AstraZeneca opts for new-style outsourcing deal with IBM

AstraZeneca's recently announced seven-year £736m global outsourcing deal is the first of its kind for the pharmaceutical industry, IBM has said.

AstraZeneca's recently announced seven-year £736m global outsourcing deal is the first of its kind for the pharmaceutical industry, IBM has said.

According to Gary Harwood, client executive at IBM, the agreement is among the first of a new breed of outsourcing agreements based on desired outcome or "service effect".

"Outsourcing agreements have tended to be very IT-focussed in the past, but clients are now more interested in the service effect than the details of how IT gets delivered," he said.

This new style of outsourcing agreement is underpinned by IBM's concept of on-demand utility services, and allows the outsourcer greater autonomy on methods of delivery.

AstraZeneca will still retain control of its IT strategy. Another unique feature of the new-style outsourcing deal described by Harwood is the use of joint governance boards.

"Strong joint governance boards have been set up as part of this relationship, so although IBM will determine how IT is delivered, AstraZeneca will still have control over the broader IT infrastructure," said Harwood.

Chris Dalton, head of external affairs in UK communications for AstraZeneca, said that by giving IBM more autonomy in delivery areas where they have more expertise, AstraZeneca would be able to concentrate on governance, supplier management, innovation and other value adding activities.

Other areas of joint collaboration drawing staff from both companies will include innovation and managing cultural and behavioural change to ensure both companies work well together.

In the past six years, IBM has focussed only on AstraZeneca's core supporting systems in its three hubs in the US, UK and Sweden. In contrast, the new deal provides a single global infrastructure and includes all IT services in the 60 countries where AstraZeneca has offices.

Although the efficiencies derived from having a single infrastructure and standardised services around the world will drive cost savings in many countries, Harwood says cost was not the primary driver for the new infrastructure.

"The main objectives were to meet distinct business needs, provide agile and flexible services to meet the rapidly changing demands of the pharmaceutical industry, and deliver value for money," said Harwood.

He said the challenge for IBM was to demonstrate its ability to pull together a wide variety of bespoke core systems across different parts of the business into a single and consolidated system.

"Many businesses that have grown through mergers and acquisitions face similar challenges, IBM is probably the only outsourcing company that could provide the depth and breadth of support AstraZeneca needed in so many geographical locations," said Harwood.

IBM will be operating mainly in a virtual global environment, but Harwood said IBM may need to call on people in each location as the need arises, particularly in the period just following the system's implementation.

Harwood said some "interesting and unique" mechanisms were in place to ensure all 70,000 of AstraZeneca's customers experienced increased levels of satisfaction.

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