Royal Mail, the UK’s largest postal service operator, has arguably seen greater upheaval during the past ten to 15 years than in any other stretch of its 500-year history. Some of this has been driven by technology. The advent of email, for example, has brought about a decline in the volume of letters sent in the UK, while online shopping has increased the volume of parcels. But the Royal Mail has also undergone significant organisational change. Most drastically, in 2006 the government’s postal regulator broke the monopoly it had enjoyed for 350 years, putting its services under competitive pressure practically overnight. The past decade has also seen a number of industrial disputes between the Royal Mail and its workforce, many of which have culminated in strike action. These have often followed cost-cutting and modernisation drives, in spite of which Royal Mail has struggled to turn a profit. In its most recent financial year, the company made a £191 million loss on revenues of £3.2 billion. As Stuart Curley, Royal Mail’s chief technology architect, explains here, the organisation’s ability to react to this upheaval has been hindered by its IT infrastructure, which he says was designed for the unchanging conditions that the organisation enjoyed before its monopoly was taken away. Royal Mail’s situation is an extreme example of a common malaise. The events of the past 18 months have called on businesses to reshape their operating models, but many have found themselves to be constrained by the enterprise IT systems they developed at such great expense. Curley sees a solution in cloud computing, which will allow Royal Mail to procure IT ‘on demand’, and so match IT expenditure to revenue more closely. Until now, IT spending plans have typically only been recalibrated according to changing revenue patterns once every five years. Today, Royal Mail is undergoing a strategic reappraisal of its entire IT infrastructure, and Curley expects much of it to move onto the cloud. That has begun already with a project to replace the company’s Lotus Notes desktop applications with Microsoft’s BPOS online productivity tool suite. But he is critical of IT services suppliers, who he believes are dragging their heels on the move to cloud computing as it threatens their existing business.
Information Age – How would you describe Royal Mail’s IT profile today?
Stuart Curley – We’ve got a highly customised IT landscape, which is inflexible and expensive to manage. It was designed for the time of the Royal Mail’s universal service obligation, not the commercial world which demands flexibility and fast pace of change. That means that for us to be able to offer new products and services to our customers, it costs a fortune and takes a long time for us to make changes to those systems.
As a business we are undergoing a period of transformation, but IT is potentially becoming a serious barrier to that business transformation.
What causes this inflexibility?
It’s partly the age of the technology, but it’s also the fact that a lot of these applications have been heavily customised.
For example, we’ve got a lot of SAP in our landscape – far too many instances of SAP, and they are massively customised. We’ve spent too much time thinking about how the Royal Mail is special; we need to move to standard core processes.
How are you addressing this challenge?
One of our strategic programmes concerns significantly reducing complexity. That means we are hacking through the IT landscape and standardising on some core platforms. We are in the process of standardising on a core ERP and CRM platform, we are completely transforming our e-business platform, and we are transforming our communications platform.
Online desktop applications
You are preparing to move from a Lotus Notes desktop environment to a Microsoft BPOS implementation. What has motivated that move?
There are a few motivations for this. One is cost: we needed to refresh our desktop apps, but the cost of staying with Notes was prohibitive. Also, we were using [Microsoft’s document-sharing software] SharePoint already, so it made a lot more sense to go down the Microsoft route.
The cloud nature of the project takes away all the headache of a technology refresh, because it is all done for us.
When are you planning to make the switch?
The actual migration from Notes starts on 1 April, and we’re planning to migrate at least 2,000 a month over four or five months. Continued… Page 2 of 2…
How is changing customer demand affecting your IT strategy?
Traditional mail volumes are decreasing by 10% a year, but the volume of parcels is going up. That’s transforming our business whether we like it or not. To be able to handle parcels, you need to approach delivery in a different way: people want packages delivered at certain times of day, they want you to be able to drop it at the local supermarket or with the next-door neighbour, and they want you to let them know that this has happened. I don’t think there is anyone who has tackled that successfully yet, but we don’t want to be the last.
How do you plan to address this?
It is one of the motivations for the events network that we are currently planning, which will underpin every event that happens in Royal Mail.
Any time an employee use a machine, such as a PDA, that isn’t part of a big application like SAP or our CRM, that machine will publish an event to the network. Each event will ‘decide’ where it needs to go – whether it is into SAP, or a messaging database, or to the customer to tell them where their package is.
At the moment this is in the conceptual phase, and we’re going out to tender. This is effectively going to be based on complex event processing (CEP) technology, although we don’t have complex events; rather, we have simple events at scale. That is why the CEP architecture is the right one – because it is a very distributed architecture.
Will this be a cloud-based system? We are not going to direct the market on that. One of the things we are going be asking prospective suppliers is whether they would host it in a traditional data centre or build it as an infrastructure-as-a-service offering. We need to hear what the market thinks is the best way to do this, given the scale and volume of messages that we are going to have. However, in the long term, everything is going to be based on a cloud.
What makes you believe that?
The reason is that I think the traditional outsourcing model is broken. I don’t think the traditional outsourcers get it, though, and I know why they don’t get it: if they moved to a truly service-based model, they would end up cannibalising their traditional revenue streams.
How do you see your organisation procuring cloud-based services? As an organisation, I don’t want to buy cloud services directly from Amazon Web Services, and I don’t want to go to a systems integrator, who will build a custom system and host it in a traditional data centre. I want to go to a ‘services integrator’ who will provide me with a given set of services and with a given service level agreement associated with it. I don’t care, at the end of the day, where the underlying infrastructure is.
What would be the advantage of this approach?
We want to pay for IT on a demand basis. We currently have an enormous amount of infrastructure to deal with four days’ business around Christmas, which is nuts. It just sits there eating up the atmosphere.
And we’re in a pretty cash-strapped economy at the moment; we can’t afford to do massive procurements in which we pay for everything upfront. What we have to do is align our IT costs with our revenue.
Are suppliers happy to operate in this way?
No. I’m finding that we’re having to do a lot of work in persuading the systems integrators that this is the kind of model we’re looking for.