Post Office paid IBM millions when it ended proposed contract to replace Horizon

Fujitsu used its influence at the Post Office to plant seeds of doubt within management over a proposed contract to replace the IT service provider’s software with IBM technology, according to a source working on Post Office IT at the time.

The source, who wished to remain anonymous, revealed more details of the Post Office’s failed attempt to ditch Fujitsu and move to a multi-supplier contract, which would have seen IBM replace its controversial Horizon software.

Work on the multi-supplier contract, which included IBM, began in 2013, but it was cancelled in 2015. The source said Fujitsu lobbied the Post Office against the project, which would have completely removed the supplier, and that IBM was paid millions for work already carried out.

The recent announcement that Fujitsu will get another year and £16.5m out of its IT services contract with the Post Office has caused anger among the victims of a huge scandal caused by the supplier’s software. But this is not its first stay of execution.

While campaigners call for Fujitsu to contribute to compensating those who suffered greatly as a result of its Horizon software’s errors, Fujitsu keeps being rewarded with more contracts.

Horizon was introduced in 1999 to replace mainly manual accounting practices. Originally from ICL, which was acquired by Fujitsu in 2002, it was rolled out across the Post Office branch network. But its introduction led to a sudden increase in subpostmasters reporting unexplained shortfalls in their accounts, for which they were blamed. The Post Office told each of them that nobody else was experiencing problems and covered up the computer errors.

This led to what is known as the Post Office Horizon scandal, which saw many lives destroyed and is regarded as one of the biggest miscarriages of justice in British history (see below timeline of Computer Weekly articles about the scandal since 2009).

The Post Office wanted to cut the rope on the contract as early as 2013, when the plans to replace Fujitsu with IBM and other suppliers were drawn up, only to be abandoned.

Discussing the contract during a recent hearing in the Post Office Horizon scandal public inquiry, Shaun Turner, a former executive at the Post Office National Business Support Centre, which supported subpostmasters using the controversial accounting system, was asked why the Post Office had planned to replace Horizon.

“I think [Horizon was] just old technology, and it was time to move on to something that was quicker to develop, easier to develop, so that new products could be brought on more easily,” he said.

During the inquiry hearing, Turner said the project was cancelled over cost and project delivery concerns. “I did hear suggestions that there were concerns over cost and whether it would be deliverable to the timescales we needed it to be,” he said.

“I think this was not just a simple changeover, like Horizon Online, where we were introducing new software; it was hardware, datacentre and the front office, as well, so it was a considerable challenge.”

The Computer Weekly source worked on Post Office IT at the time. He revealed further details of the failed attempt by the Post Office to replace Fujitsu with a service integration and management (SIAM) contract, where a supplier acts on behalf of a business to manage the services received from multiple IT delivery towers.

Multiple suppliers – including IBM, Computacenter, Atos, Verizon and Accenture – were part of the proposed SIAM contract. Between them, the suppliers would have covered all the service towers, including Horizon’s replacement in the front office, networking and end user computing, with Atos providing the integration. But this was abandoned, and IBM was paid millions of pounds after the cancellation for work it had already done on the contract, said the source.

He said a contract had been signed with IBM and the design phase had started. “Fujitsu would have been completely removed from the supply chain and were obviously not happy. It was said they were lobbying [then Post Office CEO] Paula Vennells on a weekly basis to sow doubt and persuade her that POL [Post Office Limited] were making a huge mistake.”

He said the decision was made to “pursue a new solution with Fujitsu”.

Computer Weekly asked the Post Office whether IBM had been paid millions following the deal’s cancellation and if Fujitsu had lobbied Post Office management against the deal. A Post Office spokesperson said: “Historical matters relating to IT suppliers and the Post Office are for the inquiry to consider should they so wish to.”

This is not the first allegation of undue pressure from Fujitsu in relation to the Horizon contract. During a public hearing in November 2022, the Horizon scandal inquiry was told that IT supplier Fujitsu put pressure on the UK government to sign off the original contract to roll out Horizon.

In 1998, following a meeting between the British ambassador to Japan and Fujitsu executives, the British embassy in Tokyo wrote to the UK government warning it of serious economic repercussions, including UK job losses and reductions in trade, if Fujitsu/ICL’s software contract with the Post Office was cancelled.

Since the failure to replace Fujitsu from 2013 to 2016, the Japanese supplier has managed to hang on for at least an extra decade.

In April 2021, the Post Office announced it was extending the Fujitsu contract as part of a plan to bring the work in-house, taking the contract beyond March this year. But as revealed by Computer Weekly, the contract will now run until at least March 2024 after technical challenges meant the Post Office’s planned migration to the cloud could not be completed in time.

There is anger among the victims of the Horizon scandal over the government continuing to reward Fujitsu with lucrative IT contracts.

Conservative peer James Arbuthnot, who has campaigned for the subpostmasters for over a decade, said Fujitsu should have been taken off the government procurement list.

“The Horizon system caused the subpostmasters of this country to be shamefully accused of things that they had not done,” he said. “It has had dreadful consequences for the subpostmasters and has cost the government hundreds of millions of pounds. Fujitsu knew perfectly well what it was doing, but has said not a single word of apology.

“I do understand that there may well be a problem in changing IT that is so embedded in the structure of the Post Office. That is surely a cautionary tale for all IT procurement.”