and financial assumptions have been made which are
dealt with in more detail elsewhere but are summarised here for their commercial
implications.
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4.2.1 Structure of services and payments
a Operational and SI services will be treated as separate but linked.
a The Operational service relies on SI for fourth line support (bug fixing), architectural
advice on sizing, performance etc. and implementation of service change requirements
including simplification and cost reduction. Each service element will be itemised, may
be subject to specified workload volume assumptions (eg. maximum number help desk
calls, number of terminals) and priced accordingly.
a The SI service comprises three logical activities, the common denominator being a core
competence unit of Horizon technical experts unit resourced to cover all the skills
requirements of the Horizon solution:
Support to Operations (including internal re-architecting);
Spare capacity available for new work sponsored by Post Office;
Additions to the core competence unit to meet increased demand for additional SI
work;
The first two will be subject to a committed fixed fee. The spare capacity will be
specified for each time period, by number of staff by category, and be available to
Post Office for as yet uncommitted work at no charge.
a Implementation of new infrastructure is an additional, occasional SI activity,
resourcing of which depends on the task and skills required: typically this will
involve project management of SI work, procurement of industry standard
components, and their physical installation either by Fujitsu Services or by
subcontractors;
a The original infrastructure investment (the retention of £120m) remains subject to
the availability fees: there is a remote possibility that a viable off-balance sheet
financing arrangement could be put in place to stretch payments economically
beyond 2005, but this is not assumed;
a Special discounts over the period to March 2005 offset an element of the availability
fees and are intended to pump prime the necessary investments into re-architecting
and new products;
a_ A benefit sharing arrangement is included as a component of reward to recognise the
risk and investment involved in the discounted re-architecting work and to
incentivise Fujitsu Services to be innovative and pro-active in delivering new added
value services (end-to-end re-engineering and new client products).
4.2.2 Outline description of services — key changes
a Fujitsu Services will simplify and update the operational services to reduce costs.
The Horizon platform and processes will, with Post Office’s agreement, be
transitioned over a two year period to meet the simplified service requirements and
take advantage of new technology. Cost reductions fall into two categories:
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a Those which can be delivered as soon as new processes and reporting
requirements are defined and agreed with Post Office (a time dependency).
These have been assumed to be fully in place by July 2003;
a Those which depend on technical or infrastructure change, eg. single data centre,
rationalisation of system platforms, implementation of ADSL: these are assumed
to become effective progressively according to the draft Roadmap Plan. A pre-
estimate of the costs and resources required to achieve this are included in the
proposal. The assumption is made that the definition of work and its cost
estimates will be completed prior to contract and undertaken on a fixed price
basis.
a The intention is that Post Office get best value from the pre-paid SI capacity and that
time to market for new services be minimised. A new joint planning process is
proposed to manage supply/ demand as part of the new governance arrangements.
a It is assumed that the contract will specify the basis on which Post Office will extend
the scope of Horizon with Fujitsu Services into its back office. An outline of the
work contemplated is included in the draft Roadmap Plan. It includes replacement
of existing back office processes, notably OpTIP and CBDB, the design goal being
to feed the main SAP stock management system and a new accounting system
directly. There may be linkage (and therefore dependencies) between this activity
and the internal re-architecting of platforms to be carried out as part of the Fujitsu
Services commitment, for example removal of the cash account and replacement of
EPOSS by standard product. Pre-paid spare capacity exists to carry out the essential
design work but no incremental cost provisions have been made for completing
delivery.
4.2.3 Transition
Planning detailed transition plan requires more work prior to contract. Some of this
work can be done by Fujitsu Services alone (in relation to its internal domain) as soon as
there is agreement in principle to the approach.
Specifying the BPR activity is a key activity which will require “new style” joint working
including the active involvement of the client facing teams. Much will depend on the
preparedness of key clients to update the way they do business, the common theme
being that to drive out cost they will need to move to token based transactions.
The Roadmap will need to be validated to a reasonable level of detail, with all key
dependencies understood. Competing demands for resources and release slots, and any
client constraints, could alter the pace and shape of the plan and its related cost
estimates.
4.3 Changes to terms and conditions
4.3.1 Summary
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A reduction of certain risks currently transferred to Fujitsu Services, and a dilution of
the ultra secure/ resilient service requirements, lie at the heart of the proposal. These
drive the technical and service changes which are proposed to reduce cost and time to
market.
Proposed changes fall under the following principal headings:
a Pricing, including:
a Unbundling of services, with individual cost driver based pricing;
a Risk / reward sharing where Fujitsu Services takes investment risk
a SLAs:
a Number of SLA measures
a Severity and absolute nature of certain SLAs (in particular in relation to 100%
targets, response times and transaction times)
a Complexity of SLA and LD measures (eg. transaction times and fallback LDs)
a Consequences of breaching SLAs (in particular, removing the right to terminate for
three successive quarters of a missed SLA)
a Easing certain requirements such as:
a Resilience to catastrophic disaster at a single site (redefine force majeure to
include such eventualities);
a Security within the Horizon domain (accept some degree of risk for certain low
impact events);
a Reconciliation
a Reporting
a Documentation
a Enhancing certain Governance arrangements, in particular with respect to:
a Supply/ demand planning of SI activity (rolling 12 month forecast)
a End-to-end joint working under Landscape model (as attached)
a New product initiatives with access to client facing units
a Scaling back certain absolute obligations (implying breach of contract if not
achieved) to reasonable endeavours backed by reasonable LDs, and reducing the
current high levels of liability to single figures of £ millions
a The notion of “material dependencies” will be written into the contract, whereby
Fujitsu Services will more readily receive relief and compensation for costs.
Pricing and SLAs are considered specifically.
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4.3.2 Pricing
Unbundling and individual pricing metrics are envisaged on the following basis:
a Operations:
Help desk: fixed price for capped number of calls based on staffing levels, variable
with notice up or down, with relief on SLAs if cap exceeded
System service (outlets): fixed price per counter position subject to cap on number
of site visits per month, variable with notice up or down, with relief on SLAs if cap
exceeded
OBC: no change
Data centre operations: fixed price, declining assuming single data centre and
internal re-architecting, with adjustments for change
Network: price per outlet, declining assuming progressive ADSL implementation
Software distribution/ systems mgt.: fixed price, declining assuming SLA change and
internal re-architecting, with adjustments for change: caps on distribution and
monitoring volumes, variable with notice up or down, with relief on SLAs if cap
exceeded
Product support: fixed price, declining assuming internal re-architecting, with
adjustments for change
Reference data mgt.: fixed price, declining assuming internal re-architecting, with
adjustments for change: cap on number of changes per month, variable with notice
up or down, with relief on SLAs if cap exceeded
3rd line support service: fixed price, declining assuming SLA change and internal re
architecting
SLA management/ measurement: ditto
Service (problem) management: ditto (significant reduction planned reflecting lesser
SLAs)
Client interface mgt./ reconciliation: fixed price, declining assuming SLA change and
internal re-architecting, with adjustments for change: caps on numbers of
transactions per client per month and exceptions per day, variable with notice up or
down, with relief on SLAs if cap exceeded
Security/ Audit: fixed price, with adjustments for change
a SI (development related): commitment price, for a defined skill set of which a
specified proportion of man-hours will be identified by skill type by month as
available for Post Office use at no charge (normal manrates to apply above that)
a_ SI (implementation related): priced at direct cost, open book.
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4.3.3, SLAs and easing of requirements
The proposed changes are set out in the Operational Services section but key themes are
as follows:
a_ Replace absolute 100% achievement obligations with 99.X % targets subject to LDs
but not termination;
Replace Day D with Day J;
Conform help desk SLAs to the industry norm, reflecting the advent of SPOC 2 and
consequent removal of urgent/critical advice and guidance calls;
a Accept a slightly higher degree of variation from target visiting response times for
low impact outlets Post Office to designate);
a Accept a slightly higher degree of variation from target transaction times (as the
incidence of on-line transactions increases, this reduces the likelihood that a costly
memory upgrade will be required);
a Do away with the highly complex measurements which generated the need for a
costly data warehouse, notably the recording of transactions by transaction type by
outlet by hour by day by month to enable the calculation of fallback LDs and also of
transaction volume price adjustments.
4.4 Key assumptions
A number of key assumptions are set out in the various sections.
The following is a non-exhaustive list of commercially significant examples:
1. Contract extended to March 2010;
2. Post Office back office is in scope, firm plans to be included in the extended contract
(N.B. the draft Roadmap assumes this but the indicative financial numbers exclude any
firm financial commitment);
3. Relaxation and amendment of terms and conditions as set out above will be broadly
acceptable;
4. SPOC 2, single data centre, and relaxation of contract requirements will happen as
envisaged;
5. No universal technology refresh of counter equipment is assumed but central systems
are partially refreshed to support the updating of software platforms: Windows 2000
is downloaded to replace NT in the outlets and ADSL cards are installed selectively
(but additional memory is not);
6. ADSL coverage will enable 50% of outlets rising to 80% by mid-2006 of (by then the
re-invented number of outlets) to be implemented, at single machine tariff;
7. Network re-invention down to 13,500 outlets is completed by March 2007, with
37,500 counter positions installed (the surplus to be available for spares at no cost to
Fujitsu Services);
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8. If the Mean Time Between Failures (MTBF) increases by more than 20%, Fujitsu
Services may call upon the Post Office to reduce the associated SLAs reasonably and
if the MTBF increases by more than 30% to call upon the Post Office to finance a full
technology refresh (Fujitsu Services to use all reasonable endeavours to maintain the
equipment within such limits for the duration of the extended contract);
9. Data warehouse can be dropped if there is no requirement for a “new” MIS system
(to be confirmed within six months);
10. No resilience for single data centre and single help desk is acceptable (Fujitsu
Services to use all reasonable endeavours to mitigate impacts on that basis);
11. Extended contract signed in December 2002 and agreed “new SLA regime” changes
implemented by July 2003: progressive implementation of internal re-architecting
(both platform and infrastructure) completed by March 2005;
12. Core SI headcount (committed, pre-paid) starts at 150 and comes down to 90 after
completion of re-architecting work. This critically assumes simplification of processes
and systems boundaries and replacement of bespoke software by standard products.
This in turn depends on internal re-architecting (which is under Fujitsu Services
control) and also the adoption by Post Office of standard accounting methods and
logical system boundaries (which is not under Fujitsu Services control);
13. 50% of each skill group is available to Post Office for SI work at no charge
(otherwise payable at current man rates);
14. Previously agreed future Network Banking discount arrangements for the period
April 2005 to March 2007 are replaced by this proposal and will fall away;
15. Fujitsu Services funds the development SI work for internal re-architecting out of its
SI Support allocation, and Post Office funds the physical implementation (eg. roll out
of ADSL or single data centre) at cost (a pre-estimate of which is included within the
financial forecast);
16. Post Office funds end-to-end re-engineering changes and new products (over and
above the use of pre-paid SI capacity) at standard manrates for SI (reflecting the need
to augment the core SI team with high cost freelancers) but at cost for the physical
implementation;
17. The Landscape model is agreed in the form attached to this proposal;
18. Otherwise, no material change is required to the management of subcontractors;
19. Where programme dependencies are declared as “material dependencies”, Fujitsu
Services will get relief and compensation if those dependencies are not met;
20. Rights of termination for breach will be limited to material and repeated events (as
opposed to the trivial or one-off) but LDs will be retained against the simplified SLA
regime to keep Fujitsu Services incentivised to maintain standards of service;
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21. “Open book” will be as required for a particular purpose such as agreement to a
change request or to cost recovery of re-architecting but Post Office will not have a
general right of access;
22. Exit arrangements will be more demanding and costly than under the current contract
(in line with the draft Heads of Agreement);
23. Special discounts and benefit share arrangements will be acceptable as below.
4.5 Special discounts and benefit share
4.5.1 Special discounts are proposed as follows:
a 2002/03: £15m
a 2003/04: £15m
a 2004/05: £10m
a 2005/06: negative £10m (being a clawback of £10m)
In each case, the discount (or clawback) will be effected by a credit note (or invoice)
raised on 31 March payable with 30 day payment terms.
4.5.2 Benefit share arrangements are proposed as follows:
a Share of business benefit from back office re-engineering: 10%
a Commission on new products as a percentage of the client fee: 5%
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5 Operational Service
5.1 Introduction
Post Office has requested that the Operational Service provided under the Horizon
contract should be unbundled from the Systems Integration (SI) Service and that the
associated cost levels should be reduced. This section describes specific proposals for
achieving these aims.
The current Operational Service has been designed to meet rigorous SLA requirements
with associated thresholds set for remedy payments and / or contract termination review.
Each service component has been reviewed and price reduction opportunities have been
identified that result from:
a Reductions in level of service and / or elimination of the service
a Re-architecture initiatives resulting in simpler and cheaper to deliver services
a Year-on year efficiency savings through the life of the contract
Each service component is looked at in the following section.
The collective impact of these changes is to provide a significant reduction in the
ongoing total Operational Service costs with a small reduction in some SLAs.
5.2 Key Assumptions
It is assumed in this proposal that:
a Fujitsu Services will continue to be the prime Service Manager (SM) for Horizon.
a Operational Service will continue to be charged for as a fixed fee with some
optional, separately chargeable catalogue elements. It is not necessary to unbundle
charging for individual operational service elements.
a A limited set of SLAs will continue to be monitored in the new contract and
remedies continue to be paid. However, as there will be a reduction in proactive
management of some aspects of the operational service, there will need to be a
reduction in some SLAs. Termination Review Thresholds will, accordingly, be
moderated and may only be applied where significant material damage to Post Office
business results through Fujitsu Services persistent neglect of remedial action.
a 24x7 support will continue to be provided in areas where there remains an
operational requirement.
a Operational Services will need to retain the capacity to implement and support new
Horizon capabilities provided by the SI Service e.g. management and implementation
of new releases.
a The data centres will move from the current sites at Bootle and Wigan into single
Fujitsu Services Data Centre but with similar system resilience features within the
one location.
a The current counter estate will be supported to 2010 without a full technical refresh.
However if the reliability of any part of the solution decreases significantly, or spares
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are unavailable, a separately chargeable replacement programme will be undertaken.
There is an assumption that there will be release of counter equipment from the
Network Reinvention Programme to increase the current stock of spares to a
sufficient level to last until the end of the extended contract period.
a Initially, 8,000 counter gateway systems will be upgraded to support ADSL. This
number is expected to rise to 80% of outlets by 2006, based on assumed BT ADSL
coverage.
a There will be a complete assessment of Service Management activities Fujitsu
Services and Post Office. Duplicated functions or activities with marginal benefit will
be eliminated.
a Single Point of Contact Phase 2 (SPOC-2) and the Fujitsu Services Technical
Support Desk for Network Banking Domains will be implemented.
a The requirement for operating an ISO17799 compliant service remains.
5.3 Achieving Cost Reductions
The Operational Service comprises the following component services:
Table 2. Operational Service Components
Problem Management
Field Service
Management
Management
Information Service
Reconciliation Services
Transaction
Benchmarking
Non-polled Outlet
Management
Infrastructure Operations & Service
Management Support Management Introduction
Help Desk Data Centre 20 different Support for
System Service Operations services, supplied introduction of new
(outlets) Systems from a common releases and
Outlet Business Change Management resource base. * ongoing fixes*
* 3" Line Software
Service Management _I Support
Reference Data
Service
Note: * = no immediate change proposed.
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Specific proposals for changes to individual service components are described in the
following sub-sections.
Note that the “service descriptions” given here are at a summary level designed to
convey the essence of the service and the proposed changes. Comprehensive service
descriptions would be produced and agreed as part of the contract renegotiation
activities.
The Operational Service is comprised of the following component services:
5.3.1 Help Desk
The Horizon Help Desk takes calls from Post Office users in outlets and back office
departments regarding problems with the Horizon service, logs them and routes them to
the appropriate unit if required. It is currently a premium service that provides:
a Advice and guidance about system use and technical support
a 24hour x 7days cover (except Xmas day), with a skeleton service between 20:00 and
08:00.
a Rapid telephone response (95% calls answered within 20 seconds).
a Less than 1% calls abandoned.
a_ Resilience by operation from two sites.
It is proposed to reduce the Help Desk service levels:
a No advice and guidance calls (these calls will be taken by the Post Office Help Desk) -
only a technical support (fault reporting and resource coordination) service will be
provided.
Monday-Friday cover 08.00-18.30 only and no Saturday cover
Answerphone outside service hours.
Longer telephone response (80% of calls answered within 30 seconds)
Less than 5% calls abandoned
oooddao
Operation from a single site.
The effect of these changes, combined with the implementation of SPOC2 and the
implementation of the Technical Service Desk, will reduce help Desk calls This will be
dependent upon the effectiveness of the NBSC with regard to resolution of calls. In
addition there will be further annual reductions through ongoing efficiency savings.
5.3.2. System Service (Outlets)
Fujitsu Services will maintain the estate until 2010. The service will contain the
following key elements:
a Hours of cover reduced from 08.30-20.00 to 09.00-18.30.
a No Saturday cover
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a Call to fix SLAs as agreed in CCN85le (Rectification Plan) will remain. However
there will be no data retrieval activity in support of the data delivery SLAs
Upgrade of nominated counter gateways systems to ADSL communications
Increase of existing spares holding
Increase engineer visits
One portable appliance testing (PAT) exercise
o ooo 8
Ongoing efficiency savings
Any significant increase in MTBF for any part of the counter configuration or inability to
source appropriate spares may result in an additional replacement programme that will
be priced separately.
5.3.3, Outlet Business Change
This is a separately chargeable service for engineer visits to perform outlet moves and
modifications. No service changes are proposed in this area.
5.3.4 Service Management
The Service Management service includes they day-to day activities associated with the
management of the service. These include the following activities
24 hour duty management
Resolving day-to-day service issues
Attendance at operational forums with Post Office
SLA management
Problem management (see below)
Business Continuity
Supplier management
Service Introduction
ooo O oO OO oO 0
Impacting and planning of change requests
Cost reductions will be achieved in this area by a robust audit of the current Service
Management joint framework agreed between Post Office and Fujitsu Services and the
elimination of activities that are either duplicated or bring only marginal benefit. Areas
that will contribute to savings are:
a Problem management (see below)
a Analysis of individual incidents confined to those that materially affect business
performance
a Avoidance of protracted SLA conformance negotiations
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Reduced frequency of operational forums and reporting
Reduced customer complaint and SVR processes
Elimination of duplicated effort between Post Office and Fujitsu Services
o oo Oo
Elimination of ‘micro-management’ by Post Office
5.3.5 Problem Management/Field Service Management
Fujitsu Services currently provides a team of seven field service managers with
geographical responsibility for approximately 2,500 outlets each. The Fujitsu Services
staff are responsible for handling situations such as:
a Investigating and managing resolution of exceptional volumes of incidents
experienced by individual post office branches.
a Investigating and gathering information on problems that occur across more than
Post Office outlets.
a Acting as an on-site Project Manager for complex OBC changes to marshal
resources and reduce risk. (e.g. recently at Henley and Trafalgar Square outlets)
a Following up issues of counter non-compliance. Most importantly, equipment and
electrical supply Health and Safety issues that expose Fujitsu Services to a risk of
negligence claims and litigation.
Investigating Post Office outlet complaints.
Investigating “environmental” issues
a To investigate issues where the financial integrity of the Horizon system has been put
in doubt by end-user claims of lost transactions, lost stock or cash account
misbalance.
Q Monitoring post office branches that have recently experienced multiple incidents
and problems.
It is proposed to withdraw this service and replace it with a single Fujitsu Services
Problem Manager who will liase with Post Office central staff following ITIL service
management processes. Now that Horizon is well established, responsibility for field
liaison should become a Post Office responsibility.
The shared problem management database will continue to be updated by the Fujitsu
Services Problem Manager but pro-active problem management by Fujitsu Services at
postmaster level will cease.
There will be a reduction in scope and frequency of joint problem management forums
and a more practical definition of what constitutes a problem.
5.3.6 Management Information Service
This service monitors service levels achieved by the Horizon system and supporting
operational services and checks whether SLAs have been met. Exceptions are reported
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on and managed. The service partially depends on a costly data warehouse system,
which is updated daily with details of every single Horizon counter transaction.
As part of the re-architecting it is proposed to replace this data warehouse with a more
cost-effective solution.
Fujitsu Services proposes to reduce the level of resources applied to the management
and operation of this service. The only impact anticipated on the service to Post Office is
with respect to ad hoc queries. These can be extremely time-consuming to process.
It is proposed to limit such queries to five per week, and where queries are repeated,
they would be subject to the change request process. The Operational Level Agreement
(OLA) for ad-hoc query response within 5 working days will be withdrawn.
5.3.7 Reconciliation Services
This service monitors the financial integrity of Horizon and manages any incidents
arising. It covers EPOSS, APS, Network Banking and Debit Card functions.
It is envisaged that new business developments will expand the workload of the service.
It is proposed to reduce the size of the reconciliation team by making the following
reductions in the scope of service provided:
a Monthly reconciliation review book withdrawn
a Fujitsu representation at monthly reconciliation reviews withdrawn
a Resolution of reconciliation ‘ad-hoc’ requests for transaction data in excess of 35
days old withdrawn
a 5 day reconciliation exception handling SLA withdrawn.
Service levels would be as follows:
a NWB ‘Customer Critical’ exceptions resolved within an average time of 8 hours or
less
a All other exceptions resolved as soon as possible using ‘Reasonable Endeavours’.
5.3.8 Non-Polled Outlet Management
This service is concerned with handling outlet-polling failures, which are generally
caused by ISDN line failures. The service proactively monitors the outlet network and
manages the restoration of communications. It is an important service that underpins the
successful operation of Horizon but analysis has revealed that detailed changes to the
current service and associated SLAs would yield significant savings. Note that Fujitsu
Services is dependent on telecommunication suppliers for the rectification of ISDN line
faults and cannot pass on service penalties incurred as a result of their shortcomings.
The following service changes are proposed:
a Current DFD and LFS SLAs withdrawn and replaced with SLAs below
a Laptop data retrieval facility withdrawn
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a No remedies to apply in respect of SLA non-conformance
a Fujitsu daily “Non polled’ report to PO withdrawn.
New SLAs are proposed as follows:
Table 3. Non-Polling SLAs
SLA Level
DFD Inbound Day B: 95%, Day C: 96%, Day D: 97%,
Day J: 100%
DFD Outbound Day B: 95%, Day C: 96%, Day D: 97%,
Day J: 100%
LFS Inbound P/Orders Day A: 94%, Day B: 96%
Advice Notes Day C: 96%
LFS Outbound Pouch Rec’d Day A: 95%, Day B: 96%
Pouch Delivered Day A: 95%, Day B:
96%
Cash on hand Day A: 96%
Stamps Day C: 95%, Day C 23.59: 96%
Inventory Day C: 95%, Day C 23.59:
96%
5.3.9 Transaction Benchmarking
This service provides a post-release analysis of transaction response times against
defined benchmarks using the PADS methodology. This involves use of specialised
video equipment and laborious analysis of video film to provide highly accurate
measurement.
The service is normally carried out following changes to system menus.
It is proposed to cease provision of this service. It is felt that it adds no real value and
should be replaced by a simpler approach to transaction times, e.g. measurements using
transaction generation tools that form part of counter testing. It is proposed that any
targets will be based on system times (as with NWB) and not on end-to-end times.
5.3.10 Data Centre Operations and Network Management
The service covers the provision of the twin Horizon data centres and runs the
operational schedule to ensure that stringent SLA's are achieved.
The service runs servers at two data centres - 150 servers in total, as well as a further 60
platforms on AP Client sites and other remote locations across the UK. It also covers
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test rigs within Fujitsu Services development units. The Horizon data communications
network is also part of this service.
The current Horizon data centre sites are within facilities owned and used by Alliance &
Leicester (A&L). There is no commitment to provide the facilities beyond the end of
2006. Various options for data centres have been discussed in a joint working group and
the outcome was a recommendation that the current twin data centres should be
consolidated onto a single secure site with appropriate physical resilience (dual power,
communications, fire and flood separation) so that the likelihood of a problem affecting
both systems is extremely remote.
Overall these changes will reduce running costs for data communications and 3" party
support and maintenance charges. They will also enable Fujitsu Services to reduce the
manpower required to run the service. However there will also a substantial one-off cost
for relocation from A&L to the Fujitsu Services site with a period of parallel running.
Initial plans suggest a 12-month implementation timetable, a study is required to look
into the move programme in more detail and determine whether this timetable can be
improved.
5.3.11 Software Distribution and Systems Management
The operation of the Systems Management Centre (SMC) is integral to the operation of
the entire operational service. It is involved in the monitoring and management of all
aspects of the system i.e. event management of the data centre and counter estate,
software distribution, Outlet Business Change, Network Management etc.
Cost reductions have been factored into this service through the reduction of pro-active
management of non-polled activities and by ongoing efficiency savings
5.3.12 3" Line Software Support
This service comprises the initial investigation of incidents from the outlets and the
operational estate and the production of workarounds in a timely manner.
Although the number of incidents resulting from a major release will normally cause a
temporary rise in the number of incidents handled, ongoing cost savings are assumed in
this area to reflect the increased stability of the solution and overall efficiency savings.
5.3.13 Reference Data Service
In joint working earlier this year, the desirability of rationalising Reference Data systems
was agreed. Targeted improvements would reduce manpower costs of running the
Reference Data Service:
a Automate the Message Broadcast service so no manual effort required by Fujitsu
Services
a Automate the end-to-end process (including activities in Post Office) for outlet data,
such that validation and verification is not required.
a Design, develop and implement a front-end validation process for incoming data.
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a Improve the usability of the AP Workstation
a Combine testing, which is currently undertaken separately by Post Office and Fujitsu
Services
It is believed a reduction can be made in the costs of running this service. However this
will only be possible in close collaboration with the Post Office in the above areas.
5.3.14 Security Management
The Security Management Service ensures that the integrity, availability and
confidentiality of information used within the various Horizon Services and the support
environment is maintained and compliant with legal and contractual obligations. This
service currently covers more than 20 difference services from a dedicated team.
To illustrate the breadth of this service, examples of the activities undertaken are as
follows:
Compliance management
Cryptographic key management
DPA compliance
Security event management
System access management
Horizon Pass system
Anti-virus
Security Audits
Risk Assessment
ooo oo oo odo oOo
Prosecution support
Changes to these services will be driven by changes to the Horizon security architecture
and these in turn must be driven by changes in the security requirement, derived from the
threat analysis, Post Office security policies and Fujitsu Services contractual liabilities.
Potential savings will be identified following further studies within the re-architecture
programme.
5.3.15 Release Introduction
This service comprises all elements of planning and managing all changes to the live
estate. It includes:
a Definition of Major Release strategy
a Production and management of project plans
a Management of all software release activity
2 Liaison with Post Office
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Release Introduction is driven by changes to Horizon and by the ongoing maintenance of
the service. This change management function will continue with the evolution of the
system. However ongoing efficiency savings are assumed.
5.4 Service Volumes
The following volumetric assumptions have been made in the preparation of this
proposal.
Table 4. Service Volumetrics
Infrastructure Management
Volumetrics
Help Desk
Up to 13,000 calls per month
System Service (outlets)
Up to 4,000 calls per month requiring
engineer visit
Reconciliation Services
100 exceptions per day
Management Information Services
Up to 5 queries per week
Operations Service
250,000,000 transactions to TIP per
month
32,000,000 transactions to AP clients
per month
56,000,000 transactions to DWP per
month
800,000 Stops received from DWP
per month
260,000 Planned Orders per month
96,000 Pouch Receipt Confirmations
per month
Systems Management and Software
Distribution
Monitoring 50,000 events a week
from 200 servers and 39,400 counter
systems on 17,400 sites (reducing to
37,500 counters on 13,500 sites)
Distributing 40 software packages to
200 servers per month
Distributing 18 software packages
per month
Reference Data Service
200 reference data changes per
month
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6 Sl and Applications Service
6.1 Introduction
Post Office have requested that the SI capability provided under the Horizon contract
should be unbundled from the Operational Service and that SI cost levels should be
reduced. Post Office also envisage that future Horizon applications might be procured
directly from other suppliers and integrated with Horizon by Fujitsu Services. This
section describes the basis on which Fujitsu Services proposes to approach these
requirements.
The primary cost driver for the Horizon SI Service is the core team of skilled human
resources. The secondary drivers are the costs for the infrastructure (space, hardware,
software, and communications) that is needed to create and test software before it can
be used in the live environment.
Fujitsu Services believes that it is essential to retain a capable and motivated expert
Horizon core team to provide the capability to respond to business requirements.
Horizon consists of a range of platforms and applications and so a wide range of
technical skills is now required for support and development. As with any large IT
system, new staff typically need several months of training and supervisory support
before they can be fully effective. A reasonable balance therefore needs to be struck
between the cost of maintaining a given level of capability to respond to business
requirements and the additional costs and reduced responsiveness associated with
scaling SI capability to meet each individual business change requirement.
However, there is scope to reduce these core team costs progressively through re-
architecting to reduce the variety of technical platforms and associated skills used in
Horizon. Further reductions in SI costs should flow from improved governance and
reduced process overhead.
6.2 Key Assumptions
It is assumed in this proposal that:
a Fujitsu Services will continue to be the prime System Integrator (SI) for Horizon.
There will be a substantial programme of Horizon SI and implementation activity
over the next few years driven by Post Office business change and this means that
Fujitsu Services must retain a substantial SI capability. This capability is expected to
be below today’s peak caused by the Network Banking programme, but at a level
that is dependent on the volume of SI work required.
a The SI capability already spans Horizon infrastructure, Horizon applications,
integration/testing and 4" line support for the live operational service. This proposal
extends the Service boundaries into Post Office Back Office systems to support
radical business change and also to deliver IS cost reductions. This change will
create new projects with new skill requirements.
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a. The scale and therefore cost of the current SI operation can be reduced by:
Re-architecting Horizon and Back Office systems to remove internal system
boundaries and unnecessary complexity
Reducing the complexity of requirements by improving dialogue at the
commissioning stage
— Reducing service demands
Reducing contract liabilities
Simplifying processes for commissioning and carrying out work.
a Post Office prefers transparency of pricing and is willing to share some SI risk.
Therefore, SI work will be carried out predominantly on a T&M basis at agreed man-
rates with delivery milestones against prior estimates.
a Post Office wish to have some degree of commercial separation of SI from
Operational Services but in practice there is a critical dependency on Operational
Services for implementation of new system releases. Therefore SI and Operational
Services should continue to operate in a seamless fashion in the same way that they
do now, co-ordinated by Fujitsu Services project managers.
6.3 Achieving Cost Reduction
The minimum resource level that is currently required to sustain the SI Service is in the
region of 150 heads. This is a subset of the current team, which is larger because of
peak demands caused by Network Banking. The SI Service core team comprises:
Programme and project management
Architecture & design
SI, development, testing and support
Quality Assurance
Configuration Management.
o ooo oO Co
The approximate constitution of this team is shown in Table 5
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Table 5. Unit Resourcing for SI
Unit Headcount
Prog. Dir./Dev. Dir. 10
Programme Office 12
Business
Consultants 3
ASD 12
APDU 39
IPDU 45
PTU 29
Total 150
Our long-term goal is to reduce the level of resource to a core team of approximately 90
heads.
a Managing the Skills Base
Fujitsu Services proposes to reduce the size of the core team from its present level
by reducing the range of technical skills required.
As an example of this process, through the re-architecting programme, Fujitsu
Services will replace central Sequent Dynix servers with the latest generation of high
performance standard Unix servers. Thus specialist Dynix skills will no longer be
required in the core team, expensive test servers can be retired and greater potential
for sharing development and testing resources across different activities will then
exist.
Another example is security: the current solution has an extremely high level of
security which was originally built in to enable electronic DSS payment
authorisations to be stored safely at branch level. These measures require highly
specialised skills to maintain. A re-appraisal of the security threats that Post Office
require to protect against is expected to result in a significant reduction in the
complexity of the Horizon requirement which provides the potential for further
reductions in costs of maintaining the service and introducing new business changes.
Current architecture work aims to identify similar technology/skills dependencies to
be identified and tackled. In time, it will be possible to simplify teams and reduce
infrastructure requirements.
a Managing Utilisation
Where staff needs to be redeployed or assigned to specific projects, Fujitsu Services
has a resource management system that operates across the company. However,
where practical, the preferred and most cost-effective approach will usually be to
maintain workflow for a skilled core team.
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Consequences of Under-Utilisation Consequences of Over-Utilisation
la Staff lose motivation la Costs rise due to overtime and / or use
la Best people and key skills may be lost of temporary contract staff
la Insufficient financial recoveries are made {7 Staff become overstretched
in the long term man-rates may have t
rise to compensate
IT infrastructure causes bottlenecks
o
lQ Quality may suffer
a Use of Third Party Applications
Fujitsu Services has no objection to the use of third party applications in principal.
Our current responsibilities for the operational service and SLAs mean that we need
to control application providers through sub-contracts. It is hoped that re-
architecting can reduce the level of bespoke programming in Horizon and increase
the use of standard product.
If significant parts of the current architecture can be replaced by third party
applications then this would enable us to reduce the size of the core team.
6.4 Charging for SI Services
In principal there are a number of approaches that could be combined to provide
incentives to maximise utilisation of the core SI team:
a Unbundling the commitment to funding SI and application development work makes
the expenditure highly visible
Lower effective man-rates for larger scale/longer term commitments
Rebates or lower man-rates where normal utilisation levels are exceeded through
additional work over long periods.
a SI Core Team
Under the current contractual arrangements, the core team is funded through the
ongoing service charges.
It is proposed that there should be an explicit monthly charge for the services of the
SI core team and associated infrastructure, including an agreed level of out-of-hours
cover and overtime working.
In future, the charge for this team will reduce in line with reductions in headcount
and infrastructure costs.
Fujitsu Services and Post Office will work jointly to maintain a prioritised flow of
work for this team.
Actual effort will be monitored by Fujitsu Services through timesheet reporting.
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a Additional Resources outside SI Core Team
By agreement, it is likely to be necessary to deploy additional resources to meet
particular business requirements. These might be:
a Urgent enhancements when all core resources are already working on committed
projects
a Large-scale projects exceeding the capability of the core team
a Projects requiring specialised skills and/or facilities.
Under the current contractual arrangements, any such additional resources are
incrementally chargeable via agreed work packages. Agreed man-rates may be
discounted for large work packages in negotiation.
It is proposed to replace this by an agreed scale of discounts according to the scale
and period of commitment.
By definition, resources in this category are likely to be sourced from elsewhere in
the company or outside and therefore the degree of commitment and the lead time
given will be important in determining both price and delivery dates.
a Risk
Under T&M arrangements, there must be prior agreement on how to handle cost
overruns. Fujitsu Services proposes that projects could be categorised according to
the level of risk so that little or no overrun would be chargeable on low risk projects
(so called “capped” T&M). Permissible overrun would be agreed in advance as a
declared project contingency.
Our detailed knowledge of Horizon should mean that most Horizon work should be
in the low risk category. Work on client interfaces and in the Back Office may be in a
higher risk category. Work on such projects is best managed by progressive
commitment of funding to project stages to minimise exposure to risk.
The increased emphasis on joint working to establish work package requirement
specification, as detailed in the lifecycle process described in this proposal, has been
designed to improve estimating accuracy and directly contribute to a reduction in
business risk.
6.5 SI Service Management
A new Service Management regime and process is proposed to manage the SI Service
and associated charges. The purpose of this is to manage:
a Size of the core team
a Additional resource commitment to projects
a Financial commitment and ongoing service charges
It is envisaged that a rolling resource forecast would be created and reviewed monthly.
This would detail resource allocation to major areas of work. The scope of the forecast
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would be at least 12 months ahead. Confidence in the forecast would improve over time.
There would be significant benefits for both organisations:
a Eases budget setting
a Ensures the right skills are available when needed
a Improved planning process should shorten lead times
a Aclear method of prioritising work would exist
Work priorities need to be kept under review. Naturally there will be a desire to cover
work packages from the pre-paid core team but the need to maintain progress on cost-
saving work must also be kept at the forefront.
6.6 Resource Forecasts
The measures described in this proposal will enable a reduction in the size of the Core
Team once re-architecting has been completed and migration to the new solution has
completed. However, it is believed that the greatest demand for SI resources will be
during the next two financial years. In this period there is a need to re-engineer business
processes, replace Back Office systems, reduce Horizon’s internal complexity, and
launch new retail products.
Therefore two illustrative forecasts are presented here: a minimum commitment and an
initial recommendation of the investment required to achieve additional savings as
outlined in Section 3.
6.6.1 Minimum Commitment
The minimum commitment is only sufficient for internal Horizon changes.
Figure 3 illustrates the declining minimum commitment over time and shows spare
capacity in this team over and above basic support which is available for SI work.
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Figure 3. SI Resource Allocation — no Projects
SI Resource Allocation (Heads)
60 @ New Products
140 End-to-End Change
O Network Banking
120 @ Spare Capacity (Bench)
100 @ Support/int Re-Architect
80
60
40
20
03/04 04/05 05/06 06/07 07/08 08/09 09/10
Financial Year
6.6.2. Proposed Resource Forecast
This forecast is indicative of the level of commitment that will be needed to deliver the
programme of work outlined in this proposal.
Figure 4 illustrates how the workload could be divided over four main areas of activity:
a New product development through the lifetime of the contract
a End-to-End change, mainly over the first two years
a Network Banking (declining rapidly after April)
a Horizon support and internal re-architecting activities.
This focus is based on assumptions in our pricing model and is aligned with timescales in
the Roadmap Plan. It assumes that after a two-year period of significant changes to
Horizon, the focus is on new product and support work.
In the intervening period, there is a need for further investment, which is above the level
of minimum commitment
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Figure 4. SI Resource Allocation - with Projects
SI Resource Allocation (Heads)
250
@ New Products
End-to-End Change
200 O Network Banking
. @ Spare Capacity (Bench)
150 Pa : —I & Support/Int Re-Architect
100
50
03/04 04/05 05/06 06/07 07/08 08/09 09/10
Financial Year
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7 Financial Summary
7.1 Introduction
A few key points should be noted:
a Notwithstanding much detailed assessment work, the figures remain indicative at this
stage: they will require more joint working and feedback to validate the assumptions
before they can be firmed up as hard contractual commitments;
a All numbers are expressed in £ millions in 2002/03 money before inflation: efficiency
savings are however assumed year on year, and are identified separately;
All numbers exclude VAT;
Network Banking operating charges are embedded in Core Operations charges,
principally network charges.
a The tables which follow identify by element of service the estimated commitment
required from Post Office for the Core service: this includes Network Banking.
Maintenance of the current estate is assumed to 2010.
a The charges include provision for internal re-architecting of the Horizon software
platforms and selective upgrades to produce cost savings. They also include an
element of pre-paid SI resources available for Post Office sponsored work, free of
charge. This allowance is identified.
a Provision is not made for the incremental work which will be required over and
above this allowance to complete delivery of, in particular, end-to-end BPR of Post
Office back office systems and new products. Estimates have been made separately
of probable ranges of incremental cost based on the draft Roadmap. These are
available for discussion but are not included here.
7.2 Operations charges
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Total 2002/ 2003/ 2004/ 2005 2006/ 2007/ 2008/ 2009/
3) 4 5 &© TF 8 9 Ww
Help desk 26 1 4 4 4 4 3 3 3
System service - counters 96 3 13 13 13 13 13 13 13
OBC il 0 2 2 2 2 1 1 1
Data centre operations 66 3 IL 10 8 8 8 9 9
Network 143 7 29 23 21 18 16 15 14
Software distribution/ 58 2 & 7 8g 8 8 8 9
systems mgt.
Product support 21 1 3 3 3 3 3 3 3
Reference data mgt. 4 0 1 1 1 1 1 1 1
3rd line support service 11 0 2 2 1 1 1 1 2
SLA management/ 4 0 1 1 0 0 0 0 1
measurement
Service (problem) 4 0 1 0 0 0 0 0 1
management
Client interface mgt./ 4 0 1 1 1 1 1 1 1
reconciliation
Security/ Audit 3 0 0 1 0 0 0 0 0
Inflation 0 0 0 0 0 0 0 0 0
Efficiency -20 0 0 “1 2 3 4 5 6
CCNs 5 3 0 0 0 0 0 0 0
Current pricing to Dec 62 62
2002
Total Operate 497 83 74 65 60 57 54 53 52
7.3 Infrastructure charges (availability fee)
Total 2002/ 2003/ 2004/ 2005 2006/ 2007/ 2008/ 2009/
3 4 5 6 7 gs 9 WwW
First Availability fee 41 15 15 Il 0 0 0 0 0
Second Availability fee 48 16 16 16 0 0 0 0 0
Third availabi fee - tech 0 0 0 0 0 0 0 0 0
refresh lease
89 31 31 27 0 0 0 0 0
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7.4 SI charges
Total 2002/ 2003/ 2004/ 2005 2006/ 2007/ 2008/ 2009/
3 4 3 6 z 8 2 10
SI - Minimum Commitment
Support 94 4 16 15 ll 11 11 1 14
Committed capacity 47 2 9 8 5 5 5 5 7
Inflation 0 0 0 0 0 0 0 0 0
Total SI Commitment 141 6 25 24 16 16 16 16 21
SI - Implementation of 13 1 3 7 2 0 0 0 0
infrastructure & architecture
changes
Pre-paid SI capacity available ~40 -2 7 7 -5 -5 <5 -5 <5
to Post Office
7.5 Special discount and other charges/ credits
Total 2002/3 2003/4 2004/5 2005/6 2006/7 2007/8 2008/9 2009/
10
Additional work
Network Banking 40 38 2 0 0 0 0 0 0
Add scope (back office) 1 1 0 0 0 0 0 0 0
New Products 1 1 0 0 0 0 0 0 0
Utilisat’n of pre-paid 2 “1 “1
Total Additions 40 39 1 0 0 0 0 0 0
Discount/profit share for scope -30 -15 -15 -10 10 0 0 0
extension
Benefit share
Net Total Core Commitment 750 145 119 113 87 73 7 70 73
after discount
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Appendix 1 — Lifecycle Process
8.1 Introduction
Post Office and Fujitsu Services have jointly concluded that significant reductions in the
current level of Horizon costs are dependent upon a major streamlining of existing
lifecycle processes governing the procurement, implementation and operation of
Horizon and associated business change.
This section presents Fujitsu Services’ proposal for the new streamlined lifecycle process
that is specifically focused on the areas of inter-working between Post Office and Fujitsu
Services. This Lifecycle Process proposal is directly derived from work conducted with
Post Office in the Working Together Initiative. In particular, the Lifecycle Process
incorporates the new Post Office processes and terminology described in the “Landscape
Model” documents, the contents of which have been shared with Fujitsu Services.
The results of this joint initiative have been the identification of a more agile process that
will:
a Reduce procurement costs through the rapid identification of opportunities that
cannot be supported by viable business cases
a Improve value for money and time to market for Horizon business solutions through
reduced use of bespoke developments, and improved exploitation of existing
Horizon assets
a Reduce rework and hence business risk associated with Horizon implementation
costs and timescale estimates through introduction of improved requirements
definition and qualification techniques
a Remove duplicated documentation, activities and system components through the
joint adoption, by Post Office and Fujitsu Services, of a policy to single source
information and functionality wherever commercially practical
a Remove implementation and operational service costs that are not supported by
business related objectives through improved joint analysis and qualification of
Horizon requirements
a Increase the number of opportunities identified by Fujitsu Services that will result in
cost reductions and service performance improvement as a result of service
performance analysis and exploitation of new technology developments.
The “Landscape Model” identifies the process steps associated with managing the
impact of business change within the Post Office IS environment. This proposal
develops the Landscape work further to present the sequencing of these process steps
through identification of their relationship with the main process inputs and outputs. In
addition, the proposal makes a clear distinction between the responsibility for
performing a process step and the practise of joint working by Post Office and Fujitsu
Services on activities associated with the process.
To assist with the analysis and definition of the Lifecycle Process, a formal process
model has been developed. Output produced from this model is used to help describe
the process in the remainder of this appendix. Responsibility for each process step is
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attributed to either Post Office or Fujitsu Services, following the practise adopted in the
Landscape documentation.
For clarity of presentation in the process diagrams, process steps together with the
information/business objects that are the responsibility of Post Office are shown without
shading whilst those which are Fujitsu Services' responsibility are shaded grey. A brief
description of the construction of the process model and its components is provided in
the final section of this appendix.
In the first instance, the top-level Lifecycle Process is introduced. Subsequently, further
levels of detail are shown for the Post Office Opportunity Qualification and Fujitsu
Services Work Package Delivery processes. Finally, to underline its relationship to the
contract and central role in defining the scope of supplier obligations governing
acceptance, performance monitoring, functionality, etc., an expansion of the Work
Package Requirement Specification business object is also presented. In each case, a
diagram produced as output from the process model is presented first followed by a
narrative description of the workings of the associated parts of the Lifecycle process.
In line with the terminology used in the Post Office Landscape Process documentation,
the term Work Package has been used to represent the individual items of work that
Post Office will contract with a supplier to meet business requirements.
Following Post Office review and feedback on this proposal, work will proceed on the
detailed definition of the process steps and business objects associated with joint
working that are described in summary form below.
8.2 Process Principles
Prior to describing the proposed process, it is important to recognise that a number of
key principles have been adopted in the design of the Lifecycle and Landscape
processes, namely:
a Elimination of duplication — the same documents are to be used by Fujitsu Services
and Post Office wherever commercially possible providing a single source of
information
a Clear responsibilities - one and only one party has responsibility for each step in the
lifecycle process, i.e. Post Office or Fujitsu Services
a Joint working, where this improves understanding and reduces co-ordination effort,
e.g. requirements analysis, testing/acceptance
a The cost of performing the activities and creating the outputs associated with
individual process steps are the responsibility of the process owner (as defined by
Landscape), unless prevailing contract terms determine otherwise
a Architecture laboratory to prototype key elements of new capabilities, evaluate new
technologies and visualise requirements
a Clear scope for systems integration responsibilities
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Post Office is responsible for the integration of individual Work Package outputs and the
performance of the resulting integrated business system in situations where the Post
Office Conceptual Design activity has determined that a business requirement is to be
addressed by more than one Work Package
Fujitsu Services has responsibility for integration activities within a Work Package and
the contracted level of performance of the resulting integrated Work Package in
situations where the Fujitsu Work Package Design activity has determined that the Work
Package solution will involve more than one component supplier
a Clear scope for design responsibilities
Products and environment constraints identified by Post Office Architectures are defined
in the Work Package Requirement Specification
Selection of products used in the construction of a Work Package, other than those pre-
defined by Post Office in the Requirement Specification, are the responsibility of the
Supplier.
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8.3. Top-Level Process
(acceptance (acceptance (acceptance
Tests Teste Teste
laren Defines) \completed)
at 470 470
‘acceptance’
Piannes &
Seriptes
‘work
Package
Accepted
‘acceptance
Plans
Finalise
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The top-level process provides an end-to-end view of the activities that take place in the
contracting lifecycle. The lifecycle starts when the Post Office business first identifies a
new business opportunity and ends on completion of the business solution Work
Package supply contracts. The process focuses on the key lifecycle activities at which
Post Office and Fujitsu Services processes interact. The process highlights the respective
responsibilities of the two organisations for each step in the lifecycle process together
with the associated information flows.
During the execution of a process step, it may be beneficial to consider feedback to
previous process steps to review decisions that have previously been made. In cases
where this feedback results in changes to previously established process outputs, it is
imperative that the process is re-started at the point of revision to ensure that outcomes
that were previously established are re-validated to take into account the new
circumstances. The main areas where feedback is to be encouraged have been explicitly
represented in the process model.
Similarly, at each process step it may be necessary to halt the process. The main areas
where the process may halt have been explicitly represented in the process model, e.g. a
rejected business case.
The process model presented is generic in that it has been designed to accommodate
Post Office business requirements and work packages of varying levels of complexity.
However, the amount of work involved in each process step will depend upon a number
of factors including the complexity of the work package and the extent to which existing
information can be re-used. A change control on an existing contract will therefore need
to go through the same process steps as for a work package requiring a new contract.
However, in this instance the process steps should not be onerous.
8.3.1 Post Office Opportunity Qualification
Following identification of a new Post Office business opportunity, the opportunity is
first assessed and qualified by an internal Post Office business qualification review
process. Significant opportunities for improved working practices used during this
process step have been identified which will help the Post Office complete the
qualification more rapidly and cost effectively. This process step has therefore been
expanded in the process model to define the improved qualification process. The
expanded process step is separately described in a subsequent section within this
appendix.
On completion of the qualification process, the Post Office business case will have been
approved or rejected. If approved, the Post Office Architectures Team will have made
any necessary changes to the overarching architecture to accommodate the new business
requirement. They will also have identified the requirements for the work packages that
need to be procured to provide a business solution that meets the Post Office business
requirement.
An opportunity that might result in a Change Request (CR) to an existing contract
would also be the subject of the qualification review process.
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The Post Office is responsible for the execution of this process and the production of the
resulting outputs.
8.3.2. Work Package ITT Preparation
Subject to Post Office business case approval being granted, preparations will proceed
for the procurement of the Work Packages that Post Office Architectures have identified
as being required to build the business solution. Fundamental to this procurement
activity will be the Work Package Requirement Specification that Post Office
Architectures have been responsible for producing during the qualification process step.
Because of its importance throughout the lifecycle process, an expansion of the Work
Package Requirement Specification business object has been separately described in a
subsequent section within this appendix. In particular, it should be noted, that the
requirement specification defines the scope of the work package acceptance and
performance/SLA measurement obligations. The Work Package Requirement
Specification is carried forward into the procurement documentation (e.g. ITT, CR) and
subsequently into any resulting contract.
The Post Office is responsible for the execution of this process and the production of the
resulting outputs.
8.3.3 Fujitsu Services Business Approval Review
On receipt of details of a new Post Office requirement, Fujitsu Services business
governance processes mandate certain activities that need to take place to help ensure
corporate conformance and quality of proposals and contracting activities conducted
with customers
Initially, a qualification of the Post Office opportunity will be completed which will take
into account any existing contractual obligations. Checks will be made at this stage that:
a The Work Package Requirement Specification provides sufficient information to
prepare a solution proposal
a Fujitsu Services has the capability and available resources to deliver a realistically
priced solution on the required timescales
a The estimated Fujitsu Services investment required to complete the procurement is
compatible with the value of the business opportunity.
The process improvements proposed for Fujitsu Services participation in the initial Post
Office qualification activity have been designed to minimise the chances of procurement
halting at this stage.
Following successful qualification of the opportunity, Fujitsu Services will prepare a
document detailing how it proposes to meet the Post Office Requirement. Prior to
submission to the Post Office, the proposal is subjected to a formal Fujitsu Services
Business Approval Review to ensure conformance with corporate business policies and
procedures. If the Fujitsu Services proposal is accepted by Post Office procurement
process (see below), the next step is to establish the contract terms. Prior to final
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agreement of contract terms, they will be presented to a formal Fujitsu Services Contract
Approval Review to ensure conformance with corporate business policies and
procedures
Dependent upon the level of business risk involved, Fujitsu Services directors will
participate in these review processes.
Fujitsu Services is responsible for the execution of this process and the production of the
resulting outputs.
8.3.4 Post Office Work Package Procurement
On receipt and review of Fujitsu Services’ proposal to meet the Post Office Work
Package requirement, Post Office will decide whether to accept the proposed solution.
The process has been designed so that the steps taken in the preparation of the business
case during the qualification processes will seek to remove nugatory procurement
activity and costs at the earliest possible stage in the lifecycle process. If the decision is
taken to proceed to contract, the terms will either be negotiated or derived from an
existing contract in situations where the requirement represents a contract change
control.
The contract includes the final form of the Work Package Requirement Specification,
which provides the definitive baseline for the solution design and the scope of Post
Office acceptance activity. From this point on in the lifecycle process, the Work Package
Requirement Specification is managed under contract change control procedures.
Post Office is responsible for the execution of this process and the production of the
resulting outputs.
8.3.5 Fujitsu Services Work Package Design
The Fujitsu Services Work Package Design process will commence once the contract is
signed with the Post Office. The objective of the design process is to define in detail how
Fujitsu will satisfy the requirements detailed in the Work Package Requirement
Specification embodied in the contract. The design will identify the main solution
components in sufficient detail to enable the high level design of those components to
proceed during the following Work Package Development process step.
With a consistently derived requirement baseline, the design work will be able to re-use
and build on the outputs produced by the opportunity qualification and proposal
preparation activities. The Work Package Design output from this process will be
provided to Post Office to help with the preparation and planning of the Work Package
acceptance activities. Feed back from Post Office regarding the design support of the
requirement will be constructive during this process step.
The Work Package Requirement Specification will be subjected to considerable scrutiny
during this process. The process will therefore require effective joint working to address
areas of the requirement that need clarification, subject to the disciplines of the change
control process.
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Fujitsu Services is responsible for the execution of this process and the production of the
resulting outputs.
8.3.6 Fujitsu Services Work Package Development
The availability of the Work Package Design will enable the development of the work
package components to proceed. This will include any work package components that
are concerned with satisfying deployment and operational aspects of the requirement.
The development process covers high level design, low level design, build and
integration through to system test of the complete work package solution. On
completion of the development process, the work package will be ready to commence
the acceptance activities that have been defined in the requirement specification.
The output from the development process will be used by Post Office to help finalise
their preparations for work package acceptance.
Fujitsu Services is responsible for the execution of this process and the production of the
resulting outputs.
8.3.7 Acceptance of Work Package by Post Office
The initial step in this process commence with the definition of the scope of the
acceptance requirement as contained in the Work Package Requirement Specification.
This scooping information will be used by Fujitsu Services to make appropriate
provisions for acceptance activities and their associated costs in their solution proposal.
It will also be used to inform the work package design activity to ensure that appropriate
measures are provided for in the solution to support the acceptance requirements.
Further steps in the acceptance process will use outputs from the work package design
and build processes to refine the detail of any preparations required to conduct work
package acceptance.
The output from the work package build process is a work package solution that is
ready to use as input to remaining acceptance activities. It is recognised that in some
situations, acceptance will largely be based on observation and verification of the results
produced from Fujitsu Services system tests. Wherever practical, the process encourages
avoidance of separate acceptance tests that largely duplicate the results produced by the
system testing processes. The opportunity to avoid duplicating testing activities thus
reducing costs and implementation timescales, occurs when the scoping of the
acceptance tests is determined for inclusion in the Work Package Requirement
Specification.
On completion of the acceptance process, a formal record of the outcome is produced
and the work package solution is accepted by Post Office as being ready for delivery
into live operation.
Post Office is responsible for the execution of this process and the production of the
resulting outputs.
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8.3.8 Work Package Delivery
On completion of the work package acceptance, the delivery process fulfils the
deployment and operational obligations detailed in the requirement specification. An
expansion of this process is described in a subsequent section to this appendix.
On completion of the delivery process, Fujitsu Services will have discharged its
obligations under the contract and the contract will have been completed.
Fujitsu Services is responsible for the execution of this process and the production of the
resulting outputs.
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8.4 Post Office Qualification Process
(Overarching (overarching (work Package Po Business (Po Business
‘Architecture Architecture Requirement Requirement ‘Change
Specification PlaniCosts
current) updated) (updated)
200 of} I 200 1 400 1
(New PO
Business Feasbilty PO olution 0
Opportunity! ‘Assessed Conceptual Options
CRs byPo
Business Business
Reviewed
100 ° 4100
4300
PO Business
Solution Cost (Po Business (PO Business.
Requirement Requirement case case
Specification
(Current) ancicative) Submited) \Rejected)
2000 ° 1900 ° 1900 2
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This section explains in more detail the activities that take place within Post Office
Opportunity Qualification process, which was described above in the context of the top-
level lifecycle process. The process has been designed to include important
improvements to the way in which Fujitsu Services supports the Post Office in the
identification of effective solutions to their business requirements and for which the
supporting business cases demonstrate that value for money can be achieved.
8.4.1 Post Office Feasibility, Conceptual Design and Solution Review
Processes
The Landscape Process identifies an initial process step during which the feasibility of
new business opportunities are qualified and a supporting Post Office Business
Requirement specification is produced. The resulting business requirement is used by the
Post Office Architecture Team to produce a Conceptual Design. This design will take
into account the existing Post Office Business Architecture together with the associated
policies and principles. The output from this design activity will be the initial
specification of the Work Package Requirements from which the proposed business
solution will be constructed. In situations where the need for more than one work
package is identified, Post Office will be assuming responsibility for the integration of
the individual work packages.
The Work Package Requirement Specifications produced by this process will be
supplied to Fujitsu Services so that indicative costs can be obtained, thus assisting with
the construction of the Post Office business case for the requirement. The process has
been designed to accommodate improved feed-back from Fujitsu Services that will:
a Be effective in identifying solutions that provide Post Office with optimum value for
money
a Help eliminate nugatory procurement costs through rapid identification of
requirements that are unlikely to result in a viable supporting business case
The Conceptual Design process will therefore also take as input proposed revisions to
Work Package Requirement Specifications resulting from Fujitsu Services feedback on
solution options and outstanding requirement definition issues. As a result of this
feedback, the Conceptual Design process may find it beneficial to revise the design and
re-draft the Work Package Requirement Specifications.
To make effective use of the feedback that has been designed into the process and avoid
introducing unnecessarily extended timescales, it is important that close inter-working
between Post Office and Fujitsu Services takes place at the earliest stage in the process.
The relationship must be such that working level information can be readily exchanged
between the parties prior to a detailed specification being finalised. This will minimise
the need for significant rework and increase the opportunities to identify optimal
solutions.
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In order to remove cost and business risk from the later stages in the end-to-end process
and increase the level of certainty associated with implementation cost and timescale
estimates, it is expected that a greater proportion of work will be performed on activities
concerned with establishing a more complete understanding of requirements than has
previously been the case. In particular, a greater level of detail will be required in the
final version of the Work Package Requirement Specification upon which Post Office
business case is constructed.
When the review of the work package solution options has been completed and any
resulting changes to the design and work package requirements have been finalised, an
indicative cost for the overall business solution will have been determined for use in
constructing the business case. These costs will include any provision for system
integration activities for which Post Office has responsibility.
Post Office is responsible for the execution of this process and the production of the
resulting outputs.
8.4.2 Indicative Work Package Cost Estimates
The Work Package Requirement Specification will be used by Fujitsu Services to
establish an outline solution approach and derive indicative implementation costs.
Where there is sufficient detail specified in the requirement, it will be possible to provide
an indicative cost estimate to help construct the business case.
Tt may be the case that a number of different approaches exist that meet the requirement
or variations of the requirement that Fujitsu Services have identified as being beneficial
for Post Office to consider. It is therefore possible that this process provides, as an
output, feedback on these options and issues. Fujitsu Services propose the use of an
Architecture Lab to support this feedback activity which is an important innovation to
help inform Post Office decision making in identifying solutions that deliver optimal
value for money and to quantify and mitigate the business risk associated with complex
technical and business change. The Architecture Lab concept is described in more detail
elsewhere in this document.
In extreme situations, it may not be possible for Fujitsu Services to propose a practical
solution that meets Post Office requirements. In such cases a no bid response will be
provided.
Fujitsu Services is responsible for the execution of this process and the production of the
resulting outputs.
8.4.3 Post Office Business Case Preparation and Review
Using the indicative cost of the business solution (designed by Post Office Architectures)
as input together with the estimated costs of the implied business change required to
implement the solution (prepared by the sponsoring Post Office business), the process
will establish the overall cost of meeting the business requirement. This overall cost,
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combined with the benefits identified by the Post Office business, will be used to
construct the Post Office Business Case.
The results of the Business Case review process will determine whether the requirement
is to be progressed further. If there isn’t a positive outcome to this process, it is possible
that the proposed solution design may need to be re-visited to determine whether a more
cost effective option exists. To help reduce the costs and resource wastage associated
with the preparation of unsuccessful business cases, the proposed Work Package
Requirement Specification includes information regarding the business benefits that the
proposed Post Office investment is expected to deliver. This information will assist the
Fujitsu designer in identifying solutions that represent value for money relative to the
expected level of benefit to the Post Office. It will also help Fujitsu Services identify, at
the earliest opportunity, situations where a value for money solution may not be
practical which will help to reduce Post Office and Fujitsu Services procurement costs.
Post Office is responsible for the execution of this process and for the production of the
resulting outputs.
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8.5 Work Package Delivered Process
PO Change
Requests.
—
(Werk Package
‘Work Work
Package Package
(Accepted ) Decloved Cpatsies
2
‘Work Package I ‘SLA Reports I
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Following Post Office acceptance of the work package solution, Fujitsu will proceed to
deploy the resulting solution within the Post Office estate and operate the live service as
detailed by the contract. The Work Package Requirement Specification will have
identified the SLA reports that are required to be produced to monitor live service
performance.
The process of monitoring live service performance may identify areas in which the work
package is non-conformant to the requirement specification. In such cases, Fujitsu
Services will investigate the problems to identify and apply the necessary corrective
action. The service monitoring process may also identify potential changes to the Work
Package Requirement Specification that Post Office might elect to consider under
contract change control. In this case, the opportunity associated with the change will be
input to the very beginning of the lifecycle process to assess its feasibility, etc.
Fujitsu Services is responsible for the execution of this process and the production of the
resulting outputs (with the exception of Change Requests).
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8.6 Work Package Requirement Specification Relationships
‘Business
Context
410 °
—<$_f
Release!
Migration
Strategy
420 °
—$_—
(Business
Benefits
430 0
ae
(Performance!
Volumes
440 °
—$__f
(Business
Processes
450 °
—<$____
‘Work Package (Work Package
TT Contract
Signed )
500 0 600 2
Ls 4
contained in contained in
contained in " contained in
\
‘contained in
(Work Package contained in—
Requirement ~
contained in Specification
(Current) —
‘based on
contained in
(Catisties
contained in
‘metrics defined by,
Environment
Constraints
(Acceptance
Tests
\Scoped)
470 0
————
CE
(Work Package
Costs
(SLA Reports,
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The Work Package Requirement Specification is of fundamental importance to all stages
of the lifecycle process. The scope of the specification has deliberately been broadened
from that used in the current contract. The purpose of the change is to improve Fujitsu
Services’ understanding of the business change that the work package is required to
support. This improved understanding will enable Fujitsu Services to support Post
Office with improved qualification of business opportunities, reductions in unsuccessful
procurement activities, improved cost and implementation planning estimates, reduced
business risk and an increased probability that the target business benefits will be
realised
The Work Package Requirement Specification has a dual role. Firstly, it has to clearly
convey to Fujitsu Services what Post Office requires the work package to contribute to
the construction of its overall business solution. Secondly, it has to provide sufficient
level of detail to enable a solution design to be produced that can demonstrably support
the requirement and to scope the method by which acceptance of the solution will be
established. To reflect its importance to the lifecycle process, the Work Package
Requirement Specification is embodied in the contract and maintained under contract
change control throughout the contract lifecycle.
In summary, key components of the proposed Work Package Requirement Specification
that haven’t been described elsewhere in this appendix include:
8.6.1 Business Processes
The business processes definition establishes the scope of the business activities that the
work package is required to support in combination with the business objects (e.g.
information and resources) that these activities use and produce/change. It is important
that the business process definitions characterise the work that the business is required
to perform and do not attempt to anticipate the solution. This approach will provide the
Fujitsu designer with the scope to propose optimal solutions.
8.6.2. Environment Constraints
This aspect of the requirement defines the constraints within which the Fujitsu designer
is required to work when producing the solution design. These constraints may for
example be regulatory, third party interfaces, security requirements or elements dictated
by the Post Office Ltd IS/IT environment/strategy. The requirement constraints
imposed on the solution scope the level of business risk that Fujitsu can assume.
Conversely, with respect to IS/IT constraints, it also determines the level of business risk
associated with the solution that Post Office Ltd has implicitly elected to assume.
8.6.3, Business Context
The business context explains the business rationale behind the requirement. For
example, it will inform the designer whether the requirement is for a pilot or a fully-
fledged operational solution. It will also indicate whether further related requirements
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are anticipated, in which case it might be necessary to cater for their future inclusion in
the proposed solution design,
8.6.4 Release/Migration Strategy
This section provides information regarding the proposed intention for the introduction
of the business change that will include the work package solution. This will help inform
the designer regarding facilities that will be required to support service introduction and
migration.
8.7 Process Model Construction
Process steps are represented as circular symbols on the model. Each process has a
unique numeric identifier and a short text description. The completion of a process
requires certain input conditions and results in the creation or change to a measurable
output.
Inputs and outputs to a process are referred to as business objects and are represented
by square symbols on the model. Each business object has a unique numeric identifier
(left hand bottom corner), a numeric state (right hand bottom corner) and a short text
description. Where appropriate, an optional short text description of the business object
state is shown encased in parenthesis, e.g. (Draft).
The relationships between business objects and processes are illustrated on the model by
connecting arrows. An arrow pointing from a business object to a process indicates that
it is used as an input to that process. Conversely, an arrow pointing from a process to a
business object indicates that the business object is created or its state is changed by the
process. The information flow and inter-dependencies between individual processes
within the model are explicitly shown through their relationship with the business objects
that are inputs to a process or are created/changed by a process.
The example illustrated below shows a process that, on completion, changes the state of
a business object from “draft” to “approved” and also creates a new business object. By
inference, the process cannot complete until the draft business object is available.
Business
Object
created by
process
Business 2
Object used
by process
Oraft )
1 0
Example
process
Business
Object used
by process
Approved )
4
1
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The process model can be viewed at various levels of complexity. At the highest level,
the lifecycle process is represented as a number of individual processes that are inter-
linked through their relationships with key business objects. Where appropriate, each
process can be expanded further to show a greater level of detail. Thus, a process shown
in the top-level of the model can be expanded to show the internal process steps
together with more detail of the related business objects. This sequence can be repeated
several times until sufficient definition has been captured for the purpose in hand. When
a process has been expanded in the model, the text description is italicised in the circular
process symbol.
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Appendix 2 - Governance
9.1 Introduction
It has been jointly proposed that a new level of governance be implemented to ensure the
success of a new contract. The following structure has been proposed. While some of
the detail needs to be discussed and agreed, Fujitsu Services is supportive of these
groups being set up and equipped with the necessary authority to act to achieve the roles
as set out below.
9.2 Proposed Groups
There are 7 proposed groups
Executive Forum
New Business Forum
Joint Architecture Forum
Release Planning Forum
Projects Board(s)
Service Management Forum
ooo oo od DO
Commercial Forum
Executive
Forum New
Business
Forum
Release
Planni
Joint janning
Forum
Architecture
Forum /
Commereial
/ Forum
Service
Management
Project Forum
Boards
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Executive Forum
Responsibilities
a Defining strategic direction and vision
a Aligning business objectives and direction
a Scorecards — agreeing what components will be measured,
and setting targets
a Agree key messages for joint Post Office and Fujitsu
Services communications plan
a Define Relationship Development direction — ensuring ability
to deliver scorecard action plan and to address any issues
arising
a Recognition — agreeing recommendations for Recognition.
[this is key to encourage the behaviours recognised as vital
to ensuring a more effective working relationship, as
recommended by the Relationships strand]
a Agree joint incentivisation targets for projects & services.
Membership — Post To be agreed
Office
Membership — Fujitsu To be agreed
Services
Frequency Quarterly
Other Comments
Chairmanship of this forum should alternate between Post Office
and Fujitsu Services e.g. Post Office chair one meeting, then
Fujitsu Services chair the next.
New Business Forum
Responsibilities
a Generating and scoping ideas and opportunities to achieve
joint business objectives and ensure continuous business
improvement
a Activity will focus in four key areas: products, processes,
architecture, projects
a Activity will address the end to end business process
Membership — Post To be agreed
Office
Membership — Fujitsu To be agreed
Services
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Frequency Monthly
Other Comments The purpose of this group is to ensure that objectives set by the
Executive Forum are addressed and implemented as appropriate
across both businesses; and to ensure continuous improvement is
a conscious activity in both businesses
Joint Architecture Forum
Responsibilities a Requirements Analysis
a Solutions Visualisation
a Migration Planning
a Acceptance
a Benefits Realisation Monitoring (ensuring what was done
achieved the benefits forecast, and if not, why)
Membership — Post Chief Architect
Office Nominees from other functional roles as required
Membership — Fujitsu Chief Architect
Services Nominees from other functional roles as required
Frequency Monthly
Other Comments None
Release Planning Forum
Responsibilities a Communication of service development plans — PO Ltd and
Fujitsu Services
a Agree high level planning assumptions for future
developments of services
Q Initiate, monitor and ensure progress on development of
service definitions and terms and conditions for additions to
the contracted services
a Approve additions to contracted services (that will then be
formally introduced by CCN)
Q Prioritise releases in terms of schedule and contents, in
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Q accordance with strategic direction and objectives set by
Executive Forum, and in accordance with any operational
constraints (Note — final decision for Releases to go live will
be made by Service Management Board)
Membership — Post Programme Integration Director
Office Technical Architecture
Business Architecture
IS Services Manager
Business Sponsors (as appropriate)
Commercial Manager
Membership — Fujitsu Programme Director
Services Director Business Development
Director Commercial and Finance
Development Director
Frequency Monthly
Other Comments None
Project Board(s)
Responsibilities a Project Management and Governance as per PRINCE 2
standard practice, For example:
a Review and resolution of operational issues arising in
design, development and testing
a Review progress and performance against plan
Membership — Post Project Manager
Office Nominees from Design Authority, Business Change and
Commercial Manager to attend as required
Membership — Fujitsu Programme Manager
Services . : :
Nominees from relevant functional areas, as required
Frequency
Other Comments These will take place as required, for specific projects initiated
through the life of the contract. There will be one board for
each major project
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Service Management Forum
Responsibilities a Review performance against contracted service levels
a Resolve operational issues arising from non-conformance to
contracted service levels
a Release Authorisation — review readiness and agree Releases
into live operation
a Ensure continuous improvement in the ongoing/steady
state/business as usual Service Management environment
Membership — Post Head of Business Service Management
Office Service Operations Manager
Programme Integration Director
Other nominees as required
Membership — Fujitsu Customer Services Director
Services Release Manager
Other nominees as required
Frequency Monthly
Other Comments None
Commercial Forum
Responsibilities Membership — Fujitsu Services
Membership — Post Office I Frequency
Membership — Fujitsu Other Comments
Services
Frequency Monthly
Other Comments This board is concerned with contract management and
administration rather than fundamental contract renegotiation
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