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The Story of Horizon and Horizon on
line
Dave Smith September 2010
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Preface
This history has been written without access fo notes and records and
is therefore very much dependant on the memory of a single individual.
That single individual worked for POL so it is Inevitable that It is written
from that perspective. It does not attempt to go into great detail ~ a full
account of the HNG X Project probably deserves something on the
scale of War and Peace.
The document takes the reader up fo the point In May 2008 when new
management and resources were injected into HNG X and just as Alan
D’Alvarez was faking over as Programme Director
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DateTinel The Horizon Sto
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Horizon
In May 1996 the Benefits Agency of the Department of Social Security
and Post Office Counters Limited jointly awarded a contract to Pathway
a subsidiary of the ICL computer services group
~ The Benefits Payment Card project was to
network of Post Offices through which mc
How did the parties get to this point 7
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The DSS had for many years wanted to pay benefits direct info bank
Accounts ~ ACT(automated credit transfer)
~ To reduce the end to end cost of benefits distribution
- and to reduce benefit fraud which was at an estimated annual cost of
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Horizon
The Post Office had long resisted the DSS ambition to introduce AC
~ itarguec that evel DSS could demonstrate a business case if you
looked at the wider public purse if did not pay in
sumed that be: claries and banks would be prepared to pick up the
n was driven by the fact that if beneficiaries received their
benefits into their bank accounts they would access funds through other
han the Post Office
~ Together with the National Fe
very effective in lobbying govern
of Subpo
rt
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The Horizon Story v2 6
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Thwarted in its atternpts to introduce ACT and under pressure from the
treasury to reduce fraud the Benefits Agency conceived the Benefits
Payment Card
~ Anumber of functional areas linking to benefits agency systems
~ and fo devices at the Post Office Counter
« And acard p: pability
Affer having sunk quite a lot of effort the DSS approached Post Office
Counters
—- an yanted to }
{ asked whether it
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The Post Office had long harboured an ambition to automate its
Network
~ During the 60s there were at least 4
af over £1bn
y did demonstrate that products would have to be re-
engineered to keep costs down
~ Asubsequent study, however, concluded that even if products were re-
engineered around half a dozen generic types
+ Casts re ed prohibitive and were still in excess of £1
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Horizon
The network was not however totally without the use of technology
There were nearly 10,000 Aulomated Payments terminalis which carried
out bil payment transactions
~ Crown Offices had the ECCO system which was an
system with Automated Payment capability and
benefits stop notice service
~ And a number of sub offices bought a system fo aid office accounting
produced by Post Offices in house IT department and a similar and
some would argue superior system developed by a subpostmaster,
Richard Jackson
~ Beyond this feasibillly work continued to show automation of the entire
network and products to be prohibitively expensive
office accoun!
nthe M25 a
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Horizon
And so the Post Offi
ce agreed
ihe network was a river
ce saw the Praject as a way of tying benefits payments to
~ The Post O
the network
~ And whilst a conventional business case could not be built
ness case was I the Benefits Payment Card being a
cant improveme! f roduction of ACT
r the P & Limpact was fo increase Post Office costs by nearly
n per annur
~ in other words this was the least worse option
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The Horizon Story v2 26
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Horizon
The DSS invitation caught the Post Office cold in terms of its
development of requirements
~ Because aulomation was seen as prohibitively expensive no work had
been done on requirements
~ in truth POL had little capability to ¢
il] these together in the time
~ itthus missed a golden opportun
through process and product r
fo generate significant benefits
neering
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Contract award
~ Planning started in 1994 and during 1995 the competition was reduced
to 3 players Cardiink, IBM and Pathway
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Progress?
~ in October 1996 ¢
GloucesiersI
~ But the main
envisaged
an a spoof fo satisfy the poll NS)
velopment took longer and was more complex than
~ no fault re plan agre yy all p: n February 1997
te November 1997 Pathway had failed to deliver the live tr
offices
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Horizon
Progress?
- Pathway deny cou
POCL/DSS serve formal notice of breach of contract
asserting breach of obligations by POCL/DSS
December Pathway write suggesting that if project fo continue th
need either a 30% price increase or an extension of term of S years and
a 5% increase
There followed a year of discussion largely within Government but
ncluding POCL and Pathway too
ring this tine independent experts conclude project is deliverable but
not without risk and not i late 2001, 3 years late
Government and Pathway fail to agree on terms for continuation
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The Horizon Story v2 14
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Progress?
~ In January 1999 discu
contin: h the autom
~ And in May 1989 government decided that it would be better value
money to continue with the auto: n of post offices
~ So Government devised a new strategy
sions start on what terms the project would
off y
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lorizon Story v2 a5
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The new strategy
~ the Benefits Payment Card eleme: @ proiect would be dropped,
simplifying and assuring post office a 1ation,
~ automation of the Post Office would proceed, for completion by 2001;
~ benefits payments would be made by automated transfers fo claimanis’
bank accounts; starting in 2003 and completing by 2005. Until
existing arrangements would continue:
~ people who wished to continue to collec
continue fo be able to do so.
banking technology and commercial arrangements banks to allow
this to happen for the relatively few peopie for m a bank
account may remain an unsullabie option, special arrangements would
be made
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rcash al post offices would
e would introduce suitable
The Horizon Story v2 26
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Why did i all go wrong?
were [is cor
National Audit Office carried out an investigation and the following
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Why did i all go wrong?
€ demonstrations by bidders m
of Pathway v
compliant
ace
greater risk, making thei
inflative
The purchasers found mon
The Horizon Story v2 38
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And the NAO concluded that important reasons for failure were
~ Divided contro!
- inadequate time for seecifying requirements anc ¢
~ Ashared open approach to risk management was not achieved
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Date
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Impact on the parties
~ OSs
ned by ¢ £500m
ed ~ ACT
The Horizon Story v2 20
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The leaders at the POCL felt they had been shafted by a
Government/Pathway stitch up
~ Whilst the Group Board signed up to the deal (Sunday afternoon in the
DEO’s kitchen}
~ They did so with a gun pol
things you want you can forg
~ POCL felt stuffed by Pathw
~ Dave Miller, the MD of Post
at their head ~ “sign this or all the other
th terms thal were imposed
e Network said at the time “I have the
same feelings about Pathwa’ would have for the man who had just
shoved 15 inches of bayonet up my posterior”
~ No statement could more adequately express the attitude of Post Office
towards Pathway
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1998 on the recommendation
rolect manager with DSS becom!
~ And ICL had moved in Mike Coombs probably its most accomplished
Programme Director
* He injected over 100 additional heads
+ And made significant changes to the management structure and
personnel
~ Mike Coombs and the POC:
working relationship and {
this day
And the delays undoubtedly created the time to enable POL and
thway to better prepare for the roll out
‘s customer
yed @ good
hat survives to
ramme Director e
at reser
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Acceptance
~ One term from the original PFi that was re!
received no payment until contractual acceplan:
~ Which was due to occur at the end of the live tr
offices
~ POL declared a number of high severity incidents
high sufficient to
ned was that Pathway
eS
jal in some 200 plus
t accepting the Incidents Pathway disputed that
ably right and POCL the
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The Horizon Stor
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Acceptance
~ Parties agreed that rather than [et the contract $ course and some
time down the road gef to arbitration fo Inject an Independent party to
moderate negotiations
~ Peter Copping head of PA consuiting’s IT practice assumed this role
~ and one Richard Christou, ICL Commercial Director at the tir
assumed the lead for Fujitsu
» Poor 9
* High incide
« And de
~ Copping played a key role in getting to an agre
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The Horizon Story v2 24
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Acceptance
process for rolling oul fo the live trial branches had not been well
ceived
made to the ap
nges
as that the Ch
as moratorium on roll
This gave POL the abi n yt
made
~ And determine if further changes were required whilst working up a
i n nges
the success of the changes it had
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Everyone was convinced the roll out would fail
Lincluded POCL
- government set up a cabinet sub committee under lan McCartney MP to
oversee the fail out
~ Dave Smith was appointed as Ai
nation Director
consult
ige of the
control of the first release of ad
om the out
Ja set of KPIs to manag:
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fon a day by day f
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The rolf out went like clockwork!
~ much earlier i had been decided to separate the physical preparation of
the branches from system implementation in branch
~ Aluxury @ ed by the delays io the p
~ Undoubtedly a maior factor in the ro!l ouls success
~ Soon acceptance ro! out fo just around a thousand branches
t
commenced
~ Went Y e roll oul fo live frial branches and branch perception
improved
~ Butunderpinned the need to further changes being worked on
~— And resulted in some further adjustments
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The rolf out went like clockwork!
changes included
ideo to f
ise branch staff with the
flor i
or those branches ass
ed at needing additional
~ The changes made were very successful
numbers
d fo be red
government sub committee only met once and that was fo agree its
s Of af fetgrence I
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Horizon
About the solution
~ itwas over engineered for security due to DSS
the requirement Ss
1g GCHQ fo generate
id unexpectedly give rise 310 a a oes vin another. Result was S the
need for very extensive regression testing
~ Quite contrary to expectations rather than produc! ing on ‘ ne banking
solution Pathway decided to distribute and hold autho :
branch.
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About the solution
1 Griver Was Se
telephone neiwor
ice requirements from DSS and the fact that a public
pport the stretching service levels set
on line
izon was polled but
product w vas seen as a big:
bility scaled well
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lorizon Story v2 36
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CSR+
But the next challenge was around the corner I
~ Adecision had been taken to split the delivery of the solution
- And so Core System Release plus ~ CSR+ was barn
ible at the
counter apart
~ Went extremely
~ Although again not wi problems
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CSR+
But the next challenge was around the corner !
“irsily Pathway’s customer service refused release authorisation
E elopment thought §
red during pilot
ni that refused to be re:
root cause
fing the software
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CSR+
in parallel Dave Miller, PON MD and Mike Stares who headed up
Pathway at this time resolved to improve the relation
~ Series of workshops with a ¢ to build better F
between the parties
~ The success of the roll out and the development of CSR+ helped to
create more trust between the parties
~ However the relafionship was stil crusty
~ Post Office wanted its pound of flesh do made Pa y
which there was no business impact if they were missed
if they were not met within a
flonships
vit SLAs for
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Banking
The Strategy decided by Government in 1999 laid the foundation for
ine next major development of Horizon
~ in June 2000 the Sec: y of State for Trade and Industry announced a
package of n vise the Post Office network
by;
io improve loca’
onl 2S;
Pp Shops,
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Banking
The Strategy decided by Government in 1999 laid the foundation
for the next major development of Horizon
~ maintaining the rural network by olacing a for requirement on the
Post Office to preven! closures of rural post offices; and
development proposed Universal Bank? giv
Jes for up to 3-5 million exira people, and allowing
cluding pensioners, to get cash out of the post office and
ct debit arrangements
custo)
set up dire
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Banking
In 1999 Royal Mail Group had restructured. POCL was broken up into a
number of units.
- The Network Bank busines:
Agumber of market facing business unlis were established responsible
for securing business
Anumber of service delivery units were set up to d
customers
The branch network was run by Post Office Network
s responsible for winning financial
f service to
services and other business
PON owned Horizon
and Network Bank were responsible for sec
banking services
the universal bank and
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The Horizon Story v2 36
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Banking
The development of banking became very messy
~ itheraided open warfare within the Post Office
- This became extremely pers between Dave Miller and Dave Smith
of PON and Basil Larkins and Basil Shall of Network Bank
~ Basil Larkins had joined from Abbey National as part of Shaping for
Competitive Success
~ Basil Shall, previously POCL’s IS Strateg
the banking capability using a thin layer ap)
buy all the sofware you needed “in a box”
~ He also wanted to build a financial services hub not just fo link to the
counter but fo other devices e.g. mobile phone, TV, other EPOS
~ Agreat vision but one which in the view of Dave Smith, backed up by
industry experts, could not be delivered with existing technology
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37
belleved you could build
yand that you could
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Banking
Fullfsu becomes embroiled and one of iis sub contractors Escher adds
fuel to the fire
~ Escher was a small software company based in Cambridge
Massachusetts
~ Their Riposte software was a key component in the Horizon solution
~ They Spec cialis Postal Services software which
tained a close working
~ They were led by Mik
character
~ Murphy believed that Fujitsu were not exploiting his companies
capability
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The Horizon Story v2 38
irphy ~ an interesting and somewhat vola’
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Banking
Fullfsu becomes embroiled and one of iis sub contractors Escher adds
fuel to the fire
ii Shai
off the wall ideas as a real
~ and therefore saw banking and Ba
oppo
2, they could nor ignore
to be even handed
initial id fas naive and Mike Murphy
told him so in very graphic terms at a meeting in Cambric
~ Nonetheless Murphy exploited Shall's naive views of the word
i played brinkmanship on a number of occasions threatening to
n toals if his commercial demands were not met
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The Horizon Story v2 39
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Fullfsu becomes embroiled and one of iis sub contractors Escher adds
fuel to the fire
~ IBM also gave Basil Sh
ors in Royal
arkins had
ion senior mana
s like Ba
Basil's idea could deliver a robust s
Mail were reluctant to intervene as charac
been recruited to shake things up
~ However affer a long protracted battle Basil's had to concede defeat
r couldn't execute
IBM admitted that their Websphere product could get nowhere near
ts
8 performance requirement
ih
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Banking
The project proceeded
one idea of Basis did survive however and that was the setting up of a
hub with the ultim: uh 8 being multi
this was to be oro they had previously “won” a
competition to do so
A further hiatus was created when POL and Fujitsu had a serious
disagreement o: > to ready Horizon for on line banking
Pathways price was £180m over the life of the contract
Which was £60m more than PON believed it should be
After several months of circling each other PON introduced IBM into the
equation
ed by IBM a
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The project proceeded
~ IBM came up with an attractive proposal
itive pri
of kit on the counter was the clincher
vere persuaded that they were coming
Not before , however, Path
second in a one horse race!
bly
otiations deal done pretty much bang on
and protre
case num
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The Horizon Stor
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Banking
Aspecific issue was inadvertently resolved by IBM,
~ Fujisu despite a number of alternpis could not land @ plan to deliver the
‘oll out of the estate of pin pads by Apri 2003
~ During the preparation of their bid IBM came to PON and said they
believed PON e fhe organisation most able to deliver the physical
roll out
~ Prompted by this PON looked at delivering the Pin Pad roll out working
with RoMEC
~ and decided to deliver it themselves
~ which they did with months to spare antly reduced costs over
Pathways price, and with something left in the tank I
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Banking
These commercial matters were soon put to one side however
pgrade of the infrastructure to allow real ime working went
extremely well
Ajthough there were some issues with call management al the counter
Pathways development of new functionality went exiremely well with
very high quality code
The whole project which also invalved [8M (Basil's hub survived!)
EDS/Citipank, Allance & Leicester, LINK and Royal Mails in house
service provider went extremely well
Following o m CSR+ confidence was growing in the Pathway
capability to deliver
However there were some ticking time bomb issues whic!
manifest themselves later as volumes grew
were to
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Building Reputation
But what really started to cement a new reputation was Pathway’s
response to challenges that PON put in front of it
~ Orne of the elements of Government's strategy was the network as a
one stop shop for government services
~ Government funded af pilot challenging POL to get itup and
g fo very a timescales
~ This became known as Your Guide
Was asked to supply technology
and via John Burton demonstrated a
and flexibility
Whilst Your Guide was perceived to be successful particularly by
Subpostmasters it did not drive back end benefits and died!
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Ae Dot
therio unseen responsiveness
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Building Reputation
But what really started to cement a new reputation was Pathway’s
response to challenges that PON put in front of it
incorrect pricing of mails ems was costing Royal Mail letters huge
amounts of revenue
The problem in the network was estimated to be £25m
- Quite apart from poor customer service where products were sold that
didn't exist the being regisiered post to the USA
‘as extremely complicate yg in several weighty
omes
The solution was seen as automation
Firat thoughts was that this could not be started until banking was
delivered
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Building Reputation
But what really started to cement a new reputation was Pathway’s
response to challenges that PON put in front of it
i
- And was immediately available as op;
it was decided to go with a pre existing software package from Escher
for Mails
Analysis showed that this met a high percentage of the requirements
sed to the development time for
@ bespoke package
Reference data became a challenge as the exis!
data did not have the capacity
A solution had to be found to Help
Ways forward were found and the pilot was mounted in 2002
ng Horizon reference
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Building Reputation
But what really started to cement a new reputation was Pathway’s
response to challenges that PON put in front of it
~ Pilotin this case was sot so much to prove the technology
- But to demonstrate the benefits
- The pilot established the business case and the solution was extremely
popular with the pariicipating branches
~ if was very intuitive
~ Drove in the rmance required
~ and was supportive o sellir
~ but required $40 release to put ar
rence data solution i
y place
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Building Reputation
But what really started to cement a new reputation was Pathway’s
response to challenges that PON put in front of it
There were some teething troubles with the time the solution took time
fo fire up
And label printing became an issue subsequent
an unannounced and not agreed change in sta
Letters
The solution was intuitive
Allowes the selling of mails without resort fo paper manuals
And d ‘ed significant benefit fo Royal Mail and was called Smartpost
ly shown to be down to
onary by Royal Mail
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Building Reputation
But what really started to cement a new reputation was Pathway’s
response to challenges that PON put in front of it
~ There was real clamour in the network for debit card acceptance
- Bral
§ Look every opportu to raise the issue and it featured
pro antly at the NFSP conference
By now POL had been reformed and the IT Director, Alan B:
under immense pressure to deliver debit cards ahead of bal
Challenge thrown at Fujitsu fo deliver Debit Cards by nis birthday in
2003 Le, hot on the heals of banking
Debit Cards was a different type of challenge in that It needed all the
resources being used by banking je. people, designs, rigs
and couldn't get at these before banking had finished with them
fie, came
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se
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Building Reputation
But what really started to cement a new reputation was Pathway’s
response to challenges that PON put in front of it
~ Nonetheless Peter Jeram who had replaced Mike Coombs as the SI
Director put together an aggressive plan to deliver
~ And then Fulltsu realised that they had incorporated the wrong version
of Retail
~ This ought fo have cost a delay of 6 months
~ But { built a standard agent and managed to intercept the pian
- And with some < tation plan hold the timeline
~ Some prob esting of banking change
requests released with the debit card software
~ {twas on time and extremely received in the Network
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Contract extension
The delivery of these significant developments in relatively short
order s'
- and the financi
cantly improved the perception of Fulitsu
The cost of the service was however crippling
osition of the reformed POL was grim
- So no sooner had the commercials for banking been put to bed
- Infrastructure simg
than Alan Barrie opened up a commercial discussion which looked to
trade a contract extension with reductions in costs
These negotiations took many months but did eventually yield a deal
though to March 2010
The deal invol the introduction of broadband which drove major
benefits
ation and standardisation introduced by S60
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Contract extension
The delivery of these significant developmenis in relatively short
order significantly improved the perception of Fujitsu
~ Accounting process simplification
~ An intent by both partiers to improve working together and governance
1. got a reduction in annual charges
Ing some very significant reductions in years 1 and 2 of the new
o HC!
deal
- which were incredibly fo POL
However in order to get the movement it required from Fujitsu POL had
to introduce competition in the shape of EDS and IBM
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$50
At the same time it became clear that there was a significant demand to
automate product
joint piece of work was carried out which enabled planning 3 releases
t banking was still in flight
~ The S50 release was fo establish Fu aS a frusied pariner
This period started to see the development of strong personal
relationships between the lead teams
~ Started to sought out jointly process for development
~ Things weren't perfect but were on a decided upward cun
~ And together POL and Fujitsu were building an exterr
e
I reputation
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The S50 release was ground breaking
content was
de change funet
fonality on Horizon (previously a stand:
6 DVLA
ding cash depos’
INK an extension of
« E top ups
Numerous change request
itself for Fuje
9 late to inclu
victory I
Awas
yawho wilh the &
as in the clrou)
ting 80°
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DateTine] The Horizon St
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Each element of the release had a quite different implementation profile
~ DVLA and E Top ups had short but different pilots followed by big bang
go lives
~ Bureau pi
following
~ And NS&I waite mens had delivered their part of the end to
end solution the following Spring
The on time, within budget, high quality delivery was seen as an
outstanding success across POL.
ly and was rolled out ready for the season the
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It delivered a fantastic level of benefits
~ Within days of going live across the Network the Posi Office became the
No 2 retailer of e top ups in the UK second only to Tesco
propelled if to become number 7 in the UK for Bureau de Change
~ Off the back of this travel insurance sale also expanded
~ The 's end to end process was transformed. The timescale for the
updating of their database was reduced from 4-6 weeks to hours and
enabled if to mount a nat advertising campaign warning motorisis
who had not taxed their vehicles
~ and the development for NS&i launched automated banking to this
previously paper bound organisation
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S60
The S60 release that followed continued fo build the reputation
~ ft extended the DVLA solution to include on fine MOT validation with
VOSA
~ itintroduced PAF
~ These two developments were executed in such a way as fo deliver AP
ADC capa’
at negligible cast over
ineering
programme called Impact
- itaiso d ed some infrastructure changes that underpinned the cost
reductions in the contract renegotiation
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S60
A number of things were happening in the background
new broadband nelwork was a major source of cost reduction but
< out with less than satisfactory results
service was acquired from Energis
~ The limited number of Broadband Access Servers Energis possessed
meant that large numbers of branches hung of each server
ork could not
~ The situation was exacerbated by an average of 250 brane
losing on line connectivity
~ Some of these branches could be down for days an
couple of weeks
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S60
A number of things were happening in the background
~ arid by a poor response from POL's team in Dearne anc
gis and BT
~ This created a very poor perception of Fujitsu in the network despite the
fact that service levels were being met
~ So poor was Fulitsu’s response that Dave Smith, who had became
fT Director, asked Fulltsu whether the mindset 1 Customer
Service was right which resulted in the replacement of the Director
~ With the support of the Group ClO, David Burden, Smith also
challenged John Pluthero the MD of Energis
~ James Stinchcombe of Fujitsu and Clive Read of POL worked together
on what eventually became known as the Branch Network Resillence
Programme
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S60
A number of things were happening in the background
~ involved a campaign fo get subpostmasters to novate their lines to POL
so that POL could procure an improved service from BT
~ and all the parties involved in managing the ser end fo end working
together to better manage faults.
~ and some 2000 branches getting a secondary line to kick in if
primary circuit failed
for deployment to limit downtime for those
5 without a secondary circuit
~ However the move to broad band delivered major benefits of the order
of £4 er arinum instrumental in providing a balanced response to
ihe issues at the most se Lev ie. no gain without pain
capability smith
FUJ00098040
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$70
The S70 release was given over to enabling the Network to accept
or POCA contained punitive
sd on 1% January 2005
ed that the IBM banking engine
POL's architecture team had conclu:
was superfluous fo requirements
Su were asked to quote to replace the Netw
was called
~ And what would have been a significantly negative NPV was brought
back to break even
~ Poor procurement discipline by POL and an over keen Fujitsu combined
to create the gs of a disaster
capability smith
Banking Engine as #
FUJ00098040
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$70
The S70 release was given over to enabling the Network to accept
and Pin
~ Peter Jeram nad fo go fo POL cap I hand to admit that he had not been
able to produce a pian fo the required timeline
~ Which would make POL liable to fines of tens of mi
~ After some joint we i
re (procuction
~ Achieved by solitting tf
centre change and $75 y
~ There was no contingency
arly got
erfaces remained @ problem)
ase info two, S70 which delivered the data
hn delivered the change at the counter
capability smith
FUJ00098040
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$70
The S70 release was given over to enabling the Network to accept
and Pin
The threat of severe penalties meant that POL had to eval
alternatives
- ifa plan that didn't q
comel
capability smith
The Horizon Story v2 b4
FUJ00098040
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$70
The S70 release was given over to enabling the Network to accept
and Pin
There was a design fault originating from original banking programme
that was to manifest itself as banking volumes grew
~ Hypercom produced 8 poor quality upgrade to the Pin Pad putting the
schedul er further pressure
There was fo be a mechanical f
entire network down
re in @ disk array that was to take the
capability smith
The Horizon Story v2
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$70
The S70 release was given over to enabling the Network to accept
Chip and Pin
~ There was a design problem introduced w
Banking
~ An assumption was made around the latency in the networks
connecting the two data centres
~ Based around the net distances being similar
~ infact they were quite different one being 20 the other about 60
Because banking transactions have to be written to both data centres
this difference in timings caused a transaction queue and eventually
caused each data centre to try to fall over to the other - “flip flop”
jementation of
capability smith
The Horizon Story v2 86
FUJ00098040
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$70
The S70 release was given over to enabling the Network to accept
Chip and Pin
~ This first manifested Hself late autumn as banking v
- Ona Monday morning ar
incidence of banking transactions timing out
~ This would only last for about 5 minutes
- But was nonetheless so widespread that it attracted the attention of
Ss desks up and down the country
- And caused widespread concern amongst branches
mes steadily built
to see a high
capability smith
The Horizon Story v2 67
FUJ00098040
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$70
The S70 release was given over to enabling the Network to accept
Chip and Pin
~ The pin pad code delivered by Hypercom had quality problems
- ng assurances at the outset abou way they would
closely manage Mypercom Fulltsu failed fo do just that
~ Extensive work required o the code but because Hypercom had limited
ss as ong time coming
vable to carry out large parts of the planned
ree cycies of SV&l
testing in the first
capability smith
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$70
The S70 release was given over to enabling the Network to accept
Chip and Pin
ecember just after lunch an EMC disk suffers mechanical failure
jis fo sp t bringing the whole network down
5 had a better idea of what was happening than Fujitsu customer
~ altracted widespread media attention and Number 70 Dow
phoned POL’s MD
Dave Smith demands and gets an independent review of Customer
Services which emerges with some very significant gaps
~ And gives only conditional acceptance pending fixing the filp flop
problem
capability smith
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$70
The S70 release was given over to enabling the Network to accept
and Pin
~ The Fulisu and POL teams worked closely together and were creative
in pulling back time
~ Sot ies hese prob!
of the Network Banking Engine
~ The programy
both for the F
—- and the POL Project Manager named Project Manager of the year
capability smith
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HNG X
Whilst the drama of banking was unfolding the Fujitsu Account Director
lan Lamb approached Alan Barrie
~ He proposed a project to replace large elements of Horizon
- That would deliver major cost reductions to the Post Office
This immediately cau magination and quite quickly after that
the POLET
- Funding was granted for a study
~ There were several visits fo the table for money
~ asig nt am: of analysis was undertaken on future business
requirements including a very detailed study of transactions
~ Some important Architectural decisions were m:
~ But the study work was not particularly disciplined
capability smith
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HNG X
in June 2004 Alan Barrie moved back fo Royal Mail and Dave Smith
took over In an interim role
~ Became clear to Dave that whilst the benefits had been sold into the
POLE
~ What was entailed in getting there had not
~ ET imagined t would be similar to the fir
no idea that a major technology project was Ime!
~ Equally it became o that the joint fe: y study was getting into
paralysis through analysis
~ The end date always seemed to be 3 months away
Working wi O'Driscoll , Dave sought to get business buy in with ail
n the table and to accelerate the process of getting to
negotiation and had
FUJ00098040
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HNG X
The maior issues to get the POL business behind were
~ Avery large project was concerned that would consume sign
levels of resource and dominate available bar
The project involved making all transactions on line at a ume whi
© performance was a major issue within the bu
1@ project would “biot é
have to be paid for twice Le. on old and new Horizon and t
be a period where or new infrastructure developme:
appen
~ Demonstrating that
benefit as a compe’
egotiated approach would deliver as much as
and probably earlier
capability smith
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HNG X
These were managed as follows
~ Great emph:
$ placed on the success that uand POL had
achieved in delivering major projects. Nothing here we hadn't done
before
The proposal was to give most branches
connection based on proposed Orange network. This Orange
network had the fewest common elements with existing landlines of any
mobile network
The proposed delivery of AP/
inue fo develop products and
rements from Marketing beyond
2 new system
capability smith
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HNG X
These were managed as follows
~ Abenchm g exercise was proposed to be carried out by Gariner to
uflisu would
establish a market price for the proposal and any deal with
need to be open book
~ In parallel Gariner r
The piteh made over
were very supportive
umn got the business _
fits bul with eyes open as
FUJ00098040
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HNG X
Discussion with the then MD, David Mills, and the then Group CiO,
David Burden, were to shape the project
~ Both David's had the scars to show for major system upgrade projects
at HSBC and Air Canada respectively
~ in both instances the scope had been added to In order to include major
~ The business impact of ai
rastructure change had been com:
~ Resulting in disaster in both cases
~ Both insisted that their support was conditional on keeping a tight scope
and not ente major process change
ven reassurance on scope both were tofally supportive ~ “the right
The Horizon Story v2 76
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HNG X
- Established
Getting to an acceptable proposal from Fulltsu was a long and arduous
process
~ The Gartner benchm:
ing study was key to the Post Office in
establishing where the goalposts should sit
But Gariner also did due diligence on the proposed technical solution
- Gartner benchmarking under
business plan
ned numbers built into the POL
floor below which we should expect to get the service Le.
a floor price that no supplier would be able to deliver within and make a
reasonable return
iat if Fujitsu were in the “zone” then the additional cost of r.
tith
FUJ00098040
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HNG X
Getting to an acceptable proposal from Fulltsu was a long and arduous
process
The Fullisu proposal when if came was in the right area as far as the
ngoing costs of the service was concerned
However, POL were clear that the cost of the service would need to
reduce year on year and not increase as per the Fulltsu propose
and the cost of the transformation was well above the expected cost
from the Gartner mode’
There were many meetings to ensure PO:
y understood the plan
And a number of negotiating meetings resulting in amended proposais
from Fujitsu
FUJ00098040
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HNG X
Getting to an acceptable proposal from Fulltsu was a long and arduous
process
o Ric Fi is had joined POL as Operations Director in February 2605
His initial reaction to the proposed deal was “Why would you want to do
The relationship he established with oes Courtley and Steve Andre
was to prove I SS
~ Early on int ic established
three key principles which were age reed by Courfley and Andre
capability smith
FUJ00098040
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HNG X
Getting to an acceptable proposal from Fulltsu was a long and arduous
Process
~ These were
* Fujitsu aligned themselves with POL's journey
» Fujitsu delivered what it said it would
+ No matter how good it was #f could be better
~ These principles were to be used by Ric and others fime and again to
create a reference within which issues could be resolved
capability smith
The Horizon Story v2 8G
FUJ00098040
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HNG X
Sustained cost reduction and cost base variability emerged as major
requirements during this phase of discussions
~ Business plan had been constructed on constant prices
- Financial modelling showed that ignificantly year on
year because of inflation factors Wg proposal
ving business strategy foresaw a major reduction in network size
- Financial modelling demonstrated that network reduction did not
erate anything like the expected reduction in cost base
Because the cost base was fixed in nature
~ POL Finance therefore exerted considerable pressure fo maximise the
variability of any Fulltsu proposa! on Network size
capability smith
FUJ00098040
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The position as POL saw ff is exemplified in the chart on the next slide
~ itilustrates a number of points
- The strive (yellow) curve illustrates POL’s revised expectation over and
above its business plan of year on year cost reduction
ig costs maich the business plan they do not
business plan (based on Gartner)
~ Notwithstanding these points the Fujlisu proposal did deliver substantial
benefi
~ crucially Francis, O'Driscoll and Smith believed they could do better
capability smith
FUJ00098040
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£ms
—— CURRENT
——— BUS PLAN
STRIVE
PROPOSAL
8
9
10 11 12 13 14 15 16
Year
FUJ00098040
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HNG X
The starting point was disaggregating the cost base
~ Possible because of POL's insistence that the negotiations be open
book
~ Network, field engineering and branch equipment costs were c 50% of
the cost base
~ Ar y the Fujitsu account team added Hittle val
yel Fulltsu were adding a significant margin to each
~ Significant confidence that by breaking ihe service down into a number
of components that PO! fustify the cost of terminating for
convenience calculate: in April 2007
~ McKinseys validated the numbers constructed by O'Driscall and Smith
~ And what had started as Pian B became Plan Aas it became the
business planning baseline
capability smith
n these areas and
The Horizon Story vz 84
FUJ00098040
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HNG X
However, POL clear that if they could get Fulltsu to produce a
proposal in line with business plan plus strive
ad the preferred option
capability smith
The Horizon Stor 85
FUJ00098040
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HNG X
In July 2005 Smith, supported by O'Driscoll, told Clive
Morgan, supported by Liam Foley, of POL’s intention to terminate for
Convenience
~ This was followed up by a conversation between Ric Francis and Steve
and OD:
ferated ihe key points made by S
here the goa
$ part of the problem
capability smith
The Horizon Story v2 86
FUJ00098040
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HNG X
Within a few weeks Fujitsu came back to say in principle they would
meet POL’s demands
SS u bid team
by Giac:
nges within th:
capability smith
The Horizon Story v2 a7
FUJ00098040
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HNG X
By October 2005 sufficient progress had been made for Smith to take a
imself and O'Driscoll. They
proposal to the POL Board prepared by
Reported
~ So are we there yet?
* With the st
capability smith
The Horizon Story v2 88
FUJ00098040
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HNG X
They set out the alternative
~ Which was
« Buy out the e:
+ Disaggregate the services and procure
ct S} Partner to manage the d
lower cost but ata sig
igher risk and longer
and the fr W proposal from Fujitsu were demonstrated
as follow:
FUJ00098040
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HNG X
Difference between
200 June and September
180 £100m ——CURRENT >
‘00 BUS PLAN
420 wm JUNE PROPOSAL
£ 100 SEPT PROP+STRIVE
80 OO
60
40 Difference between
20 current and
° 6 7 8 9 40 11213 14 18 16 September
wl £0.5 bn
FUJ00098040
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HNG X
The key features of the new proposal were
~ Cost reduction drives simpler design
that there were no for
astructure chang:
Hard refresh ~ a “retail” model
Fujitsu fo POL
risk
FUJ00098040
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HNG X
The key features of the new proposal were
ereation of an SI Partnership focused on realising the “strive”
- The disaggregation of t so that service ef could be
subject to market test! th Fujitsu having the option to match the
lowest price or integrate fhe new provider into the s
~ Post Office contro:
detail design a mat
“ujitsu will embed skills at cost in Post Office [T team but against
‘invesiment’ share part of the cost reduction as part of on of a number
of Gainshare mechanisms
~ Fulltsu individuals bonuses to be aligned to POL objectives
capability smith
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HNG X
On the back of this the Board gave its approval
xove io Heads subject to resolving outstand: pie issues
To take a business case to the Holdings Board in Jan/Feb 2008
tract signing end March 2008
F nm a update of the Gartner architectural review
nence Requin its Analysis
capability smith
88
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HNG X
Asignificant issue came to the fore concerning Holding Board approval
~ POL was technically bankrupt
- Were POL a
~ Negotiations were ongoing with Government re funding
~ Preference was io conclude these rather than get Goverment to
underwrite the deal
~ But Board were nat the project was to proceed whilst ways round
these issues were found
capability smith
FUJ00098040
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HNG X
A way forward was found
- So contractual w
Holdings Board clear that they were b:
forward was agreed between POL and Fujitsu
The contract vosotstons were however long and protracted fo get to a
contract for signature
nivact negotiations were a si
itsu fechnical staff
icant diversion for some
’ individuals for the
purposes of the I plan
Were probably invalidated by the protracted
negotiations
of contract
capability smith
The Horizon Story v2 38
FUJ00098040
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HNG X
POL however managed to deliver its Statement of Req
ments to
through Dave Smith created the Ateam including crucially a
u team pal aid for by POL
nager to lead the strand and
Kk Burley 100k on this role and ensured that delivery was on time
@ document was a quality do nit
~ Unilke previous such document Fujitsu did not push back on the
completeness 0} document ~ tmescale was not mei by sacrifi
quality
capability smith
The Horizon Story v2 86
FUJ00098040
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HNG X
The requirements were based around Business Equivalence
same oulcomes but nol necessarily identical functional detail
ere were some exceptions
~ Elimination of AP office copy receipt saves transaction time, reduces
use of consumables and avoids filing ime
~ Replace: of Smarfpost which was by far and away the major
complaint from subposimasters with a new Postal Services solution. A
maior gain that subpostmasiers love
~ Anew user interface which is both intuitive and follows retail standards
and reduces the number of screens that the user has to pas ough
when navigating the system
~ On line Help ~ context sensitive whi I do away with paper manuals
and ensure branches always have the most up to date information
capab y smi h
37
FUJ00098040
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HNG X
Time & Materials
~ Post Office had made it clear that the estimating risk involved had to be
shared and a es of caps and collars around an agreed orice were
agreed to achieve this
— If the project c in up to 10% below the agreed price the sav
would be shared between Fujitsu and POL
~ savings above 10% would be wholly attributable to POL.
~ Cost over run up fo a limit of 10% of the agreed price would be
chargeabie at reduce: eS
~ Cost over run above110% of agreed price up to a limit of 120% of
agreed price would be af no cost fo POL
gs
The Horizon Story vz 38
FUJ00098040
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HNG X
agreed soft hard
price cap cap
—_I I jt
Cost
10% of agreed 10% of agreed price 10% of agreed price
price
st
at contracted rates
ne a
Ab reduced Fates geome
AE NO COSE LO PO ensmmnmnenssl
charged at cost
FUJ00098040
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$80,S90 and the T releases
Whilst all of this was going on the delivery of maior software upgrades
continued apace
~ The S80 release delivered the major elements of the Impact
Programme
~ This release changed centuries old accounting practices in branch and
replaced them with standard accounting practice
~ Hw. @ most complex set of changes POL had put in front of Fujitsu
~ itinvoived the cre 1 of a new back end system based on SAP
developed by Xansa but hosted by Fulltsu
~ POL did not do a good job on requirements
capability smith
106
FUJ00098040
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$80,S90 and the T releases
Whilst all of this was going on the delivery of maior software upgrades
continued apace
~ Xansa did not make a good job of d
~ @ Yery roc
ering fo time Fulltsu were,
however, on the money I
The impact programme delivered £17m bottom line recurring benefits
Brought POL acc: ing practices into the 21 century
time press y
did not follow through with the changes required of
Nonethe! he BCS awarded the POL Programme Manager its
Project Manager of the Year award
And the project was a medallist in the [T Excellence awards
capability smith
FUJ00098040
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$80,S90 and the T releases
The last major release on Horizon was the SOO release
The core of this release was the re-engineering of the Postal Order
product
~ But this was executed so that the
architecture for ofher out payment p:
~ Itwas the out payment equivalent of AP ADC bul more com)
because of the need for an authorisation database
~ The new postal order was printed onto stationary in branch
~ and when encashed was authorised by the dalabase
~ itcould be accepted by banks and cleared gh the clearing house
system
~ Avery secure product when compared to the old paper based system
capability smith
The Horizon Story v2 102
behind reusable
FUJ00098040
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$80,S90 and the T releases
S90 was a significant success
~ The ree
Release contained a number of ofher changes including mails
neered Postal Order was a succe: S$ Own right
r leveraged by POL to deliver
would have done through
And the
other produc
bespoke developments
and together with AP ADC made Marketing buy in to Horizon Oniine
possible
The BCS made the POL Release
cheaper than
anager its Project Manager of the
fe)
18)
The Horizon Story v2 103
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$80,S90 and the T releases
Whilst T releases were considerably smailier in scale they nonetheless
ered a succession of significant product changes
~ The development of AP/ADC and APOP meant that there was no longer
a need for major infrastructure change
~ AP/ADC Js a pip ws somewhere between 15-20 product
introduc ai cost
~ By and large did not requ release as business as usual change:
~ Financial services in parti § relied on this route to market
- APOP was to prove equally ential
~ Moneygram was the first development
~ Prior to APOP would have been a development costing In the order of
£2-3m but cost only £750k and timescale reduced too
capability smith
FUJ00098040
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$80,S90 and the T releases
Whilst T releases were considerably smailier in scale they nonetheless
ered a succession of significant product changes
~ The very successful pay-out product developed using APOP
- Less obviously an APOP development is the in branch appl
process for telephony products
renitecis whose ideas AP ADC and APOP were came up with a
“tweak” to the back end database
tion agent if only allowed access to a single user ata
ion
ces of the database could be made to allow multiple
ccess for the purposes of returning values rather than
authorisation
capability smith
The Horizon Story v2 108
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$80,S90 and the T releases
Whilst T releases were considerably smailier in scale they nonetheless
delivered a succession of significant product changes
~ In short order this enabled
exarp'
ahala G
an being biotied out ff shone brigt
The Horizon Stor 106
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The Baldwin era
The Baldwin era
~ Dave Baldwin was recruited back into Fujlisu as a direct resull of Dave
Smith’s challenge to Fujitsu about the prevailing mindset in Customer
Services
~ He was barely through the door when the issues surrounding Cr
& Pin
independent review demanded by Dave Smith scored Customer
vices against the ITIL model
~ Scores were poor with some di
9 where 9 equalied best practice
~ Added pressure as Dave Miller the POL COO summoned David
Courtley to see him. ff was not a comfortable meeting for Courtley
capability smith
The Horizon Story v2 107
nsions scoring tor 2 on a scale of 1 fo
FUJ00098040
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The Baldwin era
The Baldwin era
~ Baldwin pul together a wide ranging plan involving peapie, process,
behaviours and tools
fe in full
~ Baldwin's influence grew and he played ¢ jor role in the revised
Horizon online proposal
~ During 2005 he replaced Clive Morgan as Account Director
i$ almost certainly had a hand in this. He saw Baldwin
the values and behaviours that he had an understanding
‘Courtley
~ Working with Dave Smith he sought to improve the relationship
capability smith
108
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The Baldwin era
The Baldwin era
Joint isad team m:
/destroyed trust
Led ioa series of w
eeting held examining how behaviours conifbute
orrerops bringing people together with improved
placed himsel ‘with Naomi Elio!
the role of Customer Services Director
During this period there were other key ch
Peter Jeram who was SI Director was promoted to the role of Head of
Projects and Programmes
He was subsequently replaced by Mark Wilishire
10 seamlessly stepped into
capability smith
The Horizon Story v2 109
FUJ00098040
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The Baldwin era
The Baldwin era
iso had moved off the
Alan D’Alvarez a key direct report io Jeram
account {o @ role in Kansas City USA.
Subsequently when in b
Development Team was to
Marks and Spencer accou
The moving on of Jeram and Foley represented a major break with the
past both having been involved from the 90s.
But they were also key players in bul he HNG X solution proposal
There was also another key development during this period
One of the elements of Fulltsu’s justification for the 2015 contract was
the capture of a greater re of Royal Mail purse
Director the Business
Liam Foley to the
ecame Retail
appear and
capability smith
FUJ00098040
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The Baldwin era
The Baldwin era
~ Following on from the success of face fo face activity in Mails Centres,
Allan Leighton and Adarn Crozier decided they would the ability to
be able to address the entire workforce as and when they wanted to.
~ The to become infarnous screens project was spawned ie. a project to
put plasma screer to all work Jocations that could be used to address
the troops
~ Akey consideration was Leigthon’s plans to issue emp!
shares
~ Both parties Le. Royal Mail Group and Fujitsu pretty much threw good
practice a way engaging in the project without requirements or a
contract
capability smith
1S
FUJ00098040
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The Baldwin era
The Baldwin era
~ And in the case of
Post
~ They dug themselves a big
~ into which Mark Wilshire was sucked in an altempt to dig Fujitsu out!
s to stand true fo the values tf
Courtley/Ancre right through unti he left
everything they had learned from working with
rancis had agreed with
capability smith
FUJ00098040
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HNG X Progress
Progress with HNG X
~ Meanwhile work had started on Horizon online
- Consistent with the way the relationship had evolved there was a
sharing of plans and Earned Value information
As the autumn of 2006 progressed the POL
cl team became
io be generating less
output than the plan
Hsu team begged fo differ suggesting that any gap could be
les were recognised
time
erned about progress in producing a baselined plan
8.
POL were also c
and lower level de:
capability smith
FUJ00098040
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HNG X Progress
Progress with HNG X
In yiew the evidence began to mount that activities were
consuming more effort than in the plan and that the plan and design
were slow coming together
Eventually Dave Smith escalated this a demand
review by u suggesting Pete Jeram mig!
This was agreed and a small gether which included Alan
D’Alvarez
Team reported just before Xmas 2006 with a comprehensive set of
recommendations and findings
The project was behind where it needed to be but it was considered a
recoverable situation
capability smith
FUJ00098040
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HNG X Progress
Progress with HNG X
Programme Manager was removed
- Substantial strengthening of the management of the projec!
recommended
~ And @ shortfall in re: 0e8 Needed to be plugged
~ Forecasting an overspend in days
ty fo be a number of other
carried out by teams independent of the delivery
~ One of these was car
Office
~ Critical finding
The Horizon Story v2 1s
FUJ00098040
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HNG X Progress
Progress with HNG X
- Led to Glacoms leaving the
t
development shop wa:
One of a number examples of w
leading to wasted effort
There was a succession of replacemenis/senior app:
by Fubtsu as their best
None of these
being made wit
=
&
cd
2
Pd
oo
ce
ce
2
Fa
4
wa
3
2
=
oe
4
g
Certainly a baselined plan appeared as far away as it had when the
review reported
The Horizon Story v2 BEY
FUJ00098040
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HNG X Progress
Progress with HNG X
~ Baldwin admits thal there had indeed been Hite progress.
- Suggests that Wil @ has taken his eye off the ball as he attempted to
sort out the screens issues
~ Smith insists that Baldwin and he personally take contra! of construction
of 2 plan to get to a plan
~ initially good progress is made
ire belleves he can reduce significant
he overspend by ¢ Sk
fo slip
But getting the resource required takes longer than the plan requires
~ Sense of Wiltshire doing it himself and not taking the team with him
capability smith
The Horizon Story v2 ue?
FUJ00098040
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HNG X Progress
Progress with HNG X
~ Baldwin made Reiail sector Director and lan Terblanche moved in as
Account Director taking Liam Foley to M&S account
~ Wiltshire moved on and senior resources moved in from M&S a
~ in July Baldwin and Terblanche visit t
possibly exceed the hard cap and that ti mescales are slipping
~ But nis I is subject to a detailed re-plan
proposed commercial settlement
Meanwhile the merry go round of Programme leads continues as the
second individual to leave throu alth moves on
~— And Mike Stratford arrives as Programme Director
Count
capability smith
The Horizon Story v2 18
FUJ00098040
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HNG X Progress
Progress with HNG X
capability smith
As the year progresses fo an end the Post Office team become
convinced that the days required are above 100,000 days
timescales will cor to click
Smith che and Stratford in Je
to hear ar ration of why the programn
Smith dismisses the explanation as a fabrication
And challenges on 100,000 days
Stratford categorically denies 100,000 days
In March Terblanche ad) nat the days require
100,000 days
Terb
S slipped
has moved to over
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HNG X Progress
Progress with HNG X
~ He and Smith commence commercial :
principles
ations around the twin
remain intact
days for which
re not prepared
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The Horizon Stor
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HNG X Progress
Progress with HNG X
igns to join Getronics as its UK
Smith proved to be the last t
~ Andy Hall joins as Acco
~ By this stage and fo
~ From the early summer of 2) start fo execute against the plan
~ They do hit ems bul Stratford starfs to demonstrate the ability to
absorb these and hold the plan
~ Atlong last there is evidence of proactive management
~ Although there is a real coricern about networks
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HNG X Progress
Progress with HNG X
~ And then in December out of the blue Stratford resigns to join CSC
- To Post Office Stratford cited continuous and unsupportive internal
reviews as his reasons for leaving
~ He did go for a very substantial increase in pay
~ From th Stratfo S$ fo go TE n immediate drop off in
perform: mi itle progress with testing over
ubsiantial resources in place
the holiday period even though
ly starts to disappoint
laced by inactive
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HNG X Progress
Progress with HNG X
omes Clear that network issues are very deeply routed and
les continue to drift
rch 2009 Smith asks Hail why he shouldn't demand a further
pende
review was Carried out just after a radical change i
sation outside Japan
~ The management of Fujitsu UK demonstrated at this stage a changed
approach
~ Rather than use the assurance report as something to beat the account
team up with
They swung behind the account tea
deliver the job
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The Horizon Story v2 128
id pledged thern the resources
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HNG X Progress
Progress with HNG X
an D’Alvarez appointed to lead the project team
imost immediately a return to proactive management is seen
to rapidly growing confidence within POL as they saw Alan rapidly
control
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Date
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Fujitsu and the growth in POL architecture
Fullfsu and the growth in POL architecture
POL has become a mull channel business
Fujitsu has had a mixed record of bidding to extend ifs reach beyond the
counter service
When POL went to tender for paystation Fujitsu bid nearly five times the
ining bid
lost outon Posi & Go and for ID services
it did however make progress with backend systems and is currently
building POL SAP
a common deno
variety of thos:
reflected by a wide
lved in assessing bids has been as follows
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Fujitsu and the growth in POL architecture
Fullfsu and the growth in POL architecture
~ An approach described as arrogant- we are Fujitsu our name alone
means you'll give us the work
su oul of the
is & cs that competitors
ly risk averse which alone can price Fuj
competition or mean they will not countenanc:
will engage with
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Appendix A
Appendix A is contained in a separate document
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DateTine] The Horizon Story v2