06.08.21

EPO Management Pours Money Down the River, Wasting Budget on Failed and Failing Projects

Posted in Europe, Finance, Patents at 3:11 pm by Dr. Roy Schestowitz

Objects of Propaganda
The ‘suits’ at the EPO have no clue whatsoever (they’re not hired for their skills)

Summary: EPO managers have no idea how to run a patent office (or any office for that matter); in the process they dismantle systems and processes that generally work

The Central Staff Committee (CSC) of the EPO wrote about “IT matters” earlier this month. “In this document,” they told to staff, “we explain that reality gives the lie to lofty principles when ‘prudence’ is invoked to justify cuts in some IT areas whereas generous and risky decisions are taken in other areas.”

“Prudence requires more than just realising short-term gains in some performance indicators without taking the total costs and the long-term development of the Organisation sufficiently into account,” they said.

“In a nutshell, the EPO wastes money on many bad things, based on a complete misunderstanding of technology and the needs/goals of the Office.”The document was prepared about a week ago but circulated today, quoting the real Bonaparte, not his cheap imitation, and berating Professor António ‘Hey Hi’ Campinos, the algorithms specialist and computing expert who sent the EPO to Microsoft in the United States (instead of keeping systems that the Office can actually control). Misguided or deeply corrupt (e.g. kickbacks)?

We’ve decided to reproduce the whole document in HTML form. Watch what the management of the EPO has done, as published by the CSC:

Zentraler Personalausschuss
Central Staff Committee
Le Comité Central du Personnel

Munich, .1 June 2021
sc21074cp

‘It is only by prudence, wisdom, and dexterity, that great ends are attained, and obstacles overcome. Without these qualities nothing succeeds.’

Napoléon Bonaparte (1769-1821)

Prudence: When the gap between claim and reality is wide

Who could have any objection to ‘prudent’ management and decision-making? But reality gives the lie to lofty principles when ‘prudence’ is invoked to justify cuts in some areas whereas generous and risky decisions are taken in other areas.

Introduction

Prudence is a big word. And no doubt, skills and good judgment in the use of resources as well as circumspection with respect to danger and risks is a virtue. Accordingly, it does not come as a surprise that the concept of prudence has been claimed by the powerful since centuries to justify their actions and to present them in a favourable light, irrespective of the nature of these actions.

Hardly surprising, the prudence concept found its way into management speech. At the EPO, this concept has been used for many years to justify and substantiate decisions which have a significant negative impact on staff and to make these decisions look as if there were no alternatives. In many cases, however, these decisions are highly questionable in terms of a sustainable functioning of the Office.

Use of the prudence concept during the Coronavirus pandemic

The Coronavirus pandemic is no exemption to this. Already shortly after the pandemic started, management took far-reaching measures regarding workforce planning (see e.g. the report of the April 2020 MAC meeting) by introducing a recruitment freeze1. Following this policy, the number of persons employed was

_____
1 CA/10/21, page 36


far below initial budget at the end of last year2. This decrease in workforce can have a massive negative impact on the workload of EPO staff and the quality of the work at the Office in the medium term.

Described as part of a ‘prudent approach’, these measures were largely justified by an expected steep drop in the number of filings by 10 per cent due to a likely ‘major economic disruption caused by the Coronavirus outbreak’3. This assumption was substantiated, by way of analogy reasoning, with the decline in the number of filings during the global financial crisis in 2008/2009.

This line of argumentation was questioned by staff representation, since the global financial crisis was of a quite different nature than the economic crisis caused by the Coronavirus pandemic. As is predicted by many experts, the pandemic will trigger a technology and innovation push to fight the pandemic and to shape the period following the pandemic, which is expected to show up positively in the number of filings.

With that, it can hardly surprise that the current filing numbers4 are by about 20% above the predictions based on the said pessimistic management scenario.

High time therefore to reconsider the far-reaching measures of management regarding workforce planning?

Not according to management: ‘So far, no significant overall decrease in incoming workload or increased active withdrawals of patent applications could be observed, although some sectors are more impacted. However, given the uncertainty surrounding the future evolution of the global economy and in particular the risk of a significant slowdown when the liquidity support measures will be phased out, the Office continue to follow a cautious approach and chose a workload scenario which still takes into account the possibility of a drop in incoming search workload in year 2021 by some 10% compared to budget 2020, followed by a gradual recovery over time starting already in 2022.’ (CA/25/21, page 2).

In the end, it boils down to this: Predictions were made by Management based on courageous analogies. They justified wide-ranging cuts in budget and workforce, which were promoted as part of a prudent approach. And as reality does not support the argument, reference is made to an indeterminate future when the prediction may eventually still come true.

In science and engineering, it is good practice to reject hypotheses that cannot be falsified. As an organisation that builds on the outcome of science and engineering, the EPO should apply similar principles and abstain from tempting but suspect

_____
2 ibidem
3 CA/50/20, page 5
4 EPO applications Q1 2021


management actions which rely on a one-sided interpretation of the current situation.

Prudence: Between ideal and reality

Unfortunately, this is not the only biased use of the prudence concept.

Example iPads

Let’s have a look at document CA/F 6/21 which gives an overview of ‘award decisions pursuant to Article 58(3) of the FINREGS’. While management does not tire of propagating the said prudent approach when it comes to budget and workforce, it takes initiatives in other areas with courage and stunning generosity. In Annex 2.3 of the CA document, management reports on the purchase of 4500 iPads, accessories and related services, amounting to up to EUR 15 million until 2025 and more than EUR 3,000 per tablet unit.

This special treat for staff in DG1 and the Boards of Appeal, which is explained by management as ‘another step towards a fully digital Patent Grant Process’, is not only in striking contrast with the prudent approach as to budget and workforce.

Example mainframe decommissioning

But also contrary to other decisions in the IT sector at the EPO which are claimed to cut costs and to render the operating processes more efficient. Although often described as ‘legacy’ by management, the mainframe continues to be the backbone for data and operating processes which are mission-critical for the EPO and other offices.

The mainframe remains a thorn in the side of management due its maintenance costs – which are too high, they argue. For this reason, a first attempt was made to migrate the data and operating processes from the mainframe to another hardware platform using a so-called lift & shift process, which left the underlying processes largely untouched. This attempt met with reservations from IT experts from the very beginning. And what happened proved them right: this attempt was a failure.

In a second attempt, management decided to apply an emulator solution to make the migration from the mainframe happen. Again, it’s not a modernisation of the processes but essentially a change in the hardware platform. And, in view of the failure of the first attempt and the strong desire of management to decommission the mainframe, this second attempt takes place under high time pressure.

What remains is a hollow aftertaste. While the said core data and operating processes were kept stable over many years in the mainframe environment, it is


unclear whether the said mission-critical business activities will continue to work in the new environment without a hitch, in particular in the light of the high time pressure for the second attempt. It appears to be a high-risk strategy without a safety net: No return to the current mainframe-based solution is foreseen when the second attempt would fail, too.

Is the mainframe decommissioning, as implemented so far, reflecting a prudent approach? Probably not, as an activity triggered by a strong management desire, despite the technological obstacles and organisational hiccups.

Does it at least help the Office to save substantial resources? Probably neither. According to CA/F 6/21, the hardware, software and services for the mainframe infrastructure cost several million euros per year (page 10). No doubt, this is more than a small amount of money.

But it is an investment in the very core of the EPO’s data and operating processes. And it must not serve as a sacrifice for the management’s savings policy when the same managers are prepared to spend even more money on tablets with little restraint.

Example framework contracts

Let’s take another example. On page 5 of document CA/F 6/21, management explains that IT operational services have to follow the framework contracts approach, based on the following argument: ‘The focus was on avoiding interdependent smaller contracts with too much management overhead, thereby reducing the associated coordination and communication challenges. At the same time there is a wish to leverage more flexibility to easily and quickly evolve the contractual basis for the service provision to keep up with and deliver the transformations associated with SP2023.’

The costs for this framework contracts approach may amount to up to approximately EUR 75 million until 2025.

Comparing the new framework contracts approach and the previous situation with a diversity of service contractors, different aspects strike right away:

• The new approach involves the risk that the (partly decade-long) expertise and experience of the previous service providers are lost because proper know-how transfer to the new service providers is hardly possible. This is all the more true in view of the complexity of the EPO’s data and operating processes.

• The costs and benefits of the new approach are not fully taken into account: Management sets the focus on the apparent benefits (mainly reduction of


administration overhead and higher flexibility to the benefit of the Office). What is not taken sufficiently into account is the imminent loss of know-how (see above), indirect excess labour costs due to extra burden for EPO staff to organise know-how transfer, and indirect costs due to an expected decline in the quality of deliverables/final products in the medium term.

• In the past, the evaluation of bids of service providers for specific activities was largely based on technical expertise of EPO specialists. The situation is clearly different for the new approach: due to its general nature as a framework contract, technical expertise and technical aspects only played a secondary role during the evaluation of the bids whereas apparent administrative and cost advantages became much more important.

• With the new approach, orders for IT service activities may be passed on to sub-contractors. With that, deliverables/final products may show the ‘handwriting’ of several service providers, which creates at least two problems on the part of the EPO:

a. Know-how transfer to sub-contractors to which activities are passed on is difficult or nearly impossible. In any case, it will require extra efforts on the part of EPO experts to make sure that deliverables/final products can at least rather meet the EPO’s quality standards in this situation.

b. With the different ‘handwriting’ of contributors, it will be challenging for the EPO to make sure that the deliverables/ final products can be maintained at limited expense and will live up to the EPO’s expectations.

As for the previous example, approaches to cut costs and to improve the management of the EPO’s IT activities that look tempting at first sight can easily turn into its opposite.

Conclusion

Prudence requires more than just realising short-term gains in some performance indicators without taking the total costs and the long-term development of the Organisation sufficiently into account.

In fact, prudence is a valuable concept indeed when it is taken seriously and is not used as a fig leaf to justify short-sighted decisions whose adverse effect on the EPO and its staff may show in the medium term at the latest.

In a nutshell, the EPO wastes money on many bad things, based on a complete misunderstanding of technology and the needs/goals of the Office. As some readers may recall, very "big money" was blown away on failed "IT" projects in the past. Almost quarter of a billion euros on just one such project. Nobody was held responsible for it.

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