Australia Post’s Horizon System Faces System Failures

Australia Post has rolled out a new point-of-sale system in post offices called Horizon. I have received many complaints from Australia Post licensees about system failures, including outages and missing funds. Payments that previously went directly into the licensees’ accounts are now being deposited into Australia Post’s account, forcing licensees to wait several days to access their money.  

I questioned Group Chief Executive Paul Graham about the rollout. His responses were entirely at odds with the information I have received from numerous post office licensees. While Mr. Graham claimed there had only been one outage, I was informed of multiple outages, including one that occurred during the Estimates session when Mr Graham was present.  

Both the licensees and Mr Graham have offered to hold meetings and conduct inspections to clarify the situation. I look forward to uncovering where the truth lies.

Transcript | Part 1

Senator ROBERTS: Thank you, Mr Graham, and your colleagues for being here. I am advised by multiple Australia Post licensees that the new Australia Post point-of-sale system, Post+, is in most aspects of its operation not fit for purpose, yet licensees are required to operate using this system. My questions test that contention, which I’m sure you will disagree with. On Monday, 27 May, the system went down for several hours. Australia Post offices were unable to process transactions. According to the licensed post office network, this cost their outlets $200,000 in lost transactions and wasted staff time over several days due to the errors generated in the breakdown. Who pays that loss—you or the licensee?

Mr Graham: Australia Post pays that loss. We repaid that. This is a brand new point-of-sale system that has been rolled out to almost 4,000 post offices. It is a state-of-the-art system replacing what was a 30-year-old system that was well beyond its use-by date. It is fair to say that when you implement any brand new system to the scale that we have implemented it, there will be teething problems. However, I challenge and ascertain that the vast majority of post office licensees are very pleased with the system. I have been around our post offices a lot, particularly in recent months. It does what it says on the box. It has delivered and will continue to deliver even greater efficiency than the old system. That one outage was an unfortunate event. We were still able to transact, but not obviously online. Any cost to the licensee for that was fully compensated by Australia Post.

Senator ROBERTS: Thank you. In the outage, some transactions that were in the process of completing when the system went down failed to complete. In some cases, money went missing. Your helpdesk instructed post office licensees to put in the amounts that went missing from their own pocket to ensure your system balanced with the promise that you would investigate and pay them back if it were sorted out. How much money went missing in the outage? How much money was put in by licensees?

Mr Graham: Well, those statements are not correct, Senator. We did not ask the post offices to put the money back in to balance it out. We provided a report for all those transactions that were not processed through. We did a reconciliation and audit trail working with the individual licensees. We balanced the books with them and had them put through those transactions when the system was up and running.

Senator ROBERTS: Judging by your reaction—we’ve heard this from licensees—you don’t think it’s fair for licensees to put their own money in to make your system balance when the fault was not with the licensees but with the system. So you would disagree that it is happening?

Mr Graham: Well, they didn’t put their money in. They weren’t asked to put in their money.

Senator ROBERTS: So you would disagree?

Mr Graham: Yes. We strongly disagree, yes.

Senator ROBERTS: What is the longest outage Post+ has experienced? I have received reports that Post+ can go down for days and that, while it is down, the post office can’t trade.

Mr Graham: No. That is completely false, Senator. I think we are talking minutes. We had that one outage, as you said, for a couple of hours in the very early days when it was launched. We are talking in minutes. I can’t
remember when we last had a P1 on that system. As I say, it is built with state-of-the-art architecture. It sits in the cloud. It is fully backed up every day. The reconciliation process that happens at the end of the day, which used to be a very manual process for the licensees, is now fully automated. We’ve launched a new suite of reports that show them every transaction. It enables them to get detailed analysis of the trading during the day. This is a modern system. Those statements are totally incorrect. I strongly object to those statements. I would also say that it is a very small minority of licensees who have made the noise around this system and have done so, in my view, not because of the fact that the system is not performing—it is—but for other mischief.

Senator ROBERTS: Okay. Let’s continue. Licensees report that the system does not provide an adequate reporting function, with the outcome that the licensees don’t have the data they need to run their daily business.

Mr Graham: Again, Senator, as I said, we have had a reporting system from day 1. We have recently launched the latest update of that. That report, and indeed the review of the system, is done in conjunction with licensees. We have a licensee steering committee that meets on a regular basis to look at enhancements and improvements to the system. We have a whole team of people who are working on these systems and improvements on a day-to-day basis. This is a very collaborative effort. I argue that if you were to go around and speak to licensees, you would get a very positive reaction to the system.

Senator ROBERTS: Maybe that is what I should do. Licensees are reporting Post+ runs slower than the system it replaced, meaning licensees are having to put on extra staff at their own expense. How is that an improvement? LPOs are small businesses. They can’t afford to bankroll your system development. That is the way they see it.

Mr Graham: Well, again, I would say that is a very small minority of licensees. Obviously when you are replacing a system that is 30 years old that people basically know how to operate in their sleep and you introduce a brand new system, it is like going from a rotary phone to a smartphone; it takes time for people to get used to the new navigation of that system. That is something that we highlighted to every post office before the implementation. The actual system itself, in terms of processing transactions, providing more meaningful insights and data, is significantly superior to the 30-year-old COBOL coded system that was in place.

Senator ROBERTS: You have a helpdesk which logs every disputed transaction from a post office. It must be a simple matter to get out data on those reports?

Mr Graham: It is, Senator. We have released, as I say, an updated and enhanced data report a couple of weeks ago that gives insights, visibility and transparency to every transaction that takes place in that system.

Senator ROBERTS: On notice, could you please provide the number of transactions that have needed to be sorted by the helpdesk, the total value of those transactions, how many are currently in the process of being resolved and, finally, how many were resolved in a manner that required the post office to make good the transaction?

Mr Graham: I’m happy to do so, Senator. I know from looking into that issue that it is a very small amount. We will provide that detail.

Senator ROBERTS: Thank you. The next issue is a missing transaction. Licensees have suspected that money is going missing in the normal operation of the system. Some have started running transaction reports hourly. This is catching your system out by showing the licensee putting the money in for the customer and the money then just disappearing into the ether—gone. At this point, your help desk tells them to put the money in again out of their own pocket. Licensees are reporting thousands of dollars have to be made up per outlet. Are you aware of the problem of missing money?

Mr Graham: That is totally incorrect, Senator. I dispute those claims strongly. The system provides clear transparency on everything that is transacted. There is a complete electronic audit trail, which didn’t occur in the old system. We know every transaction that is reported. What we do find from time to time is that there are operator errors. For example, someone processes a cheque but they put it in as cash. We have to go into the system and talk to the licensee and reverse that transaction so that we can actually record the right dollars going into the right account. This is a modern, state-of-the-art point-of-sale system. As I say, it is replacing a 30-year-old system that was not cybersafe and that had lots of challenges and issues. I would say very strongly that the value that the system will create and is creating will be of significant benefit to the licensees going forward.

Senator ROBERTS: Previously, sales of merchandise through the Australia Post Shop went into the licensee’s bank account on the day of the sale. Under Post+, the money goes into your bank account and is sent back to licensees in 48 hours. It is longer on weekends. How is adding that extra step and introducing payment delays to LPOs an improvement?

Mr Graham: Senator, I’m not aware of that issue, but I’m happy to take it on board. I wouldn’t see any reason why we would want to delay payment. We understand the importance of cash flow to the licensees. We have done a number of things to improve cash flow to the licensees. In terms of merchandise they buy, we give them credit for that merchandise straightaway even when it has not been delivered by us. We don’t take the money out until they physically do it. I am happy to take that query on notice. It doesn’t sound correct to me.

Senator ROBERTS: If you could, please.

Mr Graham: Yes, certainly.

Senator ROBERTS: This is a question of whether or not you’re abusing power over licensees by requiring the LPOs to cover the losses of a system you are requiring LPOs to adopt. What incentive is there for Australia Post to get this right if you don’t wear the losses from this going wrong?

Mr Graham: Well, first of all, Senator, again, I would restate that we do not expect the licensee to suffer any loss for what may or may not be a system failure. That is not an expectation of Australia Post. If the system is down and we have caused any financial harm to the licensee, we will refund whatever harm that is. We are very clear—indeed, it would be a breach of the franchise code if we were to do that—so that does not occur. If the licensees can show us that they have suffered a financial situation because of the system or an error in the system, we will happily make good on that loss.

Senator ROBERTS: I’m sure they’re watching.

Mr Graham: I’m sure they are. I am happy to talk to them.

Senator ROBERTS: What is the budget for Post+ implementation?

Mr Graham: The total budget for Post+ was about $270 million.

Senator ROBERTS: That is $270 million?

Mr Graham: Yes. It is a very large investment we made. Australia Post made that investment to improve the efficiency, improve the security and improve the features and benefits that were available to our customers as well. It has many benefits to our customers in terms of electronic receipts and SMSs et cetera. It does a number of other things that benefit the end customer.

Senator ROBERTS: Where did the money for Post+ come from?

Mr Graham: It came out of our normal capital investment cycle.

Senator ROBERTS: Is there software code commonality between the UK system known as Horizon and Post+?

Mr Graham: Absolutely not, Senator. The Horizon system was built 16 years ago. This is a brand-new state-of-the-system built in the cloud and built with global best practice around point-of-sale systems.

CHAIR: I will need to rotate the call, Senator Roberts. Make this your last question.

Senator ROBERTS: I need to come back afterwards.

CHAIR: Sure.

Senator ROBERTS: Is it your testimony, then, just to make sure I’m clear, that if a review of the software was done, there would be no code commonality between your system and Horizon?
Mr Graham: I am not a technical expert, Senator. Given the Horizon system was built in a completely different software language 14 or 15 years ago, I would be very surprised if there were any coding similar to that and done by a completely different company.

Senator ROBERTS: Thank you.

Transcript | Part 2

Senator ROBERTS: I have a brief few questions. Do you, Mr Graham, or Australia Post have access to the software code for Post+ to review? Did Australia Post review the code before implementation?

Mr Graham: Yes. We have a comprehensive review process. We have also had that process externally validated. We have ownership of the source code of that software platform. It is a core, obviously, operating platform for our retail business. Therefore, it is really critical that it does what it says it does on the box and that we maintain and continue to invest in updating that software to reflect improvements we can make both in its operating system in relation to the enhancements that can be provided to customers when they transact with us over the counter and being able to make it more efficient for our team members and the licensed post offices that use it. I will give you an example. One of its features is an online training program. If you are in a transaction and you are stuck, you can go to the screen. It will show you and explain how that transaction could be managed. None of that was available in the old system. The old system was literally a rotary telephone equivalent to what is now a smartphone.

Senator ROBERTS: So you manage it yourself internally—your Australia Post people?

Mr Graham: No. We work with the software provider who worked with us to build the software. They work with us. We have our own team of software engineers. They have their team. We work with them to implement the enhancements, do the normal backups and all the other things you would do with a large-scale technology system.

Senator ROBERTS: So the company installing the point-of-sale system is Fujitsu. Is that correct?

Mr Graham: No. That’s not correct, Senator. They are installing the hardware—the screens and the keyboards. The company that is involved is a company called OVC, which is an American company.

Senator ROBERTS: What is the name of the company?

Mr Graham: It is OVC. They specialise in point-of-sale systems. They built the software in conjunction with Australia Post. The role that Fujitsu plays is a role that they’ve played with us through a contract. They have responsibility for servicing our screens, laptops, keyboards and all the normal—

Senator ROBERTS: Hardware only?

Mr Graham: Hardware only—correct.

Senator ROBERTS: Fujitsu is the company that provided the UK Horizon system. Correct?

Mr Graham: Fourteen or 15 years ago, that’s correct, Senator. Correct. They’ve had no role in the software provision of Post+.

Senator ROBERTS: They cannot go in and change the data in a system such as account balances, as they testified they could in the UK?

Mr Graham: Correct. It is a closed system. They have no access to the software. They have no role in the software. It’s completely closed. The only people who have access to that are our engineers. Again, we have a clear technology audit trail for when people access the system as well as OVC.

Senator ROBERTS: Thank you. This is the last question in this thread. I have a few more after that on another topic.

CHAIR: You are the only one left, Senator Roberts. You can keep going.

Senator ROBERTS: Money is going missing, according to the LPOs. Where is that money going? It has to be going into someone’s bank account.

Mr Graham: Senator, first of all, again, I would strongly challenge that claim. Money is not going missing. We have a full electronic audit trail of every single transaction that takes place. We provide that report both to the licensees and to our own internal team. Again, I would highlight that there is a very small noisy contingent of one licensee group that is not representative of the vast majority of licensees. I have been out there. I have met with them. I have been in town halls. I have been around the country, as has our retail team. The vast majority of people—again, I am happy to accompany you to visit our licensees—are very positive about the system, having replaced an old creaky system that was 30 years out of date.

Senator ROBERTS: So is this small disgruntled group scattered across the country, or are they in a locality?

Mr Graham: I couldn’t give you that. I know it is a very small group. As I said earlier, we believe they are pushing a broader agenda, not just around Post+. Therefore, they are creating noise when we believe there is no noise. We take very seriously to ensure that the system does what it says it does. We have spent $270 million. It had better do what it does. This is going to be around for a long time. We have made sure that we will do an upgrade of this system every year. That is unlike the old system, which was well out of date and had not been upgraded and was a cyber risk. This system, again, is built in the cloud with modern architecture and modern infrastructure. We are committing tens of millions of dollars to continually make sure it is upgraded and reflects the needs of both the users, which includes the corporate post offices as well as the licensees, and our customers.

Senator ROBERTS: So you don’t know how big this small group is that you’re talking about?

Mr Graham: No. We believe it is a small minority based on surveys we’ve done in relation to Post+, activity when we have been out talking to licensee associations and, indeed, the day-to-day backwards and forwards we have with all licensees.

Senator ROBERTS: So they are not in any one of the two licensee groups?

Mr Graham: They may be, Senator, in one group.

Senator ROBERTS: What are their main issues? What are they disgruntled about?

Mr Graham: Well, I think it has been a longstanding issue with Australia Post over a long time. As I have said, I cannot fix the problems of the past. They are in the past. My job is to fix today and tomorrow and to listen and to respond to any genuine concerns they have. We have done that. We are not perfect. Occasionally we do make mistakes. We open up and put our hand up about those mistakes. They have, I guess, motives around the role that Australia Post should play in banking, for example. We believe that our Bank@Post service is the right service for us. We don’t believe we should go beyond that. As I say, there are historic gripes that go back some time. We have worked very hard to ensure that we resolve any outstanding issues. I say again, and with strong conviction, that the vast majority of our licensees have a very positive attitude to Post+ and have a very positive attitude to the investments we are making. Both associations stood behind our licensee buyback program in metropolitan areas. They clearly recognised the significant overlap and the financial strain that a lot of these licensees in metropolitan areas were undergoing.

Senator ROBERTS: I will move to the next topic. Can I pay my Telstra mobile telephone bill at Australia Post?

Mr Graham: You can. You will pay a fee for that, which Telstra has imposed on you as a Telstra customer.

Senator ROBERTS: Who gets the fee?

Mr Graham: The fee gets split, I believe. I will take it on notice. I believe it gets split between the licensee, who gets money for the transaction, and Telstra.

Senator ROBERTS: Recently, Telstra updated their terms of service for some mobile phone customers. It no longer allows payments to be made at post offices. Have you just lost a customer?

Mr Graham: Well, this is not uncommon, Senator. As I said, our over-the-counter transactions outside Bank@Post have gone down 28 per cent over recent years. More and more companies are encouraging their customers to pay bills digitally or electronically or online. We have seen a significant decline in what we call our Billpay services for paying gas bills and telephone bills et cetera because customers are being encouraged to pay electronically or, indeed, are being penalised if they pay over the counter.

Senator ROBERTS: The banks like doing that to us anyway.

Mr Graham: Well, that’s an opinion one could express, Senator, yes.

Senator ROBERTS: I’m not asking for your opinion. Has a long-term solution been found for the cost of carrying cash, such as with Armaguard?

Mr Graham: It’s a very good question, Senator. I don’t believe a long-term solution has been found. Again, this is where Australia Post plays an important role. Whilst we’ve had the banks and, indeed, the RBA, confirm that cash use in the economy is declining, we cater to a demographic and a profile of society where cash is the main form of transacting. It is the elderly. It is people who don’t have English as a first language. It is areas where there is a high immigrant intake or a distrust of financial institutions. We are on the other side. We are seeing growth in that area of transactions. My observation is that these are customers who may not be that attractive to the bank because they don’t have mortgages or they don’t have business banking accounting. We are the service provider that is providing that service and will continue to provide that service. As I said in my opening statement, whilst we remain very happy to do that, we need to do that at a small margin so we can continue to invest in that service. That service is on track to make a loss for Australia Post.

Senator ROBERTS: Didn’t you say maybe 12 months ago when I saw you that Australia Post has the largest retail network in the country?

Mr Graham: We have, in terms of our footprint, over 4,181 branches, correct.

Senator ROBERTS: I will come back to that in a minute. Do you have plans to change any post offices from manned to unmanned using kiosks?

Mr Graham: We have a whole range of different formats, including unmanned kiosks for self-service terminals. They are both our parcel lockers as well as where you can go to buy a stamp, envelope or satchel. That’s part of the broad range of services we provide. As I said, when we look at a suburb or a neighbourhood, we look at what services they are demanding. For example, a group in a Sydney area recently was looking for postal services. We had a town hall. We met with the community. It’s a community where a lot of parents both work. They wanted the convenience of picking up their parcels out of hours, so we installed three locker banks. That more than satisfied that local community along with some self-service terminals. In other cases—

Senator ROBERTS: Excuse me. That is to enhance a manned post office rather than to replace a manned post office?

Mr Graham: It’s to enhance availability and convenience. In other places, such as growth corridors that we see in Western Melbourne or, indeed, Newcastle and west of Newcastle, we will work with community to put in a new post office or a new range of services. We continue to see customers demand convenience with their parcels. They want to be able to pick them up 24/7 and access them through the postal pap. It’s not a simple one-size-fits-all. We look to try to adapt a range of offerings to meet community needs.

Senator ROBERTS: Thank you. This is my last question and the last topic. Some months ago, you were very positive about the possibility of an Australian postal bank. What are your thoughts now on the possibilities of that? Are you getting any support from the government?

Mr Graham: Senator, I’ve always made it clear that is a matter for government. We are very happy to continue providing our Bank@Post over-the-counter transactional services. We would be even happier if we make a small margin and our licensees could get more money for that. Anything beyond that is a matter for government.

Senator ROBERTS: Thank you.