Bank on IT

With drug sales continuing to decline, pharmaceutical companies are pinching their pennies and closely picking and choosing what areas they should invest in. Unfortunately, infrastructure technology is one of the more expensive areas, and also one of the first to be scaled back. From manufacturing mainframes to desktop computers, almost every aspect of IT is being evaluated. And if an existing solution is working, chances are that a non–mission critical update will be skipped, or a new installation will be put on the back burner. Pharm Exec reached out to some of the biggest players in IT to find out what advice they're giving to life sciences firms that are more interested in investing in dollars and cents than ones and zeroes.

IN THE CLOUDS

Mike Naimoli

Director of US Life Sciences, Microsoft, Health Solutions Group

Pharmaceutical companies should consider an elastic service in which customers pay for computational services when they need it. By moving services into the digital cloud, companies can move not only their storage capabilities, but also compute programs to the Web at a variable cost. Then not only can they get away from the fixed cost of managing their own data centers, they can also leverage their partner company's internal resources. Those people can write applications for the cloud rather than have the pharma install them and maintain them internally. The best part is that you can pay for those applications when you use them rather than depreciate the fixed cost over a period of time.

Companies must look for really well-articulated service agreements that can provide assurance that what they put in the cloud is secure. I think that's a problem for everybody getting into the cloud space. That is a paradigm that we have to establish. Increasingly, life sciences organizations are becoming global performance networks, so it's not just about research and manufacturing or development that's being done within the organization. Increasingly, these organizations are being spread out across entire continents and the globe. So when I think of applications, I think of managing all the consumables that go into R&D, managing the global integration of a company with the proper approved vendors, and manufacturing inventory-item lists that these vendors are providing product to. Those are all things that could be in the cloud. Establishing any information market in the cloud and having it be accessible by vendors and the organizations that make up the pharmaceutical company is a good use for this type of service.

We are working with our customers to establish guidance and procedure to get a cloud that can pass an FDA-validated environment. So expect to see more applications hosted in the cloud in the near future.

PAPER PREDICAMENT

Jamie Hintlian

Vice President of Pharmaceuticals, AspenTech

Drug firms have committed to moving to a paperless environment for processes such as batch record management. The problem is that companies insist on keeping paper backup records that require an army of people to manage, process, and move it around in parallel with the electronic data. Going paperless is a binary thing—either you are paperless or you are not.

In the last 15 months, we have seen a greater push to truly paperless environments. That means that companies validate what they have in order to eliminate redundant paper-backup personnel. It becomes a productivity and cost of compliance enhancement by having a more disciplined approach to the assets they already have.

I've seen poorly considered investments in software and technology that proposed to solve a problem without having done the proper re-engineering or organizational change management. They throw a technology band aid on something and end up with a solution that is not used at all used or only partially used. That typically happens outside or above plants. Because of the regulatory nature of that environment, I think there has been a "if it ain't broke, don't fix it" mentality within manufacturing. So sticking to a paper-based process has been perfectly acceptable. There's a risk of supply disruption when you have to implement any kind of change in a validated environment. That becomes an impediment to a new technology.

But I think that's changing right now. In the current economic climate, it is important to look at manufacturing and operations to save money. The spend on technology in operations has become a C-level priority.

On the supply chain side, I've seen planning and scheduling leveraged to increase capacity in manufacturing, particularly in the biologics area where the complexity of the scheduling environment tends to be extraordinary compared to traditional small molecule companies. Capacity is really expensive in biologics; the idea is to improve your scheduling to create capacity. We've seen companies erroneously move to commissioning more capacities when through better utilization of their planning tools, they could use the same capacity that they have. That doesn't go on forever, but it certainly can bridge a major capitol gap.

USE WHAT YOU'VE GOT

James Macdonell

Vice President and Head of Delivery, Patni Life Sciences Practice

The most effective way for life sciences companies to manage the high costs of IT is to generate more value out of the systems they operate. It can be done—if companies follow a simple plan. Companies need to align IT with their business goals, define the strategic systems that will be the foundation of their IT architecture, and modify their IT environment to achieve their business objectives.

Aligning IT with business is a challenge in any market. Processes that were put in place to roll out a new drug may not be the best processes to support new product lines developed internally, through partners, or through acquisitions. Market disruption and economic turbulence provide the perfect opportunity for life sciences executives to evaluate every aspect of their business and make bold changes.

As the IT business alignment changes, executives have to re-examine their entire IT environment (application portfolio, operation processes, and infrastructure). Life sciences IT executives need to identify mission-critical systems, "sunset" the software and hardware the company does not need, and augment other systems with cost-effective, strategic alternatives.

The entire IT environment must address business goals in the following ways:

1: Strategic applications (ERP, CRM, Clinical Systems, Adverse Event Reporting Systems, and LIMS) must be used globally and expanded to address life sciences functions such as CAPA, Regulatory Reporting, and Quality Management.

2: Supply chain systems must be modified to meet life sciences business goals.

3: IT compliance must be aligned with the increasing numbers of regulatory bodies.

4: Long term partnerships with life sciences consultancies increase IT responsiveness and reduce costs for the IT environment.

5: Corporate IT management and its employees must focus on business goals, while trusted partners are used for world-class quality and world-class cost of services.

Cutting IT budgets alone won't help Life Sciences companies gain advantage in this current climate. Companies must utilize their IT systems more effectively to meet business goals, improve service and lower costs.

MEASUREMENT FOR SUCCESS

Jason Burke

Worldwide Director of Health and Life Sciences, SAS

You can't improve what you do not measure. IT organizations of all sizes are faced with cost containment and reduction on a daily basis. Yet many lack the discipline to actually measure those investments. They have to ask:

1: What IT assets are being under-utilized, and where is there an opportunity to consolidate?

2: Where do we see redundancy in capacity that, if reduced, could produce savings in both capital and operational charges?

3: How much of our IT budget is spent supporting tactical tasks with a limited lifespan (e.g., point-to-point integrations), as opposed to developing more efficient and robust enterprise capabilities (e.g., a formal data integration and management infrastructure)?

4: What projections can we make about future business and IT demands that would allow us to negotiate better terms with our IT providers?

5: What organizational processes are creating disproportionately high costs, and what process improvement and cost-arbitrage mechanisms could we use to improve them?

By institutionalizing IT asset and performance management into both periodic planning cycles and ongoing executive decision making, organizations can discover previously unknown opportunities for improvements that can deliver financial returns not just this year, but also in the years to come. In this way, IT cost reductions need not be seen as potentially harming the business—they become a tool to improve it.

THINK FLEXIBLY, ACT KNOWLEDGEABLY

Jon Winsett

Managing Partner, NPI Financial

Whether you know it or not, you and your IT department have been trained by your vendors to think rigidly when it comes to pricing. You pay for x amount of licenses or hardware units, and abide by a "rational" maintenance increase each year. However, IT pricing is not nearly that simple. In fact, it's pretty darn complex. Last year, SAP made 36 changes to their pricing. Do you know how that affected your SAP investment? Probably not. The reason why companies grossly overpay for IT is that pricing fluctuates so greatly and so often that it's impossible to keep up with it.

A remedy to this problem is to take back control of IT pricing—put it on your terms and make it flexible. The first thing you need to do is take a look at your existing vendor contracts, and explore ways you can inject more flexibility into these relationships. The key is knowing where to find the potential for flexibility. Every industry is suffering from a severe market contraction right now. This contraction has probably impacted how much server capacity you need, your network traffic, and the number or licenses being used within your organization. Rationalize and reduce the number of applications or licenses needed, and ask your vendors to consider transaction-based pricing models that allow you to pay only for what you're using. Or conduct a license audit to determine how many licenses for which maintenance is required. Lastly, challenge your vendor to reduce their purchase and maintenance fees. In this economy, the traditional rules of vendor pricing have gone out the window. It's time to make them work to your advantage.

OPERATIONAL EFFICIENCY

Greg Jones

Chief Technology Officer, Oracle Health Sciences

The biopharmaceutical industry is undergoing a remarkable transformation. At the center of this much-needed evolution are new challenges specific to the increasing role of IT in enabling the new clinical development landscape.

Although technology is playing a significant role in supporting the biopharmaceutical industry's need for greater operational efficiency, the current environment also requires that organizations be strategic with their IT investments and manage the costs associated with them closely. Strategies that should be considered include:

1: Avoid expensive-to-build-and-maintain customizations by leveraging best practices supported by industry-specific, packaged software. Recent advances have made software more flexible, and this approach can help deliver new levels of efficiency and cost-effectiveness to organizations of all sizes.

2: Make reuse a priority. A service-oriented architecture (SOA) approach allows organizations to capitalize on reuse efficiencies at the component and code levels. Organizations can develop a service or code once and leverage that building block to continue to build out their IT environment—gaining speed and agility while reducing development costs and complexity.

3: Employ business process–driven integration. Organizations should drive their application integration strategy from a business process perspective and on a consistent, standards-based integration platform. This approach focuses prioritization around high value business processes, and has proven to help organizations significantly accelerate the return on their technology investments. Most importantly, it helps provide organizations with the agility they need to adapt rapidly to changing market conditions while still getting the support they need—and have come to expect—from their IT infrastructure.

OUTSOURCE IT

Vita Cassese

Partner, Exigen Capital

Because the pharmaceutical industry's core mission is developing novel therapies to maintain health and wellness, innovation has always been a key value of the pharmaceutical industry. Information technology is certainly an enabler of that innovation. But with IT costs ballooning, companies must now look for creative ways to reduce this burden.

This includes rethinking the need to own non-strategic IT functions. If your basic IT support and infrastructure functions do not differentiate you from the competition, perhaps there is no need to own them. An effective outsourcing contract not only reduces costs, but perhaps more importantly converts fixed cost to variable costs. This increases business agility as one can scale services as the needs of your company change.

Outsourcing has been available for quite a while, but it is only the beginning. The emerging business process utility (BPU) model creates the possibility of outsourcing a subset of the broader range of business functions that IT enables. BPUs provide common services to multiple industry participants—just as an electric utility or a payroll processer would do.

It only takes a bit of imagination to develop many examples of where this model could apply in the pharmaceutical industry. Few such shared services exist specifically for the industry today, but this creates an opportunity for visionary industry participants to participate in their creation, and perhaps participate in selling a best-practice BPU solution back into the market. Ultimately, the entire life sciences industry can benefit from the lower costs and more consistent results this advanced form of outsourcing provides.