Chris Day, VP Strategy & Performance - AstraZeneca
1. 07 March 2017Chris Day
CIO Event:
How Platforms and Changing Business Models Are Reshaping The IT Sector
2. 2 Developments in the industry and what drove us to Insourcing
3 Our journey and outcomes
1 AZ – Business and IT Strategy overview
3. • $24.7bn Total Revenue; $23.6bn Product Sales; $1.1bn Externalisation Revenue
• 61,500 employees
• $5.6bn invested in R&D with research across 5 countries
• 125 projects in clinical development and 15 NMEs (new molecular entities) in
late-stage development; 18 NME approvals in 2014 and 2015
• More than 850 collaborations and partnerships globally
• Manufacturing in 17 countries
• 4th fastest-growing top 10 multinational pharmaceutical
company in emerging markets in 2015
As at 31 December 2015
3
AstraZeneca – business overview
4. We push the boundaries of science to deliver
life-changing medicines.
4
Our Purpose
5. BIOLOGICS SMALL MOLECULES IMMUNOTHERAPIES
ONCOLOGY RESPIRATORY
CARDIOVASCULAR
AND METABOLIC
DISEASE
MAIN THERAPY AREAS
5
Focused on R&D in three main therapy areas
6. • Deliver a portfolio of collaboration-enabling technologies
• Build a culture of innovation & entrepreneurial behaviour
• Grow our mobile productivity via apps and infrastructure
Focus on the
customer
Deliver operational
excellence
Lead through
technology
Simplify
Collaborate
1
2
3
4
5
• Partner with the Business to maximize business effect
• Introduce technologies that add value & enable AZ success
• Improve the end user experience... simpler, faster, easier
• Reduce our dependency on 3rd party suppliers
• Rationalize and consolidate our application landscape
• Move aggressively to the Cloud where there is a business case
• Build and deliver software faster via Agile methodology
• Partner with technology leaders, establish a team in Silicon Valley
• Stabilize and secure the global infrastructure
• In-source work for greater accountability, speed and agility
• Expand IT internal capability globally through new global technology
centres
9
AZ IT Strategy – transformation to a world class IT function
7. Transformation in almost all industries is driven by IT
Those that failed to transform have been
wiped out or are struggling
Those that have transformed themselves
survived and thrived
Travel and Transport
• Online booking
platforms like Expedia
and Air BnB are
rendering high street
travel agents
• Transport companies
like Uber and Lyft are
replacing traditional
taxi firms.
Media and
Entertainment
• Adopters of online
streaming platforms
and downloads (e.g.
Netflix) flourish
• Legacy players like
Blockbuster are
vanishing
Financial Services
• Disruptive
technologies such as
P2P lending and
online trading
platforms
• High street banks are
struggling to offer
competitive products
Digital Image Processing
• Advent of digital
photography embraced by
technology orientated
companies like Nikon and
Canon
• Missed opportunity for
Kodak
Many businesses have seen major change in their product, price and channels to market
7
8. The outsourcing industry has struggled to break the link
between revenue and number of resources
As businesses become IT led, value matters not volumes
The push for change is being accelerated by various factors
including cloud, developing technologies like AI and RPA
plus a trend towards greater insourcing
IT outsourcing players have ignored the need to transform their
own core business. Significant change is inevitable.
8
9. Platforms present a great opportunity for the industry
1
2
3
4
Platforms create value
• Allow significant access and insights into their client’s business.
• Opportunity to co-develop and monetize
Platforms focus on outcomes
Platforms drive efficiencies
Platforms enable location agnostic services
• Certainty and predictable performance.
• Outcome is understood and commercials are transparent (when
compared to service based contracts.)
• Platform based business models are more resilient to change
• Clear possibility to improve efficiency of platforms through application of
AI and Robotics
• Offer an opportunity to deliver work from where it is best delivered, with
limited impact of the upcoming protectionist “walls”
9
10. While platforms present a great opportunity, there are significant
implications for the industry
• The IT services industry has generated significant capital and is full of ideas – now is the time to back these ideas,
build platforms and look for alternate business models.
• That doesn’t mean moving away from services -> they will move to become a microcosm around the platforms.
The sector will need to develop true
business skills, to ensure that
platforms do not stagnate but evolve.
This is a challenge, particularly for an
industry that traditionally adopts a
utilisation rather than IP based
model.
Platforms demand investment – to
develop, maintain and evolve.
Platforms require risk taking ability –
as for each successful platform, there
are a few that may fail. This is similar
to the drug cycle in Pharma
SKILLSINVESTMENT
10
11. Legacy model failed to perform
well
Heavily outsourced to a large
‘ecosystem’ of external IT
application and infrastructure
third party suppliers
Persistent issues: inflexible,
insufficiently responsive and
expensive
Lack of internal capability – no
ownership for technology
Rationale for in-sourcing
11
In-sourcing improves performance by allowing us to:
Achieve direct control over our IT operations
Drive improved knowledge transfer and retention
Simplify support structures and drive clear execution
accountability
Achieve greater agility, improving responsiveness to
business
Significantly reduce cost. We will no longer be funding
duplicate management.
Insource where there is clear economic and strategic value to AZ
12. Insourcing approach
Develop in-house IT capability in strategy, cost effective locations
12
• Target network of Global Technology Centres (GTCs) at four locations – Chennai (India),
Mexico (Guadalajara), China (Dalian) and Eastern Europe (location TBC)
• Chennai is our primary centre providing global technology services
• 3 Satellite centres in Mexico, China and Eastern Europe providing near-shore and
language capabilities for key markets ~200 – 300 FTE in each centre
• Initial focus on establishing GTC
Chennai centre.
• Site operational in August 2014, 300
FTE by end 2014, 1400 FTE by end
2015 and ~2300 FTE by end 2016
• 70+ key service lines now successfully
transitioned
In-source wide range of IT development
and maintenance activities, where there is
clear economic and strategic value to AZ.
Complement with support of simplified
supplier ecosystem
Rapid Build-up Scope
Strategy
13. 13
1259 1098 1155 1051 1087
450
225 66
19 3
301
1480
2066 2116
2013 2014 2015 2016 2017
Chennai
Contractors
Hubs/Other
1,709 1,624 2,701 3,136 3,206 TOTAL FTEs
$273m $212m $226m $244m $269m TOTAL COST
484 461
326
197
152
142 175
176
153
150
70 65
65
61
47
2013 2014 2015 2016 2017
Hardware/leasing
Software
Services
TOTAL COST $696m $701m $567m $411m $349m
Third party cash spend reducing by $347m... ...with manpower costs remaining flat
36% 31%
40%
55%
64%
2013 2014 2015 2016 2017
Key IT services will be ~80% insourced by Q2 2017
IT FTEs by geography3rd party IT cash spend
by category, $m
We have significantly shifted our sourcing mix
15. 15
$1,753m
$1,515m
$1,365m
$1,158m
$915m
AZ cash investment in IT”
2013
Total cash investment in IT projected to reduce by over $800m (48%) versus 2013,
helping to enable increased investment in our R&D pipeline and launches of our new brands
Our workforce has shifted to a global operating model with 80% now insourced compared to
30% in 2013.
2014 2015 2016 2017
-48%
… and for delivering a major reduction in cost
16. 16
Customer Service and simplification
Reducing Service Outages by 20%
Resolving an issue at first contact 67% of the time
AskIT in 14 sites with 97% customer satisfaction
User experience CoE established
Simplification driving results on employee
onboarding, contracting with clinical sites and
external expert engagement
Supporting Business Goals
Enabling the Science: exciting initiatives such as
React 4 Visual analytics, iCare and Chemistry
Futures
Supporting Operations: 106+ projects including
integration of the Mount Vernon site
Collaboration: Virtual meeting use increased by
500% since 2014 contributing to an overall T&E
cost saving of $130 million
AZ IT is now adding real value across the enterprise
18. 2014 2016
Business Effect:
> 50%
20 per week
18 hours
12 months
>8000
75%
limited
Customer Satisfaction
Critical Outages
Critical Incident Response
Project Delivery
End of Life Servers
Critical Backups
Innovation
> 70%
< 10 per week
< 8 hours
9 months
<2000
>95%
increasing
> 80%
< 10 per month
< 3 hours
5 months
minimal
99.9%
pervasive
Stabilize, Simplify, Innovate
Key AZ IT performance metrics
2015
IT Operating Expenditure reduced from $1.35bn (2013) to $930m (2016)
13
19. Sites not located in
technology “hot spots”Some innovative programs in
science and informatics
Good business engagement in
pockets
High spend relative
to service levels and external
benchmarks
Not aligned with business; insufficient
cost transparency
Skill gaps: technology, product
management, client engagement
IT was critical to
future business
success…
but far from being a
credible or trusted
partner to the
business
Some real strengths…
… however some significant deficits
Unhappy customers...
too many handoffs, slow, confusing
AstraZeneca IT 2013 – Far from being world class
5
21. Key Actions:
2014
Massive Change
2016
Exceeding
Industry
Benchmarks
• Launch infrastructure
transformation
• Deploy foundational
cloud apps
• Re-org, re-skill
• AZ Chennai established
• Infrastructure
investment impact
becomes visible
• Cloud extensions
• Major investment in
Agile & LEAN
• Insourcing at pace
• Major uplift in service
performance
• Full control of operations
and technology
• Simplified application
estate -> mobile first
• Heavy Investment in new
capabilities – digital and
mobile
Rapid increase in Speed, Visibility and Impact of Improvements
Stabilize, Simplify, Innovate
A three year plan to transform Astra Zeneca IT
2015
Optimizing
8
23. Insourcing approach
Develop in-house IT capability in strategic locations at an attractive
cost point
23
• Target network of Global Technology Centres (GTCs) at four locations – Chennai (India),
Mexico (Guadalajara), China (Dalian) and Eastern Europe (location TBC)
• Chennai is our primary centre providing global technology services
• 3 Satellite centres in Mexico, China and Eastern Europe providing near-shore and
language capabilities for key markets ~200 – 300 FTE in each centre
• Initial focus on establishing GTC
Chennai centre.
• Site operational in August 2014, 300
FTE by end 2014, 1400 FTE by end
2015 and ~2300 FTE by end 2016
• 70+ key service lines now successfully
transitioned
In-source wide range of IT development
and maintenance activities, where there is
clear economic and strategic value to AZ.
Complement with support of simplified
supplier ecosystem
Rapid Build-up Scope
Strategy
In 2015:
$24.7 billion sales:
Product sales: 42% in the North America (US and Canada); 23% in Europe; 25% in emerging markets (12% growth during 2015) and 10% in rest of world (Japan, Australia and New Zealand.)
Externalisation Revenue: The Group’s business model includes externalisation as a component of our portfolio management strategy. Externalisation stems from our increased R&D productivity and our focus on three main therapy areas. It includes:
strategic collaborations to broaden and accelerate the development and commercialisation of key pipeline assets in our main therapy areas. A recent example is our collaboration with Celgene to explore durvalumab, our lead immuno-oncology asset, in haematological cancers;
establishing partnerships that allow us to retain an interest and significant share of the value in disease areas outside our three main therapy areas, but where we have a strong scientific position and interest. For example our partnership with Lilly on the development of AZD3293, our BACE inhibitor for the treatment of Alzheimer’s disease.
61,500 people:
35,400 people in our sales & marketing organisation and some 12,500 in our manufacturing and supply organisation.
20,100 are in Europe; 14,400 in North America, 3,400 in Central and South America; 1,700 in MEA; 11,000 in China, 3,000 in Japan, 1,400 in Russia and 6,500 in the rest of Asia/Pacific.
We invested $5.6 billion and employed 8,900 people in R&D. Our capabilities helped us to understand the unmet medical needs in different geographies and patient types.
At the end of 2015, our pipeline comprised 146 projects, including 125 in clinical development. Since we set our target in March 2013 our late-stage pipeline has transformed faster than we anticipated, with 15 NMEs in Phase III/pivotal Phase II, or under regulatory review compared with the original target of 9-10 by the end of 2016.
Our Supply & Manufacturing resources are located to support the reliable delivery of our medicines when and where they are needed.
AstraZeneca’s Purpose is to push the boundaries of science to deliver life-changing medicines. It underpins everything we do and gives us a reason to come to work every day.
We believe the best way we can achieve our purpose is to put science at the centre of everything we do. Science defines who we are. It is part of our DNA.
Science begins with our Chief Executive Officer, Pascal Soriot and extends across the entire leadership team.
But this is only half the story. We know we do not have all the answers. We want to share ideas because we believe it results in better medicines. We want the way we work to be inclusive, open and collaborative. This approach runs through all we do, from the people who work for us, and those who work with us, to the buildings we construct and the very way we carry out our research.
We aim to be leaders in three therapeutic areas: Oncology; Cardiovascular and Metabolic disease (CVMD); and Respiratory. Across each of these areas we aim to discover and develop innovative medicines that are the best treatment in their class and/or the first of a new class of medicine.
We are also selectively active in the areas of autoimmunity, neuroscience and infection.
To put ourselves in the best position to push the boundaries of science, we seek to leverage our combination of capabilities which encompass both small molecules and biologics, and include immunotherapies and developing innovative delivery devices that can offer choice to patients.
These are reinforced by a strong focus on personalised healthcare capabilities, which aim to match medicines only to those patients who will benefit from them. More than 80% of the medicines in our pipeline are being developed according to this approach.
Our teams also work alongside the world's leading academic and biotech research institutions to stimulate innovation and evaluate emerging technologies such as Modified RNA, CRISPR genome editing.
All this gives us an integrated capability that can be matched by few others.
We have a choice I guess to strip out the simplification element but I think its pretty key esp as Ops and IT did so well in both areas…….
Results from the latest iteration of the Pulse survey (Pulse 12) are now in….
22,400 people participated in the survey (60% of the sample invited)
IT and simplification both increased by 4% and 3%, respectively
Survey respondents had the opportunity to answer a specific free-text question regarding Simplification.
Thinking about simplification, please share any best practices based on what has worked well in your business area or other suggestions for how we can enable simplification at every level of our organization
8,000 people responded (36% of survey respondents)
Great story …….the journey from Sept 2013 – really cannot underestimate this as a reflection on progress made to date.
(It would be good to reflect on conversation in ITLT on 2nd Jan on what we can do next too to continue improvement)
In 2014:
$26.1 billion sales: 39% in the US; 26% in W Europe; 22% in emerging markets (12% growth during 2014) and 13% in rest of world (Canada, Japan, Australia and New Zealand.)
57,500 people:
34,000 people in our sales & marketing organisation and some 10,000 in our manufacturing and supply organisation.
22,700 are in Europe/Middle-East; 17,000 in North- South America; and 17,800 in Asia/Pacific.
We invested nearly $5 billion and employed 9,000 people in R&D. Our capabilities helped us to understand the unmet medical needs in different geographies and patient types.
At the end of 2014, our pipeline comprised 133 projects, including 118 in clinical development and 16 approved or launched. Since we set our target in March 2013 our late-stage pipeline has transformed faster than we anticipated, with 13 NMEs in Phase III/pivotal Phase II, or under regulatory review compared with the original target of eight.
Our Supply & Manufacturing resources are located to support the reliable delivery of our medicines when and where they are needed.
Medimmune
It’s the people who make AstraZeneca what it is, and here in the North-West, those people make a difference in their local communities, as well as in the wider world of medicine.
We get youngsters interested in science and medicine. There’s nothing like hearing about it from enthusiastic people who already work in the field. AstraZeneca has a network of STEM (science, technology, engineering and maths) ambassadors who use their own time, as well as company-donated time, to work with schools, colleges and science clubs.
We give students a real taste of pharmaceutical work. They have their own mentors, take part in workshops and can apply for an internship over the summer break. We also have a great work experience programme at all the North-West sites
In the North West, AstraZeneca donates time, money and equipment to charities that improve healthcare or enhance science education locally. Everyone who works for the company is entitled to help with volunteering or fund-raising events too.