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New Year Report
Commercial overview of Large Projects
Introduction
We start the new year with some serious challenges to tackle very quickly and
effectively if we are to mect vital near term objectives
My rankings of impact if we do not succeed in these objectives by end March are:
e Libra — new deal collapses
e Pathway — Network Banking aborted, ICL blamed, no increase in scope of
work, and no extension of term (decision taken to re-compete)
¢ HMCE - loss making contract without a contracted piece of e-business action
¢ Home Office — retrenched to OA service only
My ratings of risk (probability of failure) are more difficult to call, but I would put
them all at far too high for comfort as of now (perhaps circa 50% for all of them).
Summary conclusions and recommendations
The following are part fact, part assertions. In the interests of brevity, I have not
listed my reasons for arriving at these but be assured I have not done so lightly.
Happy to discuss.
Libra
Realistically, I reckon we are tracking at least two weeks behind where we need to
be for end Feb agreement and still falling further behind.
I have changed gear and started the New Year in bad guy mode. Have discussed
and agreed with Robert Carr and Richard Plume the need to do this. Andy (not yet
back so not discussed) may find it more difficult because it means a more
authoritative style than that I had adopted since his appointment. Unless you tell
me otherwise, I intend doing what I did up to MoU - driving the team from here to
the tape.
Richard Plume is now on board and will definitely make a big difference. He
understands the need to push back, to communicate and manage down, to create
detailed delivery plans and to manage against them. To date, that experience has
been glaringly absent from this project from its inception.
As you rightly pointed out, Libra has been too accommodating to low level
customer pressure for requirements creep. The reason is partly absent middle
management controls/communication/instruction/support, partly the open
collegiate style with the LCD and partly being exposed to multiple MCCs before
we have established a firm party line.
Richard Plume notwithstanding, Libra still desperately needs a Development
Manager, a Requirements Manager (with contractual bent), and a Head of Design.
Mike Tordoff will go for VR and increasingly is not carrying the load. Tony
Drahota is in constant overload and could fall over without more support. The
customer has brought in more people — good — but they are sapping our top people
dry as they get up to speed.
On the numbers, we have identified a tally of £80m plus to add to the MoU £283m
total. [In part, this increases fixes the network and performance risks which have
crystallised since MoU on the back of changes sought by the customer, so we
should not protest too hard that this is the customer’s fault for gilding the lily.]
But the customer is genuinely worried (and I suspect rightly so) that they will be
able to sell this to HM Treasury.
The current quality of service re. large file opening on OA is not operationally
acceptable with bandwidth less than 2mb. The VA Financial Model has provision
for upgrading all main lines to 2 mb. We need to order them now to secure MCC
confidence (= demand for Libra) that we are serious about addressing
shortcomings and that we are not hiding behind the contract (correcting the wrong
Excel files for performance tests does not change the actual performance). Andy
wants to wait, even though the cost exposure pre-VA is less than £100k. I think
he’s wrong.
We still have some serious technical issues to overcome.
Overall, finely balanced.
Pathway
The Pathway / Post Office relationship has collapsed following our failure to set
customer expectations on Network Banking or to read the customer’s business
objectives or problems correctly.
There is real and immediate danger (next two weeks) of acting in piecemeal
fashion and in a strategic vacuum. You need to get more involved in the
immediate decision making and to re-establish a viable customer relationship.
Liam Foley would not thank me for saying this, but he has been sidelined by Steve
Muchow. Steve thinks he has a relationship with Alan Barrie. He has not. He is a
first rate CS guy — not a relationship manager. Right now, with the Post Office in
trouble, they need Pathway to show vision and leadership — solutions. Instead, we
come across as reactionary, slow in everything we do, difficult to deal with, risk
averse and expensive. Ask them and I suspect they will tell you exactly that. They
liked Peter Graham because he made promises (empty ones) and had not yet been
found out. You are personally associated with a hardening of stance and the
above. [Ask Liam or Pete Jeram.]
It is possible that the Post Office could stop Network Banking and blame ICL. We
would be a convenient scapegoat for their not having a viable business case. It
would also tie in with PAC criticism of the way DSS and Consignia are going
about the Universal Bank. That would be the second time ICL would be blamed
for failure to secure automation of payments to the needy and for frustrating the
Government agenda... Far fetched maybe, but possible. [This would make the
Home Office issues look like small beer.]
On the other hand, the project P&L is struck after inter-co margins, after interest,
and after LPD HQ costs and generous contingencies. Cost run-rates have fallen
well below plan during 2001, yet the project P&L has not been revised to reflect
actual cost run-rates for a year — when we still had to secure the second retention
fee and clear the SLA issues (in particular Day D). I believe PBT margin should
now be showing nearer 20% than 14%. Cash generation is one of cash cow, at a
guess some £40m ahead of the 1999 Codified Agreement plan. [Neil H has the
actual numbers.] Just worth a mention — if you were to regard the DSS walk
away as a separate contract failure, this would look like a highly profitable
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account. One that is worth preserving, taking some trouble over and not taking for
granted.
Finally, Network Banking will, if it gets the go-ahead, re-use many of the people
already paid for under the base contract. Yet the “stand-alone” P&L did not
reflect these utilisation gains — all assumed to go to the base even tough it is
Network Banking which sweats the assets. I am not suggesting we just drop our
prices for nothing in return, but there is room for manoeuvre if we get something
worthwhile (eg. first refusal at POL outsourcing) in return. My concern is that no-
one is thinking laterally or strategically.
Sirius
Progress is being made. David appears to have had a good meeting with Linda L
before Christmas. Richard Jones (PwC) is trying to get us both in to see Margaret
Aldred.
I am putting Jon Clempner together with PwC (Graham Ward) to combine Jon’s
post-OGC proposals with PwC’s separate thinking along similar lines, to create a
joint Strategic Framework initiative which we can present to the customer as the
basis for the future relationship. This will be supported by the proposed revisions
to the SBA service definitions and processes which have been developed by putting
the ICL PMs together with the PwC people to harness lessons learned from CCFP
etc... These will extend into end to end governance proposals (sensitively
expressed to include revisions to the various customer forums and processes). I
am pushing all of this and am cautiously optimistic. [We need to make quick
headway both to keep PwC on board and to stop the customer treating us as a
mere platform provider — the two go together.]
A joint Commercial away day is being scheduled to attack the running sores and
propose linked solutions. I will lead in David’s absence.
I am confident that Ann W is making progress — I need to catch up with her.
I have a meeting with Mike Fitzpatrick on ERP financing (FF) tomorrow.
However, ERP is not yet settled (am reviewing this week — holding letter sent
before Christmas re. SAP letter to Blunkett), Case-Working has apparently been
mis-read_ by us (feedback from customer tomorrow on that), and no news on
CCFP.
Will send you a further update on this next week.
HMCE
The worry is how firm will their commitment be to placing e-business work with us
by year end? Without a significant piece of new business, the project P&L will still
be in negative territory.
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