Royal Mail: How to negotiate a cloud contract

Success in cloud computing is all in the preparation. Cliff Saran find out how Royal Mail revamped its desktop IT.

Success in cloud computing is all in the preparation. Cliff Saran finds out how Royal Mail revamped its desktop IT.

Royal Mail is in the process of rolling out cloud-based collaboration to 30,000 users.

The company has spent the last 18 months assessing and negotiating the replacement of its seven-year-old in-house Lotus Notes e-mail system with a desktop collaboration platform to support a flexible, affordable and rapidly scalable infrastructure.

It is using Micrsoft's Business Productivity Online Standard (BPOS) suite.

BPOS is a set of messaging and collaboration software hosted by Microsoft in the cloud. It offers Exchange Online for e-mail, calendar and contacts, Sharepoint Online, the web-based portal software, Office Live Meeting and Office Communications Online.

The roll-out will support Royal Mail's £2bn business transformation programme, which includes the introduction of automated machinery and delivery equipment and changes in working practices. IT is set to play a major role in the turnaround, with as much as 40% for the overall transformation budget set aside for IT renewal.

Speaking at the Cloud Computing Congress in London, Adrian Steel, head of infrastructure at Royal Mail, said that Royal Mail's IT has suffered from years of under-investment. The company had 9000 bespoke Lotus applications, 47 Tbytes of e-mail data growing 6 Tbytes per year and a sprawl of Microsoft's Sharepoint portals running throughout the organisation. Royal Mail's CIO tasked Steel with finding a modern, lower cost, agile desktop infrastructure.

The company assessed deploying Microsoft Exchange in-house, but Steel said the cost was too high. He also looked at upgrading to the latest Lotus collaboration suite, but chose Microsoft's BPOS cloud service, because it offered greater flexibility than Notes. In particular, it allowed Royal Mail to ramp up and down the number of users on the system. This was an important criteria as Royal Mail's staffing levels vary seasonally by up to 5000 people.

Steel says the journey to rolling out a cloud service has been tricky. Royal Mail needed to juggle negotiations between Microsoft, Royal Mail internal security and CSC, its IT outsourcer. "It was an emotional roller coaster and required a lot of pragmatism," he says. Eighty percent of the time and effort was spent on putting together the business case, and dealing with security and legal issues. "The only people making any real money were the lawyers."

Steel says the benefits of BPOS include giving Royal Mail "four-nines" availability (99.99% uptime), predictable costs and the ability to use the latest software.

However, he has a warning to any CIO looking to adopt Microsoft cloud services.

"Microsoft offers only a partial product set. Some of the things you may want to do will not be included," he says.

This is because not every function available in Microsoft's on-premise version of Exchange, Sharepoint and Office Communications Server has been replicated in the BPOS cloud service. Furthermore, since BPOS is sold as non-customisable cloud service, tailoring it to your organisation is difficult. "It can take 50 days to make [some] changes. Every tweak we need to make takes a very long time. This is really hurting us," he said.

Contract negotiations with Microsoft took several months. The fact that Royal Mail's IT has been outsourced to Computer Science Corporation (CSC) since 2003 created additional hurdles. Steel warns, "We wanted [our own] SLAs [service level agreements] and terms and conditions, but Microsoft moved very slowly."

Once the BPOS project is complete in August, Royal Mail plans a roll-out of Windows 7 and Office 2010.

Lessons from Royal Mail's cloud project

Far from being "pay for what you use" simplicity, cloud computing has numerous pitfalls. Royal Mail's project shows that although Microsoft's BPOS is a cloud service for e-mail, enterprise messaging and collaboration, it has limitations. CIOs and IT directors are likely to have to jump hurdles once they start negotiations. The same will be true of any cloud provider's service.

From Royal Mail's experience, Microsoft was reluctant modify the service, which is presumably designed in an optimal way, so customising anything becomes arduous. Furthermore, CIOs tied into outsourcing contracts should check whether the cloud provider is prepared to negotiate with a third-party.

Many people see cloud computing as the future of delivery IT services. CIOs will need to go through these and other pain points before it matures to a point where it becomes a true "pay for what you use" service.

Are you ready for cloud computing? 
  1. Can you customise the cloud application quickly?
  2. Can you specify your own service level agreements and terms and conditions?
  3. Will the cloud provider work with your outsourcer?
  4. Can you live with the limited set of functionality available in the cloud application?
  5. Is your desktop, server and network infrastructure up to the job?

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