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Memo
“an essential part of everyday life” www.postoffice.co.uk
To: From: cc:
Note to File David Mills Alan Barrie
Peter Corbett
Date: 07.08.02
Meeting with Richard Christou, Chief Executive, Fujitsu
Richard Christou called today ostensibly to make my acquaintance but
actually to complain about our treatment of Fujitsu concerning their
contract and lay out his negotiating position. He made the following
points:
1 He had personally been involved in re-engineering the Horizon
contract with the Post Office after the DHSS withdrawal.
2 _ His predecessor had been removed because of the fiasco and he
had been appointed because of his success.
3 He therefore had a deep personal interest in Horizon and had
ensured that we had their best developers at all times and that
within their overall portfolio our system was given preference.
4 He acknowledged that it was expensive and over-engineered but
stated that it was fully meeting the specification and gave us a
100% ‘lights on’ position.
5 He said that the contract in effect only gave them a £5million profit
and that Fujitsu would make more money (£11million) if we serve
notice upon them now.
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6 Fujitsu were upset that we had gone out to market test and they
did not believe that in the time available or with the information to
hand that we would be able to get a sensible response on which to
base a judgement.
7 He would not give us an open book position when faced with such
a competitive situation.
8 He referred to conversations with John Roberts when they had
discussed how the contract could be revamped by bringing in the
outsourcing of back office processing to them. I asked if he meant
Chesterfield and he replied in the affirmative.
9 Healso stated that he could give up-front benefit if in the longer
term we engineered to reduce costs which we could then share.
10 He thought the process of negotiation was going too slowly and I
reassured that in any event I would be forced to terminate
negotiations if this were to be the case.
I then in turn made the following points to Christou:
1 The Post Office is insolvement and loss making and my mandate
is to make it profitable. To do this I have to make an early impact
on both income and costs which means reviewing the cost line.
2 Out IT expenditure is too high a percentage of non-interest
expenditure and must be brought back to 15%.
3 The Post Office’s cash burn affects Consignia’s liquidity and must
be reduced.
4 I was open minded on the market test but I have no desire to
move from Fujitsu. This would only be driven by a commercial
imperative.
Christou concluded by implying that our negotiations with them were
far too adversarial and we needed to step back and try and create a
win win situation. In turn I thought this was difficult whilst everyone
was dancing round the handbags, and we would need to work hard
during the coming weeks to reach a mutually acceptable conclusion.
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Christou said that he might need to contact me personally during or at
the end of this period but that we would leave our teams to continue to
negotiate.
Whilst we parted amicably, he will not have been happy with my rather
tight-lipped response to him.