What mistakes did AstraZeneca make?
AstraZeneca being among the world’s largest pharmaceutical company entered a deal with IBM in July 2007. The company signed a seven-year contract worth 1.4 US dollars with IBM. the agreement was based on an agreement that IBM would offer outsourcing services to the pharmaceutical company. The contract was to spurn over 60 countries, 91 clauses and about 31schedules, Zulia (2011)..
- The pharmaceutical company went ahead to terminate the contract prior to the agreed time
- The information technology capabilities of the company are tied to R&D hence complexity
- The deal was based on an outcome based specifications and did not put into consideration its growing and development needs
What mistakes did IBM make?
According to Sin (2011) IBM was quick to make an outsourcing contract with AstraZeneca. This was an opportunity for it timekeeping profits because this was a deal with a big and better pharmaceutical company that employs the use of information technology in its daily activities. The agreement made was to be of great aid to the outsourcing company.
However, the IBM made mistakes such as;
- The IBM did not ensure that obligations and requirements for termination are included in the contract before accepting the deal.
- The IBM used a single outsource vendor instead of dividing the outsource vendors.
- Both parties failed to clearly define the exit strategy during the pre-contract stage
Why are outsourcing contracts for five or more years?
Generally, the whole process of outsourcing included the large number of vendors that trusts and makes investments basing on the contracts that they make. The IBM made the contract using the template of the vendors.
Why do you think two major corporations could make such mistakes?
The two parties were quick to sign the deal as they were in good terms. IBM was sure that they would service the pharmaceutical company without facing problem. The pharmaceutical company on the other hand never considered their growing factor. It was easy to just to sign the contract as the requirements at that time were being me by the vendors. Using a single outsourcing company seemed cheap, easy and conducive as they could easily monitor them.
Generally, wrong assumption, lack of preparation and low level knowledge on outsourcing by both parties led t the mistakes. They also overlooked very critical details as they hurried to seal the deal.
Do you think the 2007 SLA was doomed to fail? Explain your answer.
Yes. The2007 SLA was doomed to fail from the beginning. the reason for contract termination wouldn’t matter but the service provision and fees battles would soon pop up as the contract ended.
What provisions in the 2012 SLAs protect AstraZeneca and the vendors?
It is well known that contracts tend to cover the provisions of standard of deals in technological services, which houses the SLAs and pricing, and also the policy for cooperation. The policy contains thirteen principles that outline the principles of collaboration. A good example of the principles in this case is the, “first fix, pay later”. This only means that when a technological problem is experienced, IBM and AstraZeneca should work together and fix the problem as fast as possible without considering the cost implications, Bogdanich (2010)..
Why would parties prefer to use an arbitrator instead of filing a lawsuit in court?
Many parties prefer, as a matter of course, that their disagreements be forwarded to a common arbitrator. The following are factors that many put into consideration when opting arbitration rather than filing a law suit in a court or rather adding a compulsory arbitration clause in the contact during contract signing. The using of an arbitrator has more advantages to that of a law court. It is less expensive, les time is used in the process and there’s less confrontational arguments as the concerned parties had earlier agreed to the arbitration earlier. This factors are discussed in length below;
- Time - Arbitration provides an easy, fast and efficient problem resolution compared to time consuming court proceedings. The arbitration process also limits the ability or chances of appealing make the case judgement fast and attainable in a short period of time.
- Flexibility. Unlike the Court litigation which is wholly depends on statutory and procedural laws, arbitration uses provisions obtained in an agreement between the parties once the arbitration process commences. The conflicting parties also have an opportunity to come up with procedural rules for the arbitration process, document exchange or witness interrogation’s rules to be followed during the arbitration are pre-established and are added in the arbitration document.
- Cost of case. Arbitration is found to be less costly than filing a law suit, simply because of its squeezed schedule in an effort to complete the trial quickly. Law suits require a lot of finance in both pre-trial and succeeding processes, which include paper work and witness’s deposition.
Zulia, U. (2011). Can competition law repair patent law and administrative procedures? AstraZeneca. Common Market Law Review, 51(1), 281-294.
Bogdanich, W. (2010). Radiation offers new cures, and ways to do harm. New York Times, 23, A1.
Sin, H(2011). IBM POWER7 multicore server processor. IBM Journal of Research and Development, 55(3), 1-1.