AstraZeneca to bring IT in-house but remain offshore

Pharmaceuticals giant AstraZeneca plans to cut back on IT outsourcing but will retain offshore delivery through a captive centre in India

Pharmaceuticals giant AstraZeneca is reducing the amount of IT it outsources to Indian suppliers but will retain the advantages of the offshore delivery model through a captive centre in India.

The company is also planning to open delivery centres in Eastern Europe and California.

AstraZeneca becomes the latest in a series of huge companies moving IT work in-house. General Motors, Daimler and Procter & Gamble are other examples.

Despite reports that IT service providers based in India are approaching UK corporations with proposals to acquire their captive IT delivery units, AstraZeneca wants to reduce the amount of IT delivered by service providers. AstraZeneca CIO David Smoley, told Indian newspaper The Hindu.

“Today, roughly 70% of our IT work is outsourced. Our goal would be to target around 30%, which is still healthy. We want to become a world-class IT shop, with both classic IT ops and a big emphasis on innovation,” he said.

“We want to gain control from an IT operations perspective. As we bring work in, we’ll gain some efficiency and better control,” he added.

Suppliers including Accenture, Infosys, HCL and Cognizant could lose significant business as a result of AstraZeneca's decision.

Peter Schumacher, CEO at management consultancy Value Leadership Group, said IT buyers are looking for more value and offshore captives can offer this. 

"Captives are low cost, have deep domain expertise and can be more experimental,” he added.

If a business wants to try things out on a small scale, it can use its captive to do this at low cost with the right skills, said Schumacher.

The AstraZeneca Indian captive will be in Chennai and operational by mid-2014. A global delivery model will be completed by the California and Eastern Europe centres.

We want to gain control from an IT operations perspective. As we bring work in, we’ll gain some efficiency

David Smoley, AstraZeneca

According to The Hindu, the work that will be done at the centres will include SAP, infrastructure operations, application development and maintenance, and cloud and mobile.

"There is a dissatisfaction and a recognition for many companies that outsourcing can go too far. And if not managed properly, it can be expensive. There are efficiencies you can gain from creating a strong central team,” he said.

In 2012, General Motors said it would insource about 90% of its heavily outsourced IT operations. Through a historic link with IT services firm EDS, GM outsources most of its IT to HP.

In June last year, German car manufacturer Daimler said it planned to achieve savings of €150m a year by bringing IT services in-house and expanding its IT operations in India and Turkey.



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