IBM to Lose Million Pound Deal with AstraZeneca

19 Apr 2011

Global pharmaceuticals giant AstraZeneca, is set go its separate ways from IBM, cutting the contract early, according to reports.

The $1.4 billion deal, signed in July 2007, was supposed to be a seven-year arrangement, but now IBM is to leave AstraZeneca in 12-15 months, according to multiple sources familiar with the matter. AstraZeneca is said to have made its plans known on April 8, after several months of negotiations with IBM.

Last November, the head of AstraZeneca's IT procurement division said the company was attempting to improve relationships with suppliers and have "tough conversations" with them. AstraZeneca also outsources to Cognizant, Infosys, Genpact and BT.

Under IBM's agreement, the supplier has provided IT infrastructure management services to AstraZeneca locations in 60 countries. The services include server and storage hosting, desktop management, network maintenance and management and help desk support for AstraZeneca's 61,000 employees.

According to sources, AstraZeneca has been dissatisfied with IBM for a long time. Several IBM competitors are now gearing up to compete for the $200 million a year contract and replace IBM at the pharma giant.

"Of course we are interested, I think every player on the market is," said a high-ranking executive at an IBM competitor, who spoke on the condition of anonymity.

The 2007 agreement was seen as a key win for IBM's services unit, given that it came at a time when an increasing number of large pharmaceutical companies where tapping offshore vendors for their IT needs.

AstraZeneca was created in 1999 after a merger of Swedish pharmaceutical company Astra and the Zeneca Group of the U.K. It is the world's seventh-largest pharmaceutical company measured by revenue, which was $33.3 billion in 2010.

IBM and AstraZeneca declined to comment.

print this article

Comments

I was outsourced by AZ to IBM, back in '01. When we were outsourced we were a small, skilled internal IT support team. I think CATS was maybe 100 people, pharms IT support was maybe 200.

As you can imagine at IBM this was quickly transformed into a huge, management heavy bureaucratic nightmare. More hours were spent filling out time sheets, producing reports and comliance documents than productive work. Over the years most of the original staff were made redudant.

This was never going to be a good deal for AZ. IBM are not a charity. Clearly they were going to cut costs (services) to the core and charge as much as possible for everything they can get. I'll bet the directors who wanted to 'just manage a contract' are still there, though. They have mashed potato for brains, they really do.