Pharma major, AstraZeneca has set up its first insourced IT facility, The Global Technology Centre (GTC) in Chennai. David Smoley, Chief Information Officer, AstraZeneca speaks on the successes of the GTC from launch to date, and highlights the technological capabilities at the centre which enables a global support system for AstraZeneca, in an interaction with Viveka Roychowdhury
The pharma industry, as did other sectors, went through a phase of outsourcing services which were designated as non-core. But now the trend is reversing. What are the benefits of insourcing versus outsourcing when it comes to IT services, specifically?
Insourcing helps to develop an environment of collaboration. The in-house service delivery model, unites the whole team under one roof which results in improved response speed, increased internal knowledge of critical IT systems, enhanced end-user satisfaction with IT service, which in turn significantly reduces cost of IT Operations. By insourcing work, we have fewer hand offs and simpler controls.
What was the rationale for AstraZeneca deciding to insource IT in 2013?
The idea behind insourcing was to strengthen our internal IT capability by bringing work in-house from third parties and reducing third party spend. Our strategy is to have less than 30 per cent of our overall IT workload provided by third parties.
Which other pharma peers have since taken this decision as well?
I would refrain from commenting on specific peer companies, but we have seen this trend with at least a few other companies in the industry and quite a number of companies in other industries.
Why was Chennai India chosen as the location for the Global Technology Centre (GTC), as AstraZeneca’s first, insourced IT facility globally?
The reason behind the choice of Chennai as the location for the GTC was the large, diverse pool of IT talent in the region, the pace of the local IT industry’s development and various other general factors which give Chennai an edge over other cities.
Does the India global delivery hub differ from the ones in Mexico and China? In terms of scale, services, etc.?
The GTCs in Mexico and China are going to be built on the model of the Chennai GTC. These centres will also act to provide business resilience. However, Chennai will continue to house more than 60 per cent of AstraZeneca’s global IT workforce.
Could you take us through the major milestones/steps that the company had to take in the journey towards insourcing IT?
It all started with our IT strategy, that focused on customer service, technology leadership, operational excellence, simplification and innovation. We then had to take time to fully understand our IT spend and service portfolio. This was followed by the design of the future in-house operating model, identification of appropriate locations to build our technology centres. We were then able to quickly establish the Chennai Technology Centre and run structured programs to in-source services. We have completed over 70 per cent of the insourcing roadmap in the last 12 months.
What were the major hurdles and how were these tackled?
When we started, we lacked broad knowledge and capability around our business systems and technical platforms because so much of this know-how had been lost to external vendors. One of the other challenges has been to find the right talent in niche fields in India. There is a shortage of specialised knowledge and experience in emerging areas such as the cloud technologies. There is a need for collaboration of the educational institutions and the industry to solve this.
The company’s IT insourcing project has been hailed as a success story. What are the broad parameters/benchmarks which the company is tracking to measure this success?
We measure our overall success as an IT organisation based on some of our key strategic themes, such as providing innovative solutions to the business, creating a stable IT foundation, organisation effectiveness etc. We track a variety of specific metrics around quality and speed of services we deliver, the customer experience and productivity of our resources.
In the pharma industry, media reports put the average spend on IT as a proportion of revenue at about 3.3 per cent, whereas AstraZeneca’s IT spend was about 5.4 per cent before insourcing. What is the spend on IT today, two years after the move to insourcing?
AstraZeneca was outsourcing over 70 per cent of its IT work as measured by workers. Two years into our strategy we have flipped this to where more than 60 per cent is in-house, and the IT cost has now reduced to 3.9 per cent of revenue.
What are the goals to take this project further?
The current goal is to reduce IT costs as a percentage of sales to the industry benchmark of 3.2 per cent of revenue and, ultimately, to beat it. We are also aiming to provide a lean, agile supporting infrastructure for everything we do. We will be working proactively with the business as a trusted, strategic partner. We aspire to gain competitive advantage through cutting edge innovation.
What are the major successes of the GTC from launch to date?
The centre has rapidly insourced IT Applications and Infrastructure Management functions previously outsourced to eight global vendors. The IT insourcing is one of the major drivers in IT cost reduction. One of the major successes has been to reduce the IT cost from 5.4 per cent of revenues in 2013 to 3.9 per cent in 2015.
The journey started with a target of 300 employees in the first year. The centre has grown to more than 1500 highly qualified IT professionals in 18 months since the start and we are continuing to grow at a rapid pace.
The insourcing initiative has enhanced end user satisfaction with the IT services and has brought the whole team under one roof, thereby facilitating a highly collaborative environment.
How does the Chennai GTC fit into the company’s global strategy?
The Chennai GTC helps us achieve direct control over our IT operations, while driving knowledge transfer and retention. It helps improve business performance by giving us greater agility and improving responsiveness to the business. The cost reductions we have achieved in IT have freed up cash to be reinvesting into drug discovery and development, which is the heart of our business.
What is your advice, tips to other pharma companies contemplating this move?
In addition to embracing technology, IT staff have to better understand the business, focus on behaviour, be bold, and build their networks. The less IT organisations rely curated information and more on networking and learning from other businesses, the closer IT will be to success.
The GTC – What kind of technology and supportive Infrastructure does it host?
Some of the functions insourced are:
- ERP support and development
- Full suite of IT Infrastructure services
- Application maintenance for other business critical applications
- BI/Analytics and Information Management
- Solution Engineering capabilities (Application development, Mobility)
- Cloud and mobile services