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As “Mr Bates” stirs police over Horizon, Post Office burns £31 million on failed cloud migration

Cloud migration "impairment" writes off the equivalent to 81% of the Post Office's annual restructuring costs.

The Post Office – now under criminal investigation over “potential fraud offences” committed during the Horizon IT scandal – lost £31 million in 2023 after it had to “discontinue part of a transformational programme to move existing software onto cloud infrastructure” The Stack can reveal. 

The sum suggests that 81% of its restructuring costs for 2023 were wasted.

(An annual report published December 20th puts these at £38 million: “The majority of spend being in relation to ongoing programmes to transform IT infrastructure, including the Horizon replacement programme.”)

The previously unreported “impairment” was revealed in the same annual report and comes as the Post Office faces a fresh wave of attention over one of the worst miscarriages of justice in British history, courtesy of “Mr Bates”; ITV’s new four-part TV drama on the Horizon IT scandal.

Between 1999 and 2015, more than 700 post office branch managers were prosecuted after buggy* Horizon accounting software delivered by first ICL and then Fujitsu flagged false accounting shortfalls. Hundreds were jailed or left bankrupted. At least four of those affected killed themselves.

The Post Office, to-date, has paid out £85.98 million in compensation. No Post Office nor Fujitsu employee has been prosecuted over the case.

Notably, as recently as 2021, Post Office IT staff were blogging about having to resolve system errors and having produced 981 test scripts to help understand user journeys and "make improvements based on actual day to day issues Postmasters face when using Horizon." Since The Stack flagged this in its earlier reporting, the Post Office appears to have deleted an entire series of blogs by IT director Simon Oldnall, including the one cited, which had been published under a "supporting you focus" headline.**

Clouds, over the Horizon

Fujitsu DCs, Belfast: Not the destination of choice.

The Post Office has repeatedly failed to exit the Fujitsu software.

In 2021 it awarded Fujitsu a fresh £42.5 million Horizon extension, describing it as a “highly complex, legacy platform, written in outdated versions of software languages” and having an “inflexible monolithic architecture that makes technology change difficult”; one in a growing series of expensive contract extensions won by the controversial provider. 

But Post Office staff blogged enthusiastically in 2022 about plans to shift to AWS and that 2021 contract included a series of amendments to its services agreement that anticipated a shift of the software to AWS by 2023. As per the newly revealed, £31 million “impairment”, this has not happened.

“Fundamental technical challenges” that the Post Office “could not economically and technically overcome” forced a fresh £16 million extension it said in an April 2023 contract notice posted publicly.

In November 2023 it posted another £36 million contract extension with Fujitsu, saying that Horizon “is a highly complex platform, written in legacy versions of software languages and which incorporates five "systems" in one i.e. financial services, banking, government services, mails and retail… the inflexible nature of the construction of the architecture of "Horizon" itself makes technology change challenging.

The new CapEx sum was for “an appropriate refresh and improvement program” it said in a contract notice on November 21, after it took “the decision to pivot back to the Fujitsu provided Horizon Data Centres until the successful transfer of services out of Horizon and into its replacement NBIT ("New Branch IT"). As a result of this retention of Data Centre capabilities it is necessary to carry out Data Centre Fortification works to provide stability, avoid obsolescence and ensure business continuity.”

Modernising complex legacy systems is a fraught business, but writing off £31 million in a year for getting it wrong, whilst continually funnelling tens of millions to the software provider that helped co-deliver a colossal miscarriage of justice is, arguably, a poor look for all concerned.

nb: Swift work on complex modernisations is indeed achievable, with the right partners. Take, for example, the US Army, which in 2021 migrated its Logistics Modernization Program or “LMP” from on-premises servers to a hyperscaler environment in a 24-hour operation.  The LMP, used by over 23,000 people across 50 global locations, underpins the Army's supply chain – one of the largest in the world – hosting data on equipment readiness, asset management, arms depots, and more. The system manages seven million transactions daily and is integrated with more than 80 DOD systems. Certainly, that migration took planning with military precision, but… 24 hours, folks. Perhaps the Post Office could put in a call to Dr Raj Iyer and get some tips on how that was achieved. 

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*The Court of Appeal’s Lord Justice Holroyde, Mr Justice Picken and Mrs Justice Farbey DBE found in an April 2021 judgement that “throughout the relevant period there were significant problems with Horizon…POL [Post Office Limited] knew there were serious issues about the reliability of Horizon. It had a clear duty to investigate all reasonable lines of enquiry, to consider disclosure and to make disclosure to the appellants of anything which might reasonably be considered to undermine its case. Yet it does not appear that POL adequately considered or made relevant disclosure of problems with or concerns about Horizon in any of the cases at any point during that period. On the contrary, it consistently asserted that Horizon was robust and reliable…”

**Sadly the Wayback Machine has not archived the blog in question, but does confirm that it did, indeed, once exist!