Offshoring business critical work was once a no-go area for big businesses. But a deal signed by pharmaceuticals company Astrazeneca shows that businesses are growing more comfortable with handing over mission-critical data to third parties.
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The company is on target to save £150m in five years following a £47m agreement with Cognizant two years ago. The supplier took over the management of the pharmaceuticals giant's product research operations, including its IT infrastructure - a heavily regulated and business critical business process.
Cost-cutting is not straightforward because there is no room for error. Any inaccuracies with the data collected during clinical trials could be disastrous for the business. It could lead to the wrong decisions being made during product selection or leave Astrazeneca open to intervention from regulators.
"The integrity of the data has to be beyond question," says Amanda Sax, head of data management at Astrazeneca. "We have outsourced the data management, but we are accountable to regulatory bodies."
The majority of the savings come in staff costs. Before the deal was signed, Astrazeneca had 1,000 people involved with data management in some way, although many were not full-time. There are now 350 Cognizant staff, including 300 workers in India and 50 more in the US, UK, Japan and Sweden, working alongside 50 full-time Astrazeneca employees. Cognizant can ramp up the number of staff to match workloads.
Astrazeneca has made further savings by reducing the number of IT systems. "Cognizant has rationalised our processes and systems and designed simpler tool sets and processes. For historical reasons, we had over 50 tools and applications for managing data, but this is now under 25," says Sax.
It is too early to say whether the quality of data has improved, but Sax says that the efficiency drive will continue.
The companies have jointly formed a $10m innovation fund, which will be invested in developing systems and processes to automate and standardise the way they manage Astrazeneca's data.
Asked whether putting almost an entire business unit in the hands of a supplier risked business continuity, Sax said: "Of course we have to make sure we have addressed risk and if we had to bring it in-house or find another provider, it would be easy because of the rationalisation."
Robert Morgan, director at consultant Hamilton Bailey, says it is risky to outsource business critical data. "Liability remains with the customer. And it's not just about litigation but the reputational damage that can be caused if mistakes are made."
But Mark Lewis, Lawyer at Berwin Leighton Paisner, says many companies are looking to outsource strategic research and analytics. He says Indian offshore service providers are involved in strategic analytics at board level within large businesses.
"This explains the growth of the research and analytics outsourcing sector."
Offshoring grew as a movement because businesses wanted to reduce how much it cost them to run simple business processes such as call centres. But offshoring has evolved and now, as Astrazeneca has shown, businesses can offshore critical operations.
Cognizant designed forms used by Astrazeneca when it works with doctors to test drugs. Astrazeneca uses the results of the trials to select which products to license. Data from the forms is fed into a database built by the supplier. Cognizant checks the data for accuracy, before it is approved by Astrazeneca and locked down.