Fujitsu had Post Office ‘over a barrel’, inquiry told

The Post Office board was desperate to end its IT contract with Fujitsu as early as 2013, but the supplier had the Post Office “over a barrel”, according to a former non-executive board member.

During the latest Post Office scandal inquiry hearing, where former Post Office chair Alice Perkins faced questions, a document from July 2013 revealed the Post Office has long hoped to replace Fujitsu and its controversial Horizon system.

Perkins was copied in on an email from the Post Office’s non-executive director Tim Franklin to company secretary Alwen Lyons regarding the Post Office’s difficulty transitioning to a new supplier and a proposed extension to Fujitsu’s contract.

Perkins told the inquiry that the Post Office had to extend the relationship with Fujitsu to provide “a bridge to the new arrangements”.

In the email, Franklin wrote that he was in agreement with the proposals to extend a contract with Fujitsu because he didn’t think the Post Office had any choice. “Horizon is a complex Fujitsu proprietary system and any move, other than renewal, would present unacceptable risk,” he wrote.

He said he agreed with the then CIO Lesley Sewell’s plan to mitigate its dependency on Fujitsu in the future, adding: “I do feel they have us over a barrel and they know it. If they want a future role in our IT estate they should want to be less exploitative of us now.”

The Horizon system used in branches caused unexplained accounting shortfalls, which subpostmasters were blamed for. Many were prosecuted and forced to pay the losses back, with businesses and lives ruined. It is regarded as the widest miscarriage of justice in UK history.

During the public inquiry hearing, Perkins confirmed that Franklin’s view was one shared by the Post Office board, saying: “All the different non-executive directors that came on board had the same view. We all wanted to move away from Fujitsu altogether.”

Earlier in her evidence, it emerged that Perkins was concerned about the Post Office’s relationship with Horizon supplier Fujitsu. She wrote in the 2011 notes from a meeting with an auditor that the Post Office was being “too nice” in relation to Fujitsu and that the Post Office was being “naïve”.

She believed that the Post Office and Fujitsu relationship was unequal because of the number and experience of people and the fact that they have often hollowed out their own capabilities in companies buying IT services. 

“I knew that the procurement of IT systems in the Post Office up until that point had been handled by the Royal Mail Group and the Post Office was going to have to build its own capability to stand on its own feet,” she told the inquiry.

Government-owned Post Office is highly dependent on Fujitsu, which it has used since the late 1990s. Despite the supplier’s role in the scandal, the Post Office is struggling to move from its Horizon platform.

In 2015, the Post Office tried to replace Fujitsu with IBM, but it went back to Fujitsu when complexity grew, cancelling a contract with IBM after spending millions of pounds. During a previous inquiry hearing, details were revealed that IBM had started work on the £100m project to replace Horizon, but Post Office directors went back to Fujitsu for help when the complexities of the project became apparent.

In April 2021, the Post Office announced that it was preparing for the end of the Horizon agreement with Fujitsu, adding an extra year to support its transition to a new system. In May last year, it set 2025 as the target date for the completion of the project.

By December 2023, increasing costs and a lengthening timeline meant the government had to hand the Post Office an extra £103m towards its project to replace the controversial Horizon software used by thousands of subpostmasters. Then last month Computer Weekly revealed problems with the latest project to replace its controversial Horizon IT system, with Fujitsu set to receive up to £180m more in taxpayers’ cash to support the system for another five years.

One of the key differences today is that Fujitsu does not want to renew the controversial contract and only wants to commit a year at a time while the Post Office finds an alternative, according to a source.

The Post Office scandal was first exposed by Computer Weekly in 2009, revealing the stories of seven subpostmasters and the problems they suffered due to the accounting software (see timeline of Computer Weekly articles about the scandal below).

Also read: What you need to know about the Horizon scandal. 

Also watch: ITV’s documentary – Mr Bates vs The Post Office: The real story.