Royal Mail slashes IT bill in half

The Royal Mail has slashed its IT spend in half as part of the major cost-cutting programme launched after it made a record £1.1bn loss in 2002.

The Royal Mail moved back into the black with profits of £220m earlier this year, although failed to hit any of its 15 service targets. A goal of £400m profit in the final quarter has also been set by chairman Allan Leighton.

In an exclusive interview with silicon.com, Royal Mail CIO David Burden, who joined in 2002, said the organisation's IT bill needed "radically" cutting.

"We were spending truly enormous amounts of money on a number of very large programmes," he said.

Burden attributed part of that to the Royal Mail's public-sector mentality. "There's always a bit of a tendency when there's the perceived backstop of government to perhaps over-define, over-design and gold-plate projects," he said. "As we've become a Plc and as competition has started to build, it is very clear we can't go on doing that."

He claims IT expenditure has been cut by "40 to 50 per cent", through the £1.5bn outsourcing deal with CSC's Prism Alliance and by applying a much more rigorous project appraisal process.

"It's always difficult to say how much of that is because necessary projects came to an end but then everyone has a string of projects which are absolutely necessary until you start shining a bright light on them."

Cost-cutting has been Burden's main focus since he joined the Royal Mail, but this year will also see the launch of the delayed and over-budget £370m automated international mail-sorting centre at Heathrow.

Burden said it will deliver both cost savings and additional revenue-stream opportunities but admitted the project has been "painful".

"Obviously if we had properly understood the circumstances, I think we might never have started the process but it will be made to work," he said. "Like a lot of these things it was designed at a period where the sky was the limit and it got a little bit out of control, and certainly beyond the means of a company that was about to start losing lots of money."

Read the full interview with David Burden later this week on silicon.com.