As a Commons Trade & Industry committee voices its concerns,
the Pathway debacle returns to haunt the Post Office. Mike Simons
discovers that new plans to develop a Universal Bank in Post
Offices could add £20m to original cost projections.
Plans to develop a Post Office-based Universal Bank will add
£20m to the cost of the Horizon counter automation project, which
is currently getting 300 Post Offices wired up a week.
The extra cost was revealed in a report into the future of the
Post Office by the House of Commons Trade & Industry Committee,
published last week.
The report expressed serious reservations about plans to provide
every Post Office and sub-Post Office with a computerised platform
for benefit payments, banking and e-commerce.
In a reply to the committee, the Post Office said, "We see this
as a useful analysis of the major issues facing the Post Office and
its network of retail outlets, and we will be studying the
recommendations closely."
Horizon is a revamped version of the disastrous Pathway project
implemented by the Department of Social Security, Post Office and
ICL to provide for the automatic payment of social security
benefits through Post Offices.
Pathway collapsed when the DSS pulled out, leaving the Post
Office with a £571m write-off. ICL took a £180m hit on its balance
sheet.
The project was revamped under the Horizon label. Ministers now
claim that its successful roll-out is key to the Post Office's
future and efforts to prevent the closure of large parts of the
branch network.
The Post Office and contractor ICL have been busily wiring up
the nation's Post Offices. However, the Trade & Industry
Committee was told the software installed in the first 13,000 sites
was built for the Pathway project and is based on an obsolete
magnetic strip card design that does not allow full Internet
access.
Complete functionality will depend on a series of software
upgrades, the first of which was introduced at the end of October.
It allows the use of smartcards, two-way messaging between Post
Office branches and headquarters buildings, and stock replenishment
messaging.
Giving evidence to the committee, Stuart Sweetman, the Post
Office's group managing director, customer and bank services, said,
"Our judgement was that if we launched everything all at once that
would be a task too far."
In addition to raising doubts about software, the all-party
committee questioned plans to use the Post Office network to
provide a Universal Bank for those excluded from the current
financial services organisation.
"We are relieved that the failure a year ago to meet the first
Horizon milestone, about which we expressed concern in our 1999
report, has not proved to be significant," said the committee. "It
is obviously essential that the ambitious plans being developed by
the Post Office to enable it to become a major financial services
outlet do not stumble as a result of any technical deficiencies in
the Horizon programme.
"If banks are in effect to be obliged to make their basic
accounts accessible through Post Offices, and to pay for the
privilege, they are entitled to know that the system will be
resilient and cost effective.''
The Post Office is now tendering for the banking software it
will introduce next year, but the biggest problem it faces,
according to Sweetman, is bandwidth.
The Post Office's current business processes rely on batch
processing of information. "At the moment none of the applications
we have on the Horizon platform require 100% online validation. We
will have to upgrade the telecommunications behind Horizon and I
think that is probably the biggest issue," he told the DTI
committee.
Sweetman estimated that by 2001 it will have cost an additional
£20m to upgrade the Post Office network to accommodate the
combination of dial-up and broadband links, depending on the size
of the Post Office.
The Post Office's plans to turn its branches into centres for
e-commerce also caused concern among committee members.
On e-commerce, the report said, "While we share the vision of
Post Offices benefiting from the fulfilment of electronic ordering,
the details of the commercial arrangements now being made between
Post Office Counters, Parcelforce and electronic retailers, and
their effect on other private sector fulfilment companies, deserves
careful scrutiny by the regulator.''
In the face of all these potential problems the committee called
on ministers to ensure that the Post Office was properly funded and
supported by other government departments.
Post Office IT
- The Post Office network is the largest retailer in the UK, with
18,500 branches
- Almost 30 million customers visit a Post Office branch every
week
- The Post Office handles approximately £140bn in cash a year -
more than any other financial institution
- The collapse of the Pathway Project put at risk the biggest
single source of income for Post Office Counters