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AstraZeneca and IBM re-ink mammoth outsourcing deal

By Kirsty Barnes , 17-Jul-2007

Computer giant IBM has re-inked a huge $1.4bn (€1.0bn) IT outsourcing deal with drug giant AstraZeneca, who is continuing its cost-cutting drive to become 'lean and agile'.

The contract, which will begin in six months time, is effectively the continuation of an existing $1.7bn seven year contract that was first signed between the two firms in 2001, covering IT infrastructure services, in what was the pharma industry's largest deal of this kind at the time. However, although it is slightly less in terms of monetary value, the newly-signed deal is broader in shape and scope as well as geography, an AstraZeneca spokesperson told Outsourcing-Pharma.com.


"The new contract includes server hosting and storage of AstraZeneca's scientific, commercial and supply operations, where as the previous contract mainly involved out major operations in the US, UK and Sweden," he said. In addition, the previous contract covered AstraZeneca's operations in 45 countries, while the new contract covers 60 countries.


"We have chosen to work with IBM again because it is clear we will derive much benefit from the relationship. We know them, they know us and the way we operate and we will achieve significant cost savings through continuing this arrangement," said the spokesperson. "This is the first time since the merger between Astra and Zeneca in 1999 that we will have a single infrastructure linking all functions, regions and markets across the world and this will streamline our operations and give us greater global consistencies."


The new aspects to the contract will be phased in over two years. There will be little impact on staff, said the spokesperson: "Initially three people will be affected and further on there will be some redeployment opportunities." Most of the staff that were going to be affected by the arrangement between the two firms already have been, when in 2001 up to 1200 of AstraZeneca's IT staff, principally from the US, UK and Sweden, were transferred to IBM. This year AstraZeneca is waging a cost-cutting campaign being driven by senior management, primarily the company's chief information officer, Rich Williams, in order to become "lean and agile."


Plans first announced along with the company's financial results at the start of the year included a reduction in global headcount of over 3,000, with 700 job losses at the company's Macclesfield site in the UK and 850 jobs set to be cut across the Swedish sites over the next three years. As part of AstraZeneca's drive to "increase efficiency and productivity", and a "global need to address overcapacity in manufacturing and product supply," other recent announcements that have been made by the firm include the shelving of a manufacturing facility in Germany, and the sale of another plant in France, with hundreds more jobs being affected.


In addition, AstraZeneca, who currently produces 85 per cent of its APIs at its own manufacturing sites has recently launched a new Asia strategy, part of which involves "moving to exit making APIs in our own plants over the next 5 to 10 years," Marc Jones, vice president of Global External Sourcing, AstraZeneca, told Outsourcing-Pharma.com.


The company already has a small sourcing presence in China as well as India, although it plans to use China as the pinnacle of its new outsourcing plans in the region: "Outsourcing for APIs will give us flexibility going forward. Our plans in China and India are embryonic but we see this as the way forward," said Jones.

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