AstraZenecaThe journey to world-class IT

Chris Day 23rd June 2016

•$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 20152

AstraZeneca – business overview

3

Medicines that change lives and make a difference

Making hearts healthier

Helping more people survive cancer

Helping people breathe more easily

How do we do this?

• We work with ‘discovery’ scientists to make sure the chemistry can be manufactured

• We design the best ways for patients to take the medicine

• We produce the new medicine

• We make sure clinical trials can be carried out to the highest standards

• We continually improve formulations and processes

4

AstraZeneca in the North-West

60 yearsAt the forefront of drug discovery testing and production for more than £1,377m 30

patent first-approvals for medicines discovered here

Contributing

of Gross Value Added to the UK economy

Macclesfield – AstraZeneca

the largest pharmaceutical production facility in the UK

Speke –AstraZeneca

the sole provider for the UK government’s childhood flu vaccination programme

Macclesfield – AstraZeneca

a hub for world-class medicines development

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

Customer Focus

Operational Excellence

Technical Leadership Simplification Collaboration

1 2 3 4 5

A different strategy was required …

6

… supported by a challenging stretch target

Spend half as much money to deliver twice as much service by 2018

7

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

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

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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

Global Technology centers expand AZ technical capability

10

Insourcing approachDevelop in-house IT capability in strategic locations at an attractive cost point

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• 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

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1259 1098 1155 1051 1087

450225 66

19 3

301

14802066 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

326197 152

142 175

176

153150

70 65

65

6147

2013 2014 2015 2016 2017

Hardware/leasing

Sof tware

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 65% insourced by 2017

IT FTEs by geography3rd party IT cash spend by category, $m

We have significantly shifted our sourcing mix

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

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2014 2014

Get a coffee and chat while starting up

Slow and difficult to connect on the road

Old devices, stuck on old technology

Spotty inconsistent Wi-Fi

Today

Lift the lid, instant connect, no password

From anywhere, from any device

Continual refresh increasingly mobile

Ubiquitous Wi-Fi

Large, complex application estate

Clunky, legacy enterprise solutions

Stuck on old technology

Today

50% applications removed. Business

simplification enabler.

Leading edge cloud solutions deployed.

Mobile first

Rapid agile, introduction of new

technology

Making AZ a great place to work

Improving the user experience in 2016 and beyond

Improving connectivity

Simpler ways of working•Faster, cost effective IT changes•Stable, responsive and innovative IT services•Simpler choices for users•Harmonising and standardising data

• Smart IT as a global standard• Full network automation and monitoring• World class architecture in new sites• Significant expansion of Video Conferencing

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Enhancing collaboration• Save $ and time with virtual meetings• Continued shift to “mobile first” strategy• Exploit cloud technologies• Streamline user workflow and transactions

Key lessons learned

• “Culture eats strategy for breakfast”. Fast paced delivery required a culture reboot -> Move to openness, smart risk taking and an entrepreneurial mind-set.

• Change management is critically important . Significant investment in stakeholder and IT employee engagement throughout the program. Proved to be a key success factor.

• Plan for success. We under estimated how successful our model would prove. At times in-sourcing demand far exceeded our ability to deliver.

• Robust governance is key. We invested significant effort in putting in place a robust governance processes. Even so we had to continually re-evaluate and strengthen these structures as the program progressed.

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Questions ?

17

18

Backup slides

Customer Focus

Operational Excellence

Technical Leadership Simplification Collaboration

1 2 3 4 5

1. Improved user experience & choices

2. IT is getting “out of the way” of the business

3. Our ability to introduce new technologies that add value and enable AZ success

1. A stable and secure the working environment

2. Insource work for greater speed and agility – our own people own IT

3. Benchmarked as moving to world class

1. IT delivers cutting edge technology

2. Partner with technology leaders

3. Move aggressively to the cloud (where there is a business case)

1. A simpler IT organization

2. Simplified & faster business & IT processes

3. Reduced group operating costs of 26% by 2016

1. IT provides world class collaboration tools

2. Increased speed and agility in working with partners (internal & external)

3. A culture of innovation and entrepreneurial behavior enabled by technology

From these we will demonstrate:

A different strategy was required …

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3

•Operating model that strengthens alignment of IT to the business

•Balanced near shore and offshore delivery with uncompromised customer focus

• Incubation centres enabling development & delivery of leading edge solutions

• Centres of excellence to focus on key technologies or architectural paradigms

•Simplified IT organization with clearer governance and accountabilities

•Simplified processes, consistent and transparent approach

•Reduced costs and overheads

• “One team” across GTCs and onshore sites is integral to AZ promoting and fostering better collaboration

• Agile and delivery focused – utilizing the best skills irrespective of the location

•Consolidated teams leading to better quality and efficiency

•Major uplift in service quality.

•Transitioned services are exceeding target delivery levels.

IT Transformation has delivered a wealth of benefits

8

2012 2013 2014 2015 2016 20170.0%

1.5%

3.0%

4.5%

6.0%

3.2%

5.0%5.4%

4.6%4.2% 4.0%

3.5%

IT Spend % of Revenue (Pharma > $10b) AZIT IT Spend % of Revenue

21

IT S

pend

% o

f Rev

enue

Revenue* $B 27.5 24.9 24.4 25.0 24.9 25.8

*BP 12 Revenue Projections

High spend relative to external benchmarks