The Path Ahead for Enterprise Computing

Contemplating changes in enterprise computing systems is never a casual task for pharma CIOs, regardless of how many new bells and whistles new enterprise systems might have. But these days, the tasks are even more daunting, even while the need for up-to-date computer systems has never been more critical. Consider:

• The major mergers of the past year—plus new multibillion-dollar acquisitions currently being contemplated—necessitate wrenching IT-infrastructure changes as two disparate systems come together
• FDA is on tighter regulatory kick, with many more product recalls being sought than in the recent past, and with system-validation and auditing functions becoming more onerous
• The push for personalized medicine is vastly complicating the process of clinical trials (let alone the adoption of genetic tests and biomarkers that drive personalized medicine). At the same time, the industry is getting better at mining commercial and observational data, leading to heightened expectations for pricing and forecasting accuracy, finer detail in adverse-event reporting, and more complicated “key account” marketing to managed care organizations (MCOs)
• The focus—some would say “distraction”—on social media as a collaborative tool for workers.

No CIO’s to-do list is complete without work groups or strategic planning on cloud computing, software as a service (SaaS), virtualization, enterprise-wide regulatory compliance (for such things as aggregate-spend reporting, or for Sarbanes-Oxley compliance) and IT security. Meanwhile, such perennial topics as business intelligence (BI), business partner collaboration, and outsourcing remain as urgent priorities in many life sciences organizations.

“The big themes at the largest pharma companies remain being able to communicate across the organization globally, working with trading partners and suppliers effectively, and having end-to-end visibility in materials, manufacturing and marketing,” says Bill Swanton, a VP at Gartner Group (Boston), who has tracked IT trends in enterprise resource planning and supply chains for years at AMR Research. “To that can be added the difficulties of uniting disparate IT systems as a result of mergers and acquisitions, and the push for better IT processes among healthcare providers, which the life sciences industry will benefit from.”

Among the largest multinational pharma firms, though, the problems are somewhat simpler to address, simply by asking, where are we on our version of SAP? Industry insiders are watching the Pfizer-Wyeth merger closely because Pfizer was the lone holdout among the top 20 multinational biopharma firms in not using SAP—but with the merger, Pfizer is now joining the others. (Pfizer Germany had been using SAP for years; meanwhile Wyeth has been a star among SAP life sciences clients for its SAP implementation.) According to Q1 reports from Pfizer, the company had spent nearly a quarter-billion dollars from last October to the end of Q1 on systems integration—a mega-sized budget as befits the world’s largest pharma company.

To be sure, the most broadly installed component of SAP in biopharma is SAP Financials, for financial reporting and accounting. SAP is competing fiercely against Oracle for enterprise systems and a host of applications ranging from supply chain management to regulatory compliance. IDC Health Industry Insights (Framingham, MA), in toting up total IT spending in life sciences, says that Oracle is the current leader, having passed SAP in 2009.

According to IDC’s latest biannual Life Sciences Leading Indicators report, published in July, software will nose out hardware and services in terms of percentage growth in this year, with 54% of companies expecting to increase their software budget, while about 18% expect a decrease (Fig. 1). IDC’s Eric Newmark, research manager, says that overall IT spending is on the rise, “a clear indication of a perceived economic recovery.”

Among IT vendors, Microsoft is actually the leader for pharma purchasing, at least by mention, with a 55% share. Among enterprise software vendors, Oracle gets the nod from 25.2% of respondents, and SAP from 12.6%. Among IT services vendors, Hewlett-Packard is the leader, with 8.9% of mentions, IBM second with 7.4%, and Accenture third with 6.7%.

Fig. 2, from the same report, shows spending priorities ranked by mentions. Analytics scored the highest, with just under 8% of respondents, a priority that has remained in the Top 3 for the past 3 years. Outsourced services, which had been in fourth place in 2009, fell back to 12th place in this survey. Meanwhile, channel management software (for tracking inventory and sales activity across commercial channels, and analyzing and reporting pricing trends), made the list for the first time last year, and has now climbed to 10th place.

Mobility and middleware

Enterprise software, especially for multinationals, tends to be massive systems that require major systems-integration work, and that encompass many corporate functions. So it’s not useful to do a feature-by-feature comparison of the systems. Interviews with the two industry leaders, though, show a shading in emphasis in terms of where the companies are headed.

SAP, which most recently acquired Sybase, a database-administration and connectivity IT developer, puts an emphasis IT availability “on demand, on premises and on device.” Andy De, industry solutions marketing director, says that the competitive landscape is changing toward providing not just the right data or analysis, but making it available to business users as “actionable insights” wherever a client wants to access it—including mobile devices. Paul Shawah, Life Sciences Business Unit director, adds that connectivity also encompasses collaboration with business partners—“beyond the four walls” of an enterprise—and SAP has been building out its collaborative capabilities across core business processes “so that business partners can collaborate inside the SAP system as if they were all on the same platform.” Bill McDermott, SAP’s newly installed CEO, summarized the theme in a recent speech as: “Mobility is the new desktop.”

The on-demand/on-premises issue brings up one of the hotter topics in business IT these days—the utility of providing software as a service (SaaS) via a rental agreement, versus buying a site license and installing the software on premises. Press reports say that SAP has been slow to bring its SaaS offerings, mostly organized around the “BusinessByDesign” platform, to market; the technology was announced in 2008 with a goal of having over 10,000 customers by this year, but the rollout has fallen short of that. To be sure, concerns over data security and reliable availability have not made SaaS a preferred choice among pharma companies, although the trend is clearly in that direction.

Oracle, for years, has stood out among IT vendors for its aggressive stance toward acquisitions, having rolled up a long list of enterprise and applications IT vendors, most recently hardware and Java software developer Sun Microsystems in 2009. This year, it added to its healthcare and life-sciences applications with the acquisition of Phase Forward, a leading provider of clinical health data systems (which, it’s worth noting, has a SaaS-based offering that Oracle will be extending).

“With our string of acquisitions, we’ve been forced to do what are clients do every day—get disparate IT systems to communicate with each other,” says Folia Grace, applications product marketing life sciences VP at Oracle. “That has led to the development of Oracle Fusion Middleware, which is designed to be a plug-and-play interface among IT applications.” Middleware is not a brand new concept; there have been many periods of time in IT development when a technical application needs an interface to communicate with the enterprise. But Oracle’s product—which is a standalone suite of software packages—is intended to make this interfacing happen faster and without the extensive applications development often required during enterprise installations. As Oracle updates its software applications, it is building in connections to Fusion Middleware, including templates that enable business-intelligence dashboards to be set up easily.

Arvindh Balakrishnan, VP of the Life Sciences unit at Oracle, says that traditional enterprise-resource planning has diminished as a focus of enterprise computing. “What happens now is a few people get the financials and ledger data from an ERP, but now it needs to be surrounded with better tools for managing research projects, portfolio management of the businesses, sales and reimbursement.” IT managers and corporate executives looking at updating their enterprise systems need to step back and take a broader look at where their organization is going, he advises. “Don’t look at point solutions. Look at the overall portfolio, and the product life cycle process.”

Oracle has its SaaS offerings, but Balakrishnan says that SaaS in its current state has its limitations. “SaaS makes a lot of sense when you don’t know ultimately how big the organization is that will be supported by the IT infrastructure.” For example, when a new pharma product is being launched, the sales and marketing organization that will support it might be small, with growth dependent on the commercial success of the product. A SaaS implementation, with its pay-as-you-go, flexible scaling is suitable for that situation.

On the other hand, the functionality and reliability of an on-premises system can be favorable when an existing organization with a known scale is in place.

The small enterprise

Enterprise or ERP systems are traditionally thought of for the largest corporations, but as time has gone on and mergers have continued, many large corporations now have multiple ERP systems. In addition, the usefulness of managing an organization from its enterprise system has made ERP attractive to smaller companies. SAP is currently promoting its “All-in-One” suite of enterprise tools, and has competed for small-to-mid-size clients for years.

But other vendors are also in the market, offering enterprise systems for the under-$500-million life sciences company. Prominent among these is CDC Software, which absorbed Ross Systems, a developer of ERP technology for process manufacturers, years ago, and has added to its portfolio with a variety of enterprise-level applications.

The most recent of these, says David Kahan, marketing manager, is TradeBeam, a global trade-management tool. The acquisition is expected to complement CDC solutions focused on collaborating with contract manufacturing organizations and other outsourced suppliers, all of which is united around the Ross Enterprise Outsource Collaboration application. Through acquisitions and organic growth, CDC is making a bid to provide IT solutions to a large number of the CMOs operating in China that provide APIs and finished products to manufacturers in the US and Europe. The company is also bidding to provide as much of its IT services via a SaaS model as the market will accept. “SaaS is held down right now in the life sciences industry by concerns over network reliability, security, and the complexity of enterprise applications,” says Kahan. “Each of these will be addressed by technology development; it’s not so different from many other IT developments over the years,” he says.

What’s coming

Looking into the near future, Oracle’s Grace says that the combination of cloud computing (for which SaaS is an enabling technology) and mobile devices is creating a step change in the enterprise computing world. “The entry of the Web was one such change years ago; more recently it’s been the development of the concept of dashboarding to bring together many disparate sources of information to provide business intelligence,” she says. The next step change might be called “everything on demand everywhere,” with the idea that both finding and then displaying or accessing necessary data will be done smoothly and swiftly in the background, so that a user can view information from a desktop or mobile device equally well, and IT systems will be able to synchronize and communicate data virtually at will.

This vision picks up some of the themes that have been espoused around business intelligence applications of late, where the refrain is “knowledge, not information.” Gartner’s Bill Swanton says that in the final analysis, the holdup is not IT capabilities, but human factors. “Company managers struggle to manage their businesses,” he says. “When a manager is trying to keep tabs on 200 key performance indicators (KPIs), he’s got a problem. Ultimately, the question is what do I measure to run my business?” PC