Analysis of AstraZeneca-IBM IT Outsourcing Contract and Its Failures

This report delves into the critical failures of the IT outsourcing contract between AstraZeneca and IBM, examining the mistakes made by both corporations. It analyzes the reasons behind the contract's termination, highlighting issues such as outcome-based specifications, the inability to adapt to rapid business changes, and the importance of comprehensive contract provisions. The report also explores the advantages and disadvantages of social media, providing a balanced perspective on its impact. Furthermore, it discusses the role of Service Level Agreements (SLAs) and the preference for arbitration over lawsuits. The analysis offers valuable insights into contract management, business strategy, and the evolving landscape of IT outsourcing, drawing on relevant academic sources. This is a comprehensive analysis of the IT outsourcing contract between AstraZeneca and IBM.

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IT Infrastructure Management PG
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What mistakes did AstraZeneca make?
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.
What mistakes did IBM make?
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

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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.
Why are outsourcing contracts for five or
more years?
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).
Why do you think two major
corporations could make such mistakes?
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

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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).
Do you think the 2007 SLA was doomed
to fail? Explain your answer.
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.
What provisions in the 2012 SLAs protect
AstraZeneca and the vendors?
There are numerous provisions in the 2012
SLAs which protect this organization and
the vendors. There are provisions of

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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.
Why would parties prefer to use an
arbitrator instead of filing a lawsuit in
court?
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.

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Part B
Social Media
Abstract
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.
Index terms: Social media, strengths and
weaknesses
Introduction
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.
Advantages of social media
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.
Disadvantages of social media
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

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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.

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References
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