Back to Reality — Postal Service Reboots E-Biz

There's a palpable sense that things must change at the 226-year-old U.S.
Postal Service. At the entrance to USPS headquarters in Washington a TV monitor
runs a video that shows executives describing the agency's latest moves to cut
costs, in part by rolling out new technology. Despite billions invested in automation and information technology since the
early 1970s, Postal Service productivity grew by only 11 percent over the past
three decades, according to the General Accounting Office (GAO). Now, the
800,000-employee Postal Service faces a fiscal 2001 deficit of $2.4 billion.
Factors in the projected shortfall include the slow economy, rising fuel costs
and electronic alternatives to paper mail. Still, agency leaders maintain that technology is one of the keys to making the
Postal Service more competitive, and they're moving ahead with a series of Web
technology projects. One of the most significant is a Web front end for PostalOne, a system that
seeks to eliminate the administrative paperwork for bulk mail, which accounts
for 70 percent of total mail volume and 50 percent of the agency's $65 billion
in revenue. More than 770,000 businesses use the Postal Service to send bulk
mail. If PostalOne and other Web projects are to fly, the Postal Service must
overcome not only its financial woes but also its failure to produce meaningful
e-business results to date. For fiscal 2001 through April 20-roughly half its fiscal year-the Postal
Service had generated a paltry $2 million in revenue on its new initiatives,
including e-commerce, advertising and retailing, the GAO reported earlier this
year. The Postal Service's original projections for e-commerce sales in fiscal
2001 were a vastly more optimistic $104 million. "A lot of the e-commerce initiatives are brand-new, so the chance of them
making any significant revenue was minuscule,'' says Bernie Ungar, a GAO
director who has testified before Congress on Postal Service e-commerce
initiatives. "Officials at the Postal Service even admitted they were
overzealous with their initial projections." Postal officials note that the agency's evolving strategy reflects the
expectations for Internet technology and e-business, which have been reset in
the past year. "One of the fallacies the whole economy fell into a year or two ago was that
somehow the Internet was changing the economy and it was a new business model,"
says Stephen Kearney, senior vice president of corporate and business
development and head of the agency's e-commerce projects. "Now that things have
come down to earth, everybody realizes that the Internet is more of a business
tool." That's why the Postal Service launched PostalOne for its bulk mail business
customers. PostalOne is one of the main customer-facing portions of the Postal
Service's plan to build the Information Platform. The Information Platform
comprises the core IT systems that receive, process, transport and deliver the
mail. Today, there's a tremendous amount of paperwork associated with verifying a
mailing to receive a discounted postage rate and creating related
documentation. PostalOne calls for automating this paperwork and offering
business customers online payment tools. Business customers will install a
Java-based USPS application that will reside on their server and manage the
online paperwork, validate and encrypt files, and handle communications with
PostalOne servers. Phase 1, now under way, automates most of the paperwork. Phase 2, which has yet
to receive funding approval from the agency's board of governors, will handle
online payments and integration with the Information Platform. As part of the Information Platform, plans are also in the works to build a Web
interface to the agency's Processing Operations Information System (POIS),
which will collect, track and ultimately deliver performance data on the
agency's more than 350 processing and distribution facilities. These efforts follow several e-commerce projects launched in the past year: -NetPost Mailing Online, a service that lets small businesses transmit
documents, correspondence, newsletters and other first-class, standard and
nonprofit mail over the Web to the Postal Service. Electronic files are transmitted to printing contractors, which print the
documents, insert them into addressed envelopes, sort the mail pieces and then
add postage. The finished pieces are taken to a local post office for
processing and delivery. Customers get the automated first-class rate, which is a few cents less per
piece than the 34-cent first-class rate. USPS charges 1.5 times its cost for
the printing and one-half cent per impression. – Post Electronic Courier Service, or PosteCS, a secure messaging product that
lets mailers send documents by e-mail or over the Web to recipients via a
Secure Sockets Layer session. PosteCS has an electronic postmark-an electronic
time and date stamp developed by USPS-embedded for proof of delivery. PosteCS
is used mainly to transfer large files, such as financial statements. Cost is
based on security option chosen and file size. – NetPost.Certified, a secure messaging product developed to help federal
agencies comply with the Government Paperwork Elimination Act.
NetPost.Certified is used, for example, by the Social Security Administration
to get notified by prisons when inmates are no longer eligible for benefits. NetPost.Certified includes an electronic postmark and a public key
infrastructure. The PKI uses Cylink's NetAuthority as the certificate
authority, a custom-built registration authority and encryption from RSA. The
service costs 50 cents per transaction. Chuck Chamberlain, manager of the Postal Service's eGovernment Business Unit,
played a leading role in this project after earlier positions building
applications. "It's almost like we're building industries," he says. – EBillPay, the Postal Service's most controversial foray into e-commerce, which lets customers receive, view and pay their bills via the
agency's Web site. The Postal Service partners with CheckFree, which offers its
service on the USPS site and performs back-end processing. Enhancements slated
for this month include an embedded electronic postmark, person-to-person
payments and the ability to receive and pay bills via e-mail. The eBillPay service has come under harsh criticism, most notably by the
Computer & Communications Industry Association, which claims USPS shouldn't be
competing in a market that private companies already serve well. The ability to offer businesses and consumers online bill payment options is
vital for the Postal Service, which estimates that $17 billion in annual
revenue is at risk from first-class mail going through electronic alternatives
for bill payment and presentment. But all such e-commerce initiatives must also overcome organizational problems
that have hampered the Postal Service's activities to date. Roughly a year ago, the agency was touting its eBusiness Opportunity Board, an
internal venture capital group styled after a technology company. The eBOB has
since evolved into an internal management committee that looks at both Internet
and non-Internet initiatives to reduce costs and increase revenue. "Some of the projects we launched also helped us learn about e-commerce," says
John Nolan, deputy postmaster general and the driving force behind eBOB. Despite its problems, the Postal Service has been resilient over the years, in
large part because of its enormous resources. It's the nation's second largest
employer behind Wal-Mart, and its revenue would rank it eighth in the Fortune
500. USPS is far from the only organization that's seen its e-commerce prospects
falter during this year's economic slide. Like many enterprises in the private
sector, USPS has found that the Web may be of more use internally-at least in
the short run-than as a medium to serve the general public. Internal efforts include a Web-based expense report system that will be first
made available to 80,000 of the agency's nonunion business travelers, as well
as an e-procurement system that promises to save $100 million annually. The Postal Service has also built a Web interface for its Time and Attendance
Collection System, which delivers near real-time information to Postal Service
managers on when employees punch in and out. TACS feeds into the Delivery
Operations Information System, providing delivery supervisors information about
the time of day carriers left the office for their routes and when they
returned. TACS also feeds into POIS, so supervisors have one system to monitor
employee activities. The agency's Web travel voucher system, called eTravel, was built with Concur
Expense from Concur Technologies. The new system, first used in April 2000 by
about 50 of the agency's top officers, now serves 17,000 employees. The Postal Service estimates that its eTravel system saves 75 percent of the
paperwork it takes to process expense reports and cuts the time from 15 minutes
to five minutes. The Postal Service last month launched eBuy, an e-procurement system that
handles 11,000 items, including office supplies, computer hardware, custodial
supplies, leased vehicles and tires. The system's front end was built
internally, and its back end is based on iPlanet's ECXpert, which is used
primarily to convert secure EDI transmissions into a file format the eBuy
system can read. Although Internet technologies can save the Postal Service money, make its
employees more efficient and potentially bring in revenue, information
technology can only do so much. Technology can't regulate postal rates, cut air
freight costs or pay the billions of dollars in pension benefits the Postal
Service owes its retirees. Starting this month, FedEx will provide air transportation for a large
percentage of the Postal Service's priority, express and first-class mail. It's
an arrangement that USPS says will save the agency $1 billion in air
transportation costs over seven years. As part of the alliance, FedEx will
place roughly 10,000 drop boxes at post offices nationwide. Nolan says one can expect USPS to forge other strategic alliances, akin to its
partnership with CheckFree to develop eBillPay and its collaboration with FedEx
to slash air transportation costs. "We can't spend hundreds of millions of dollars on new products," Nolan says.
"But we're everywhere, we're trusted and we're not going away." That may be so, but it remains to be seen whether the Postal Service's steps
are far-reaching enough to ensure its relevance in e-business.