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Seven steps to outsourcing success

A major shift is required in the way outsourcing's contribution to a business is measured, as few European companies are currently extracting full value from their outsourcing investments, despite significant investments being made into outsourcing deals in 2008. To give companies a helping hand, a newly released report has outlined seven steps that can help firms realize "real benefits" from their outsourcing investments. These benefits will go beyond the one-time cost savings and will help businesses to gain a competitive advantage.

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The report, prepared by Cognizant and Warwick Business School (UK), builds on earlier research into attitudes to outsourcing. As reported in previous issues of PTE (October and November 2008), many companies are incapable — or in some cases just not bothered — when it comes to measuring the value of outsourcing. In an exclusive interview with PTE, Ilan Oshri, one of the authors of the academic report, explained that most companies will not continue down this path and will eventually take steps to improve their understanding of outsourcing investments and ROI. "There is growing pressure by shareholders to understand the link between the firm's business strategy and ROI. Recent evidence indicates that approximately 40% of a firm's backsourced activities has put additional pressure on CEOs to answer shareholders about the real value of outsourcing," said Oshri.

This will drive businesses to seek more sophisticated ways to measure the Return on Outsourcing (ROO). But how can this be achieved? Unfortunately, there are no shortcuts as outsourcing excellence can only be achieved through a combination of methodology, industry expertise and the integration of business strategy into outsourcing objectives.

To help companies along the way, however, the report does offer some advice in the form of seven steps that the authors believe can help companies to realize the full value of their outsourcing investments:

• figure out the context of the outsourcing activity
• figure out the outsourcing strategy
• figure out the benchmark
• realize what is value over time
• make the CIO a strategist
• build the retained organization
• invest in outsourcing learning capabilities.

Oshri explained that each step will involve challenges; however, one of the key hurdles will be understanding the dynamic nature of value. "Most firms conceptualize the value in the contract and rarely revisit it over time," said Oshri. "Putting together learning teams to reassess 'value' over the outsourcing project life is critical."

Another challenge will be making the CIO a strategist, as this will require changes in mindsets in the businesses, as well as structural changes that will enable the CIO to act as a strategist.

Although Oshri believes that most companies will correct the error of their outsourcing ways, what awaits those who don't? "Two things will happen. One, the companies that don't assess the value of outsourcing will fail to understand what they are getting in return and consequently will become frustrated when expectations will not materialize," explained Oshri. "Second, there will be a growing disconnection between a firm's sourcing strategy and overall strategy. Those firms who don't measure the ROO will continue to focus on the operational side of outsourcing, missing out on opportunities to use outsourcing as a strategic tool to transform their organization and improve their strategic position."

The full report can be read at: www.quantifyingoutsourcingbenefits.com

The Pharma 2.0 transformation

What's in store for pharma this year? The industry is in the midst of a transformation, with dramatic changes such as increased regulations, new guidance on adaptive trials and internet advertising, new genomic technologies and the reality of personalized medicine on the horizon, according to analyst firm Ovum, which is part of the Datamonitor Group.

For the short term, however, Ovum believes that major changes are unlikely. In fact, unless any significant changes are brought about by new regulatory guidance or the Obama administration, Ovum pretty much expects the industry to remain status quo for the majority of this year. The trend for slow growth will continue, and cutting costs and reducing time-to-market will remain a priority, particularly with the impending patent cliff in 2011. The industry is also expected to continue to prioritize streamlining operations to cut costs, reduce time-to-market for new drugs and ensure a longer exclusivity period for patented drugs.

"Indeed, there will be changes in 2010 brought on by the US healthcare reform, the pending patent cliff and new regulations, but nothing as drastic as a stock market crash or the fall of the banking industry," predicts Ovum's report 2010 Trends to Watch: Pharmaceuticals Technology.

As well as meeting the short-term challenges brought about by current economic conditions, the industry will also have to keep its eye on the long-term trends that are gradually shaping the industry. One of the key trends noticed by Ovum is the shift to the new business model of Pharma 2.0, which, according to Ovum, is a "leaner, globalized entity whose increased scale is achieved 'virtually' rather than through accretion."

Indeed, technology will play a significant role in pharma's transformation is technology. Pharma 2.0 involves increasing collaboration and knowledge sharing between once siloed departments and global organizations. To achieve this, companies are embracing IT solutions. Additionally, they are looking to eHealth technologies as they collaborate more with healthcare organizations.

Technology will also be crucial to other parts of the business, particularly R&D as the move to personalized medicine gathers momentum. Ovum predicts: "As translational medicine and personalized medicine evolve, knowledge and data sharing tools, such as laboratory information systems and eNotebooks, will become essential. As personalized medicine relies on biomedical science and genomics, bioinformatics solutions are crucial to both pharma and biotech companies."

Clinical research will also benefit from increased technology. According to Ovum, eClinical technologies, such as electronic data capture and clinical trials management systems, can ease data collection and trial management processes.

Unfortunately, the report does also bring some bad news to the industry; the leaner business model of Pharma 2.0 could spell more job cuts as companies continue to cut their workforce and close down facilities. For the contract services industry, however, there is an upside. "Pharma companies are rapidly leveraging the abundance of CROs, CMOs and CSOs in the emerging markets to facilitate R&D manufacturing, and sales and marketing operations, as they offer a highly skilled workforce at a lower cost base."

Again, Ovum stresses that technology has a key role to play: "It is important for pharma organizations conducting business in the emerging markets to implement technology solutions that add value to their operations, as well as provide greater transparency to executives and regulators."

www.ovumkc.com

News bites

EMEA's new identity

The EMEA has unveiled several changes to the organization, including a new structure and visual identity. One primary change involves integrating human pre and postauthorization activities into one unit. Going forward, the EMEA will now be known as EMA.

Read more at: www.pharmtech.com/emeaidentity

Counterfeit fears

Five percent of consumers across five European countries suspect they may have received a counterfeit prescription, and 1% believe that they definitely have, according to research conducted by ICM Research on behalf of a UK patient safety communications company.

Read more at: www.pharmtech.com/icmresearch

UK adopts EC regulation

Guidance has been published in the UK regarding a new European variations regulation that comes into effect on 1 January 2010. After consultation, UK health ministers have agreed that the new rules will be adopted for all variations, including those held only in the UK.

Read more at: www.pharmtech.com/variations

Illegal websites targeted

The FDA has issued 22 Warning Letters to website operators to help curb illegal actions involving medical products. "Many US consumers are being misled in the hopes of saving money by purchasing prescription drugs over the Internet from illegal pharmacies," said FDA Commissioner Margaret A. Hamburg in a press statement.

Read more at: www.pharmtech.com/campaign

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PharmTech blog

Genzyme's next challenge

Genzyme's Allston Landing (MA, USA) plant has resumed production of Cerezyme, the company's treatment for Gaucher's disease. Genzyme has presumably found and eliminated the source of contamination that had been reported weeks earlier.

Read more at: www.pharmtech.com/genzyme

Regulatory challenges

Zubair Hussain, Presidentelect of The Organization for Professionals in Regulatory Affairs (TOPRA) and Head of Regulatory Affairs for Pfizer UK and Ireland, speaks about what he sees as pharma's key regulatory challenges for 2010 and beyond, as well as what needs to be done to increase the profile and perceived value of regulatory affairs in the pharma industry.

Read more at: www.pharmtech.com/zubai

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