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31* January 2007
Account Review
Post Office &
Royal Mail Group
Dave Baldwin — Business Unit
Director
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Account Plan Summary
* Deliver programmes to time, cost and quality
* T Release, HNG-x, SIP, Kiosk, Project LIGHT
* Superb service with demonstrable continuous
improvement
* CSIP 9 and 8.5 during 2006/7
* Grow business in line with POL business channels
* Local, Rural, Handheld, segmentation etc
¢ Extend outside of traditional Horizon though Sl
Partnership and IT Business Partnerships
* Campaign to take a share of CSC business in Royal Mail
* Be perceived and act as innovative and proactive
supporting POL and RMG strategies
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Customer’s business
¢ Royal Mail Group
* 100% shareholder UK Government
¢ Letters, Parcelforce, Post Office, GLS
* UK (GLS Europe) letters and parcels logistics and mails
* £9.1bn Revenue
* Letters £355m Operating Profit (05/06) and expectation to
reduce greater than forecast
* Post Office
¢ Retail arm — Mails, Telephony, Financial, Government
¢ 14,500 -> 12,000 branches UK wide
¢ £900m Revenue
* (£111m) Operating Loss -> (£400m) in 2007
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Customer’s — Drivers, Issues & Outcomes
* Royal
Top 5 Business
Drivers/Issues/Outcomes:
¢ Post Office
Business is unprofitable and
getting worse
Five 2 Eleven programme —
break even by 2011
Significant network change
Mail
De-regulation hitting harder
than expected
Reliance on manual labour vs
automation, not helped by
Unions
RMG vs Government view on
employee share ownership
Top 5 IT
Drivers/Issues/Outcomes:
How can IT help to drive cost out of
the business
How can IT drive innovation
How can IT support the new
strategies vs being a blocker
How IT can help move from
transactional culture to selling
How does strategic relationship with
Fujitsu drive Strive
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Post Office Spend Analysisé¢
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160
140
120
100
80
60
40
20
Post Office IT Spend Analysis
84.00%
83.00%
I 82.00%
81.00%
80.00%
I 79.00%
78.00%
I 77.00%
76.00%
75.00%
2006/07 2007/08 2008/09 2009/10
£m
(——_ Other
(Prism
lag Fujitsu Opportunity
[==5 Contracted
Horizon/HNG-X
—*~— Fujitsu %
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Analysis of Competitors
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Competitor Services Strengths (+) Actions required
Name they provide I And weaknesses (-)
CSC (Prism All Royal + Incumbent supplier + Campaign to secure some of Prism business from review
Alliance) Mail IT + Reduced significant cost in April 2008
excluding -Poor service quality and resources *Continue to grow relationships across RMG
Post Office -Deliver to contract, little innovation *Back both BT and C&W in network consolidation
*Drive wedges between Prism partners
Accenture IT - Incumbent supplier to Bank of Ireland + Ensure that Bol (POFS) are aware of Fujitsu capability
Infrastructure .
services for
Bofl JV
EDS Card Account I + High Quality service *Engage with JPM re Card Account renewal / replacement
IT and BPO + Reliable
Helpdesk - Expensive, not passing on savings from JPM
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Customer’s overview of Account
* Customer (POL) sees Fujitsu as a strategic partner
* Highly and over referenced
* Royal Mail Group and Post Office Vendor of the Year
* CSIP average 8.75 (8.5 and 9)
* The top 3 attributes from the CSIP are:
¢ Being honest in what they say and do
¢ Being realistic in their promises
¢ Always delivering on their promises
* Nervous about HNG-x development meeting pre-pilot
timescales (Jan 2008 -> Mar 2008)
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Finances — KPI’s (RMG Account)
High Level Financial Summary
Actuals & Forecast YTD (£m)
Actuals Forecast Budget Prior
Orders 32.3 32.3 195.0 16.3
Revenue 715 15 80.1 72.9
Revenue Growth % -2% -2% 10%
Gross Margin 20.8 20.8 18.2 22.6
Gross Margin % 29% 29% 23% 31%
Current 06/07 (F/Y) & forecast (£m)
Forecast Budget Prior
Orders: 250.0 200.0 17.3
Revenue 109.7 109.7 106.6
Revenue Growth % 3% 3%
Gross Margin 26.6 23.8 42.1
Gross Margin % 24% 22% 39%
Current 06/07 (F/Y) & forecast (£m)
Qi Q2 Q3 Q4 FULL YEAR
Orders 8.1 9.7 14.6 217.7 250.0
Revenue 21.1 23.8 26.6 38.2 109.7
Gross Margin 7.2 6.7 6.9 6.0 * 26.8
Gross Margin % 34% 28% 26% 16% 24%
* - Q4 includes £900k of risk spend which is an opportunity
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Jan0O7 Forecast for 2007/08 RMG Account
High Level Financial Summary (FY07/08)
JANO7 Forecast for 2007/08
Qi
Orders 12.9
Revenue 23.0
Margin 6.1
Margin % 27%
Headcount 95
Q2
4.6
30.2
6.7
22%
95
Q3
3.2
28.7
6.5
23%
95
Q4 FULL YEAR
13.8 34.4
29.5 111.4
6.2 25.5
21% 23%
95 95
9
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Risks and mitigations (2007/08)
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Development Risks
POA resourcing problems introduces delay to
Programme
SI development effort under-estimated
Planned server consolidation cannot be achieved
Zensar development fails to deliver assumed savings
Zensar working fails
RV testing does not complete on time
Operational Risks
Key FS (Services) resources not available when required
Unexpected RATEX following implementation
Complete failure of Counter component
Denial of Service to Post Office
NWB non-availability (through network problems) causes
SLT failures
Horizon software releases generate extra costs
Horizon CMOS battery failure in Counter PCs
Commercial and Finance Risks
Over complex contract hinders progress and diverts
resources
Labour indexation exceeds RPI
Escher work to rule following HNG decision
Mitigation Actions
Early completion of ERICS and dedicated
75 resource manager
100 Fortnightly review of level 3 plan
Fortnightly review of infrastructure
20 deployment
Full off-shore failed but mitigating through
427 beneficial day rates
Full off-shore failed but mitigating through
575 beneficial day rates
210 Fortnightly review of level 3 plan
Early completion of ERICS and RAR's and
38 dedicated service delivery manager
6
Catastrophic failure risk passed to POL
under contract, impact assessments being
16 undertaken
Understand threats and available counter
measures. Working with POL on intruder
35 detection and PCI compliance
Mitigated through revised LD arrangement -
24 to be released
60 Tight control over changes affecting HNG-X
Costs included in operational service costs -
25 to be released
15 To be released
69 To be released re 2008
35 Continuing to work well together
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Finances — Major Contracts
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GM % approved at CAR GM % Reason for the variance &
Major TCV In Year For life of Actuall For life of Impact on the contract
Contract/s} contract Forecast in Contract
year
IHNG-X £31m 35% 33% 35% 33%
Development
lexc H/W
Digital Media £14.9m
Network Delivery delays by BT
5.6m 3% 3% 3% 3% Openreach and Samsung
Hardware resulting in need for replan.
2m 22% 22% 8% 8% \Target to mitigate additional
Implementation] costs
7.3m 11% 11% 11% 11%
n-going 3 yrs
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Status of Projects and Service Delivery
* Highs
* Positive Customer Relationship with POL
* Operations, Development and Programme
* Horizon performance stable — Business as Usual, T Releases
* HNGx architecture and high level designs progressing to plan
* HNGx programme budget stabilised to plan
* Lows
* RMG Digital Media Network project on Amber Alert
¢ Revised proposal agreed and in execution
* Lessons Learnt from pilot phase included
* POA service - Engineering SLT performance
* SIP in place, including dependencies on customer
* HNGx Release Authorisation date and confidence
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Customer’s organisation chart
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Post Office Organisation
Ric Francis
di:
_ Programme —
_ Office Director
_ Rob Durrant
oe
Peter Corbett Sue Whalley
foe)
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Customer / stakeholder Type of Buyer Prime FJS contact Actions to build systematic executive level
contact name & title & Status of relationships
relationship
Alan Cook CBE Economic Continue with regular exec contact
Managing Director - POL
Ric Francis Economic Continue with regular contact and Japan visit
Operations Director - POL Feb07
Dave Smith Technical Continue with weekly contact
Head of IS and Change — POL
Andy Mclean User Continue with weekly contact
Head of Operations Control - POL
Sue Whalley User Build on the strategic briefings
Strategy Director - POL
Ninian Wilson Economic Continue to explore close working
Group Procurement Director - RML
Gary Hockey-Morley User Continue to identify new business initiatives
Marketing Director - POL
Gerard Banaskiewicz Economic Continue to explore opportunities
Head of IT Procurement - RMG
David Burden, Group ClO Technical Continue to explore strategic options,
especially in the individual service space
Dominic Wilson, IT director — Royal Mail Technical Continue to identify opportunities
Letters
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Date of Last 7/12/06 Score Date of Next CSIP I tba
CSIP Interview Interview
Key Feedback Points from last Interview Actions to address/exploit feedback
Case study on relationship In planning - copywriter engaged
Focus on proactivity & innovation Coaching and change programme
Maintain high quality service delivery Deliver continuous service improvement plan
Engage more people into POL Exec Engage more people into POL Exec from Account Team
Average Scorecard over last 6 Average SLA Performance over last 6
months months
Present Service Delivery Issues Actions to address
HNG-x time to RAB Fortnightly review and pressure on L3 plan
Engineering performance Deliver action plan by end Feb 07
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Post Office Account - HQ Management
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Dave Baldwin
Business Unit
Director
Julia Andrews
Executive Secretary
Liam Foley
Business Development
Director
Mark Wiltshire
Systems Integration
Director
a
I
Colin Lenton-Smith
Commercial Director
ee
Naomi Elliott
Customer Service
Director
——,_
Katie Hathaway
Financial Controller
NN
Chris Bridgland
Human Resource
Manager
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Summary of opportunities to add business value
KEY AREA where we can add Business
Value to the Customer (+ what we would
provide)
What would be the value to the
Customer in their terms
TCV for Fujitsu
(+ start date / duration)
Identify appropriate cost effective solutions for
Post Office Local
A reduction in operating costs and
increased flexibility that enables
solutions outside the physical post
office
£1 million
June 2007 — length of contract
Self Service through the implementation of a
first class solution
Queue reduction/faster
service/happier customers
£4.7 million
September 2007 — length of
contract
SIP — Systems Integration Partnership where
we will provide excellent strategic level
resource to help achieve POL business
Better ROI in IT
£1 million per annum direct
£? Millions indirect
Baer isagement and Management
Information
Accurate up to date MI anda
single data repository across the
organisation
£0.65M for data management
£1.5M for MI
Call centre rationalisation
A reduction in call centre costs
and a simplified view of the
Unknown at this stage
Potential take over elements of the Prism
contract
Better R61 on IT costs. More pro-
activity for new developments
Better relationship with service
provider.
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Key dependencies & Issues
* Business Consultancy from BTG that can work with POL in the
strategic development
¢ (Mark Dorgan and Philip Warley engaged at board level in POL)
* Sufficient high quality resource to fill the SIP (up to 30 heads)
* Technical capability in the technical devices space, especially in low
cost payment terminals
* Network consultancy to enable Fujitsu to advise POL on the most
effective approach to achieving VfM across their points of service
* Possible high quality bid team for Prism contract
* Services architect, Transition Expert, TUPE, Programme
Manager
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Actions
Action No: Action: Actionee: I Due Date:
Look to build relationship with Alan Cook with
sponsorship/support from Ric Francis. Take
opportunity to celebrate contract signature (June
2006)
1. Complete - A relationship has been built with
Alan Cook with meetings hosted with David
Courtley, Richard Christou and Akikusa-san.
Contract due to be signed on 31/8/06 and will be
low key celebrations at Post Office request.
Good news story around overall service availability
to be publicised once the HNG-X contract is signed.
Complete - We will publicise internally in a low
2. key manner due to Post Office request that no
external publicity be made for at least 3 months
after contract signature. Reasons are valid and
can be disclosed separately.
Branch Network Resilience — there is risk around
movement from C&W. Discuss with Ray Clarke.
3. Complete - Risks discussed and corrective
actions eventually put in place. Service take on
successful.
DB/LF
cLosep I “SAP
DB Contract
CLOSED I signature
DB As
CLOSED I appopriate
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