Royal Mail in £1.5bn outsourcing mega-deal

Royal Mail Group has outsourced its IT support services in a £1.5bn deal with a group of companies led by Computer Sciences Corporation (CSC).

CSC’s Prism Alliance, which includes BT and Xansa, will be responsible for running Royal Mail Group’s data centres, data networks, voice services, desktop computers, and more than 600 business application systems.

Royal Mail Group hopes to accrue savings of £250m over the life of the 10-year contract.

Under the terms of the deal more than 1,700 people, mostly IT professionals currently employed by Royal Mail, will transfer to CSC, Xansa and BT on existing terms and conditions under TUPE regulations. CSC will account for approximately 1,470 employees, Xansa 220 employees and BT 45 employees.

CSC will manage the contract and will be responsible for the maintenance of Royal Mail’s 42,000 desktop computers and the management and development of Royal Mail’s server, mainframe and IT processes. CSC will also develop and maintain applications and provide a range of professional services supporting business-critical systems.

Under a sub-contract with CSC, BT will provide a new network and services, including local and wide area voice, data, mobile, internet and firewall technologies. BT will also provide support services for call centre operations and intra-company video and audio conferencing. This work represents £450m over 10 years.

Xansa will provide application management and enterprise solutions to Post Office Limited and Royal Mail Group corporate functions as part of the Prism Alliance. The Xansa services are valued at up to £180m over ten years.

Adam Crozier, Royal Mail chief executive, said in a statement: “This is a great deal for Royal Mail and a great deal for our people. It is a vital component in our renewal plans in terms of reducing costs and giving us the information technology services that we need to make Royal Mail a great company."

Pierre Danon, chief executive of BT Retail, said: “This partnership is the kind of ‘multi-sourcing’ approach to outsourcing that companies are realising is the best structure for today’s challenges.”