Transferring 1,735 IT staff to CSC was a challenge that could not be rushed.
In June, 1,735 Royal Mail IT staff transferred to supplier CSC as part of a £1.4bn, 10-year outsourcing contract. In one of the biggest deals of its kind, Royal Mail outsourced its datacentres, data networks and more than 600 business application systems to the CSC-led Prism Alliance, whose members include BT and Xansa.
Like many large outsourcing deals, the move was not without controversy. Some unions, for instance, threatened strike action unless concerns over the pension rights of staff transferring to the supplier were addressed before the deal was signed. The way the Royal Mail overcame these hurdles will be of interest to other companies undertaking outsourcing deals.
Chief information officer David Burden joined Royal Mail in November last year from airline Qantas, midway through the complex outsourcing negotiations, and played a crucial role in getting the agreement signed and delivered. When he arrived the transaction had been approved in principal and CSC had been selected as the preferred supplier.
Despite boardroom pressure on Burden to close the deal, when questioned by staff he emphasised that the deal was not a foregone conclusion. In fact, it was to take a further eight months before Royal Mail IT staff started to transfer to CSC. "My answer was that we would do the deal only if it was a good deal for the Royal Mail and if it was a good deal for the people," he said.
His experience in the airline industry meant Burden was no stranger to overseeing large IT outsourcing deals. The biggest challenge, he said, was gaining the support of often sceptical staff.
"I am absolutely convinced you cannot outsource effectively in something as complex as IT unless the people who are affected think it is a good deal for them. There is too much scope for problems," he said.
Outsourcing deals also have to comply with legislative requirements such as the Transfer of Undertaking Employment Regulations, which require suppliers to uphold the contracts of staff who transfer to them under an outsourcing deal, although this does not cover pension rights.
"People who work for a large company like the Royal Mail seem to be very attached to it. There is a lot of tradition," said Burden. To address this, Royal Mail and CSC held a series of "roadshows" to whip-up support for the proposed deal. Burden and his CSC counterpart Guy Hains attended these events.
"The roadshows were pretty onerous, as we were still negotiating with Royal Mail," said Hains. "I personally made sure I went to these roadshows. They asked the really personal questions. We had a process that meant what was really important to them was heard."
Burden worked closely with CSC throughout the staff consultation process to make sure Royal Mail addressed the concerns and fears of the people affected by the deal. He believes there was no substitute for running roadshows to inform staff. "You talk to people face to face; you answer questions. We also had newsletters and e-mail correspondence," he said.
Every staff member had the opportunity for a one-to-one interview with the management and was offered the option to consult with an independent financial advisor. Staff were represented in negotiations by union Amicus and the Communications Management Association, which Burden consulted throughout the process.
A big concern for Royal Mail and its staff was that pension rights were not covered by the Tupe regulations. "This proved the most complex issue we had to deal with regarding our staff, given the current climate of companies shutting down final-salary pension schemes." Burden said.
Royal Mail made a commitment to its employees from the start that if the transaction happened, the people who migrated to CSC would receive a broadly comparable pension to their existing Royal Mail pension.
Burden believed that job opportunities and security would be better working for the Prism Alliance than at the Royal Mail. IT staff would have better career prospects under the outsourcing deal because they would have the opportunity to work with different CSC clients and develop a wider range of skills, he argued.
"We believe it is fundamentally better for an IT professional to work for an IT company than it is to be working in another business," he said.
Royal Mail had invested heavily in SAP enterprise software and training, and CSC was keen to take advantage of this capability. "Outsourcing is like an acquisition," said Hains. "The skills we have acquired provide us with very rich seams of capabilities." Among the attractions for CSC were Royal Mail's call centre processes and the SAP implementation. "We are very committed to keeping these skills up to scratch," said Hains.
About 200 IT staff now work at Royal Mail. Most manage the relationship with CSC. Others are associated with business units in Royal Mail and are involved in defining requirements for the Prism Alliance. A few specialists have remained to focus on the future and are looking at how the company can best develop electronic services.
Outsourcing: An IT worker's view
As the market for IT outsourcing has grown, unions and staff have voiced concerns that employees may not receive proper support and training when transferring to a supplier. However, for many IT professionals the experience can be career-enhancing.
David Ahearn, chairman of the Unicenter User Group, used to work in the IT department at insurer Royal & SunAlliance.
In May, Royal & SunAlliance outsourced the processing and administration of its life and pensions policies to Unisys subsidiary Unisys Insurance Services. About 1,700 staff were transferred from Royal & SunAlliance to the supplier, among them Ahearn.
Working now for a supplier, Ahearn said he needs to have a different focus, compared to being at Royal & SunAlliance. "We have to deliver service levels back to Royal & SunAlliance efficiently," he said.
Because Unisys is a bigger company from an IT perspective, Ahearn said there are more opportunities for IT staff than there were at Royal & SunAlliance. "It is an opportunity for the staff who transferred. We are in a bigger marketplace," he said.
Ahearn's advice to IT professionals affected by outsourcing deals is to embrace change. "The industry does not stand still. There should no worries for good technical people," he said.
This was first published in September 2003