GSK hands out $171m BPO contract

The news is good for IT services firm Affiliated Computer Services (ACS), who was on the receiving end of the new ten year contract.

Under terms of the agreement, ACS will consolidate for GSK a number of services that are currently outsourced to a variety of providers or being delivered within GSK, therefore the news will not be welcomed by the undetermined number of other outsourcing firms who have lost their contracts with the UK-based drug giant.

It is not known what internal reshuffling will also result from the decision and whether job cuts will follow and it is also unclear as to whether some or all of the BPO services will now be carried out by ACS in low-cost offshore destinations, such as India, and whether cost cutting was the motivating factor behind the decision.

When asked by Outsourcing-Pharma.com to comment, GSK refused.

Specific functions that ACS will now perform include payroll processing and benefits administration for GSK in the US, as well as employee and manager self-service portals and integrated online tools for several HR processes across US and UK businesses, said a statement released by ACS.

ACS first became an IT outsourcing partner to GSK in June 2003 when it began supporting GSK's legacy business systems.

In 2004, ACS signed a subsequent agreement to custom build a new Registration and Medication Ordering System (RAMOS), supporting GSK's RAMOS clinical trials.

Late in 2005 the firm also awarded a $100.5m contract to provide remote server management and monitoring services for more than 5,000 UNIX, Wintel, OS390 Mainframe, and Open VMS servers located at GSK data centres in the US and UK.

Meanwhile, GSK's latest decision is symptomatic of a growing IT and BPO outsourcing trend that is sweeping the pharmaceutical industry.

Swiss giant drugmaker Novartis recently signed a contract deal with services provider Genpact to outsource some of its business processes to India.

India-based Genpact will provide the pharma division of Novartis with support in accounting and purchasing activities and manage this as a global shared service, Chris Lewis, Novartis' spokesperson told Outsourcing-Pharma.com.

Last November, Eli Lilly awarded Indian software firm Tata Consultancy Services (TCS) a major multiyear business process outsourcing (BPO) contract, while Danish pharma company Novo Nordisk signed a similar deal with TCS a few months earlier.

Indeed, evidence of this trend is supported by recent research that suggested that more companies in the pharmaceutical industry than any other industry are set to increase their reliance business process outsourcing this year.

Both cost and process improvement were motivating factors for undertaking BPO, according to Equaterra, the consulting company that produced the research last month.

Of the 25 large pharmaceutical companies surveyed, 44 per cent of firms that had outsourced one or more business process areas planned to expand their outsourcing into new process areas, 39 per cent planned to expand outsourcing into new geographies or business units, while 22 per cent planned to expand in the existing process areas outsourced, and nobody planned to cut back their outsourcing, said the report.