Service level-linked outsourcing deal helps Royal Mail cut losses

A deal to outsource the management of Royal Mail's online platforms to IT services group Sapient has helped to reduce losses to...

A deal to outsource the management of Royal Mail's online platforms to IT services group Sapient has helped to reduce losses to £611m this year, the organisation said this week.

Agreed last year, the contract, part of a three-year recovery plan aimed at slashing its £1bn business losses, has saved millions of pounds, according to Royal Mail.

The news came as postal workers voted against taking strike action, opening the way for further restructuring to bring the business back into operational profit.

To ensure the success of the contract, part of Sapient's fee is linked to achieving specific business objectives, said Paul Kelsall, head of technical development for e-business at Royal Mail.

"The service level agreements cover three main areas: responsiveness to problems; accuracy of software releases: and - the biggest - the time taken to fix problems," he said. "If Sapient fails, it will lose a lot of money. So far we have saved a significant amount and got a better service, so it has been good value."

The platform is being managed by Sapient staff, based in India and the UK. Royal Mail sought the advice of companies that had gone through similar outsourcing contracts before signing the Sapient deal.

"We took best practice from banks and retailers that we know, which we can do because we are not competitors," said Kelsall.

"We made sure Sapient had a team in both India and the UK, because the advice from one of the big banks was that you need people who understand local issues."

Under the first stage of the contract, Sapient integrated three separate sites - for Royal Mail, Post Office and Parcelforce Worldwide - on to a single platform, using its application management services.

With the integration complete, Sapient's ongoing remit is to provide maintenance and management, Kelsall said.

"Sapient is hitting all its targets. It responds to calls in less than 25 minutes, releases rarely miss their target dates and fixing problems, which used to take months, now takes a matter of days," he said.

No Royal Mail staff moved to Sapient as part of the outsourcing deal.

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