Why AstraZeneca’s Outsourcing Contract With IBM Failed And The Impact Of Social Media On Communication

AstraZeneca’s over-reliance on IT capabilities led to contract termination

Discuss about the IT Infrastructure Management PG for Network and Communication.

AstraZeneca organization did not consider that the business which they were doing could change more rapidly than what the contract could have accumulated (Borgman, 2010). They were much dependent on their information technology capabilities (Borgman, 2010). On the contract the organization failed to cover all the information related to any eventuality which led to the termination of the contract. What were contained in the contract were merely the hosting server services along with the storage for the network, communication, commercial and the supply chain operations (Duggan, Ellison, Lampe, Lenhart & Madden, 2015). It is when the organization decided to terminate the 1.4 billion contract which was seven year global strategic outsourcing agreement with the IBM. There was tough legal battle with the two organizations but the court sided with AstraZeneca (Larson & Chang, 2016). Among the major reason why the deal between the two organizations failed was due to the use of the outcome based specifications. What was contained in the contract was merely to encourage innovation among the vendors, nothing related to what could happen if there was a rapid business change in case they took place since business nowadays changes a lot (Larson & Chang, 2016). During the signing of the contract it was seen as the ground breaking model, which was to encourage other organization to enter to such an agreement, but unfortunately it failed because AstraZeneca was changing faster than what the contract stipulated.

IBM at the time knew very well that very large and long term information technology outsourcing contracts are at time difficult to change due to the aspect vendors usually accrues profit from such deal (Duggan, Ellison, Lampe, Lenhart & Madden, 2015). When it comes to large outsourced deals, the vendors can make major investment in the first two years as the service is set up and at the same time customized. When this is done the vendors expect that they would make profit margin in the last two to three years (Borgman, 2010). They should have covered all these components in details for the contract termination for example the continuing services to be offered and the percentage of what their fees should be.

The contract are usually 5 or more years such as this one which was 7 years due to the difficulty associated to changing on the way the vendors accrues on their profit (Larson & Chang, 2016).  With regards to the huge outsource deals, the vendors make major investment in the first two years since their services are set up and they are customized (Larson & Chang, 2016). They expect to make their margins of the profits in the last two or three years.  Additionally, the outsourced contracts are longer in order to allow time for the organization to attain strategic goals but with the flexibility to terminate on some or all the services either at any particular time on notice or at a given break points in return to the payment of the early termination compensation (Laudon, 2015).

Use of outcome-based specifications and poor assumptions reason for failure

In my view I think the two corporations could have made such mistakes as a result of the poor assumptions. In my view they might have overlooked on the important information when it came to signing of the contracts. There organizations did not realize that there is some variation which depended on the type of the business outsourcing contract to adapt (Larson & Chang, 2016).  It is important to note that the existing outsourcing organization are usually renegotiating, restructuring and at the same time renewing the contracts more than ever before (Laudon, 2015). This kind of activity is usually driven by the changes which are associated to the organization strategy, changes in the scope of the services sourced, issues which are related to the pricing, or perhaps the introduction of the new technology and work practices (Laudon, 2015). I think these two corporations did not have knowledge in relation to outsourcing as well as preparation of the contracts (Laudon, 2015). If they had information they could have incorporated on these aspects which have been highlighted in the contracts and ensure all the components are considered and this ensures there is not termination (Wixom, Ariyachandra, Douglas, Goul, Gupta, Iyer & Turetken, 2014).

Definitely, I think it was bound to fail. On my thoughts I think even though there was termination of the contract, it was to eventually end (Laudon, 2015). The contracts of course allow for the termination for the default or the insolvency event based on the reasons (Laudon, 2015). Additionally, the clients could have committed to a fixed period across in which the scope of the service or will have the right to terminate to some or all the services on notice (Laudon, 2015).  There might been problems related to the poor services as well as an increase in the fees in relation to the contract when it has ended.

There are numerous provisions in the 2012 SLAs which protect this organization and the vendors. There are provisions of information technology services which are related to SLAs such as pricing, and cooperation policy (Laudon, 2015). This kind of policy contains 13 principles to which are ‘fix first, pay later’. This therefore means in case an urgent detail in relation to IT takes place, vendors as well as AstraZeneca should cooperate to fix on the issues first. They need to resolve the issues before asking any question in relation to cost (Sook-Ling, Ismail & Yee-Yen, 2015). Previously, vendor might have examined the contract to check and confirm the responsibilities and protect the margins and this delayed on the fixing of the problem (Sook-Ling, Ismail & Yee-Yen, 2015). To return to fast solution, the organization wanted the option for the fast payment to the vendors.

Vendors’ expectation to make profits results in long-term contracts

Using arbitrator as compared to filing the lawsuit in course is much less expensive (Sook-Ling, Ismail & Yee-Yen, 2015). Moreover, resolving conflict with an arbitrator there is less time which is consumed and parties are confronted less and they can agree faster to reach a solution in the process of arbitration.

The social media plays a crucial part of the lives of people across the globe. There has been debate in relation to how the social media can improve on the communication skills. In this essay it will explore the strength and weaknesses of the use of the social media.

The internet has had a great impact on the individuals today than it was before (Sunstein, 2018). The internet has been a continual source of news, entertainment as well as education for the users around the globe (Popescu, 2014). The most innovative of the technologies such as social media has attained mainstream popularity and it has become the most visited destination on the internet.

The social media has made communication to be much easier than it was before. Currently with the touch of a button individuals could communicate with anybody anywhere in the world through the social media (Gerbaudo, 2018). Social media is advantageous since it helps individuals to connect with the likeminded individuals, and expand business contacts.

The social media has disadvantages such as decrease in the in the real world, decrease in the personal connections as well as the possibilities of the cyber bullying, hacking and issues related to privacy concerns (Fuchs, 2017).

Conclusion

In this essay it has discussed on the subject of the social media. Moreover, it has also discussed on the advantages and disadvantages of the social media.

References

Borgman, C. L. (2010). Scholarship in the digital age: Information, infrastructure, and the   Internet. MIT press.

Duggan, M., Ellison, N. B., Lampe, C., Lenhart, A., & Madden, M. (2015). Social media update 2014. Pew research center, 19.

Fuchs, C. (2017). Social media: A critical introduction. Sage.

Gerbaudo, P. (2018). Tweets and the streets: Social media and contemporary activism. Pluto   Press.

Larson, D., & Chang, V. (2016). A review and future direction of agile, business intelligence,  analytics and data science. International Journal of Information Management, 36(5),    700-710.

Laudon, K. C., & Laudon, J. P. (2015). Management Information Systems: Managing the Digital Firm Plus MyMISLab with Pearson eText–Access Card Package. Prentice Hall Press.

Popescu, E. (2014). Providing collaborative learning support with social media in an integrated environment. World Wide Web, 17(2), 199-212.

Sook-Ling, L., Ismail, M. A., & Yee-Yen, Y. (2015). Information infrastructure capability and organisational competitive advantage: framework. International Journal of Operations &  Production Management, 35(7), 1032-1055.

Sunstein, C. R. (2018). # Republic: Divided democracy in the age of social media. Princeton  University Press.

Wixom, B., Ariyachandra, T., Douglas, D. E., Goul, M., Gupta, B., Iyer, L. S., … & Turetken, O. (2014). The current state of business intelligence in academia: The arrival of big data.    CAIS, 34, 1.