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Case study

A Pharmaceutical Company Transforms Its Technology Function

Outperformed by competitors on a range of technology benchmarks, PharmaceutiCo responded by migrating to a more advanced technology platform that improved its run rate and facilitated a one-time inventory reduction of $4 million.

  • min read

At a Glance

  • $3M savings
  • 2% of revenue attributed to annual run-rate benefits

The Story

The Situation

PharmaceutiCo's* technology and delivery model was experiencing gaps along several dimensions vis-à-vis best demonstrated practices for similar technology organizations. Among its shortcomings:

  • Major functionality gaps in terms of bar-coding/workflow, data warehouse and customer connectivity
  • Complex technology
  • OldSystem, the current technology platform, was starting to experience signs of architectural fragility
  • Lack of alignment of tech resources with business priorities
  • Limited economic benefit from technology investments
  • Sub-optimal resource management and use of outsourcing

As a consequence, PharmaceutiCo's technology functionality lagged competitive benchmarks in areas critical to the company's strategy.

Although PharmaceutiCo was pursuing a number of technology initiatives, these were unlikely to close the relevant gaps within the context of the current IT delivery model.

PharmaceutiCo asked the Bain team to advise on the following issues:

  • How effective is PharmaceutiCo's technology group?
  • How can the group best support the business strategy of achieving competitive parity on operational productivity and best-in-class performance on customer relationship management and retention?
  • How can PharmaceutiCo accelerate existing tech projects?
  • Which core application package should be used?
  • Should PharmaceutiCo outsource any part of its application development or maintenance?
  • How should PharmaceutiCo's IT function be organized?

 Our Approach

We created a two-phased approach to determining business full potential and best practice benchmarks particularly around operational productivity, salesforce and customer service/relationships.

Our Recommendations

We recommended a number of improvements to the company's technology and delivery model.

Technology diagnostic recommendations

  • Create IT Steering and Operations Committees to serve as the connective tissue between the technology function and the rest of the organization
  • Develop prioritization schemes to align tech projects with business priorities
  • Utilize business and project plans to manage and track the economic benefit from technology investment
  • Selectively use outsourcing to reduce costs, improve outcomes and accelerate the closing of technology functionality gaps

Tech strategy recommendations

  • Use NewSystem, new technology platform, which has more complete and advanced functionality than competing packages
  • Do not outsource application development and maintenance on NewSystem during the migration as it will add additional complexity and implementation risk
  • Simplify the current organization structure by reducing nine divisions to five divisions, combining similar functions and systems
  • Develop technology organization performance measurement system
  • Close critical hire gaps

The Results

We encouraged our client to begin implementation of a new ERP platform (NewSystem) for their facilities. At the beginning of the case, every member of the management team was convinced this was not the right answer, but the business case and process we facilitated persuaded them to begin pilots and pursue implementation. The expected annual run-rate benefits equate to 2% of revenue.

A range of other benefits were realized as part of the project. These include a $4 million one-time inventory reduction, $3 million in savings from generic product selection, improved customer service/retention and risk reduction, leading to fewer regulatory issues. Furthermore, operating efficiency was increased, performance metric reporting improved the establishment of an IT steering group help the business alignment/value assurance efforts.

 

* We take our clients' confidentiality seriously. While we've changed their names, the results are real. 

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