Delivering IT Quality

The United States Postal Service walks a tightrope between IT budgets and service quality without missing a step

Clerks and carriers are the public face of the United States Postal Service (USPS), delivering mail to some 146 million U.S. businesses and households daily. But behind the scenes, a first-class IT organization provides the technology tools USPS needs to compete--and leading that team you'll find Robert Otto, CIO, CTO, and vice president.

Otto began as a clerk in the Federal government in 1969 and joined USPS in 1980, tasked with responsibility for nationwide computer security. The scope of his responsibilities grew, and he eventually assumed charge of USPS financial systems and spearheaded USPS's Y2K efforts. In 2001, he became CIO, and in 2003 was named CTO in addition to his CIO role. "I inherited an IT department that was a distributed organization," Otto recalls. "There was no single direction. One of the requirements I made of my CEO was that, if I take over this role, I'm going to be responsible for it all. And we centralized everything at that point."

Centralize, standardize, simplify

USPS found that centralizing IT services could be a big money-saver: consolidation reduced support costs by 30 to 60 percent. "We find that centralizing any function takes out costs and work hours," Otto says.

But centralization was just the beginning. Aggressive simplification was the next stop on the route. Twenty-five thousand servers in 2000 have shrunk to fewer than 900 today; the 1,500 software products used in 2000 have been reduced to about 340 (some of which are legacy applications that can't be easily consolidated or eliminated). The six-foot-long shelf that held USPS's IT procedures in 2000 has been whittled down to a one and a half inch thick handbook.

USPS also established IT standards and used budgets to expedite the adoption of those standards. Take databases: in 2000 at least six different products were deployed, and Otto wanted to move the company to a single platform (in this case, Oracle). "So we offered it free to everyone," Otto says, and he promised to support it into the future. "The staff had the choice to use other products, but they would have to pay for them. We talked about why we thought this was a good standard for our company, but the enticement of it being free and always supported was overwhelming to them."

The IT organization's structure was transformed and simplified as well. The CTO's office now has just six direct reports, each overseeing a line of business (such as systems development, computing, and information security). Half of these direct reports are USPS veterans, and half are experts recruited from outside. The 25 IT managers who report to them run specific services.

The result is a taut 2,500-person IT organization-1,800 employees and 700 contractors-supporting 335,000 postal IT users. "We're one of the smallest IT workforces in the Federal government in relation to the number of users we support," Otto reports.

The USPS's modular, line-of-business structure is not just functional; it's also strategic. It gives USPS the option of shifting workloads to the private sector when necessary. "Because we're organized this way, I can take appropriate portions of the business and outsource them," Otto says. "Sometimes you're good at certain things, and other times it's not worth using your intellectual capital."

Tighter budgets, more deliverables

IT reinvention at USPS coincided with budget tightening. In the last seven years, budgets for each of the 31 managers has been trimmed by between two and five percent each year. "I tell them they have to be more efficient that year, that they need to find ways to do it," he says. "And they've stepped up and done it." In some cases, departments have reduced their costs by one-half since 2001.

The savings have come from sources big and small. For example, USPS had 119 different IT help desks in 2000; now it has two, a redundancy that exists only for disaster preparedness. Standardized desktop configurations, tightened rules for user-installed software (it's now flat-out forbidden), and remote workstation management together saved between $20 and $30 million per year while reducing downtime. Consolidating servers has eliminated 1,200 contract positions from the budget, saving $250 million since 2000.

Cost reductions have also come from tough negotiation of software licenses. Vendors sometimes think the size of USPS [see Box] means the organization pays top dollar for software, but the opposite is true. Otto has a dedicated team handling software licenses for USPS and charges them with renegotiating licenses with a dozen vendors per year. He gives them tough objectives, typically to save between $10 and $15 million per year. It's not unusual for USPS to push the envelope and get 85 percent discounts.