Royal Mail needs consultants

Royal Mail is currently modernising its business

Royal Mail is tendering for up to £40m-worth of IT consultancy services as part of plans to improve the efficiency of its £1.5bn-worth of technology outsourcing contracts.

Increased investment in IT is playing a key part in helping Royal Mail adapt to a more competitive business environment, according to a spokesman.

“The business is in a period of modernisation, and part of that programme is upgrading our IT infrastructure,” he said.

The scheme, which started last year, involves operational restructuring, as well as new salary and pension schemes for employees.

But the rise of email has eroded Royal Mail’s letters business, and rival parcel couriers are also increasingly competitive.

And in October the company reported a 34.3 per cent fall in annual profits, mainly caused by pension costs rising by £193m.

The consultancy tender, launched last week under new chief information officer (CIO) Robin Dargue, is designed to support the modernisation scheme. It will cover areas including networking and communications, security, e-business, supply chain systems, and web services.

The tender is for an initial period of one year, with the option of three year-long extensions.

But Royal Mail already has in place a 10-year outsourcing deal with a consortium led by CSC, which includes subcontractors BT and Xansa.

In the light of these contract provisions, it is surprising that Royal Mail needs extra consultancy, according to Eric Woods, public sector practice director at analyst Ovum.

“The organisation obviously needs extra IT capacity, and has been obliged to put it to tender ­ though it is unusual to do this when the company has existing outsourcing contracts,” he said.

The current crop of contracts were set up as part of a major technology overhaul between 2001 to 2004.

At the time, the company implemented SAP software for its finance and purchasing systems, and Siebel software for its customer relationship management. It also put in automation tools to improve productivity.