Posts Tagged ‘Outsourcing’

Pharma Outsourcing Driving Need for Cloud-Based Services

September 30th, 2014

As demand shifts from high-margin branded drugs in Western regions to low-margin generics in emerging markets, successful bio/pharmaceutical companies are adopting new business models that include significantly more outsourcing and require a deeper understanding of costs all along the value chain. Enterprise resource planning (ERP) systems that have been effective for the internal management of sourcing and production are insufficient for managing the extended relationships and multidirectional communications needed in this new environment. Bio/pharmaceutical companies are therefore turning to cloud-based services to achieve greater transparency and facilitate collaboration.Outsourcing38

Outsourcing trend
The biggest trend driving changes in the market today is the shift from a focus on Western markets to growth areas in emerging regions, according to Diane Palmquist, vice president of product management for GT Nexus, a cloud supply-chain platform provider. “High-margin blockbuster drugs are coming off-patent and mature Western markets are experiencing limited growth. Consequently, the focus has shifted to emerging markets, where the growth rate is higher. However, the demand in these regions is greatest for low-cost, low-margin products, and buying habits are very different (buy the dose, not the bottle),” she observes. The result: bio/pharmaceutical companies need to completely transform their old business models.

The biggest impact can be seen in the higher level of outsourcing now taking place. “Pharmaceutical companies are outsourcing nearly every aspect of the business, including some research-related activities, API manufacturing, drug product formulation, packaging, and logistics,” says K.R. Karu, industry solution director for Sparta Systems, a provider of enterprise quality management solutions. Palmquist adds that currently approximately 40% of industry business is outsourced, and that number is expected to increase to 80% over the next several years.

Loss of control
As outsourcing has increased, companies have lost control over many aspects of the supply chain. “Companies are still trying to manage interactions with suppliers and service providers through personal communications, which is not only inefficient, but ineffective given the number and complexity of relationships and issues that must be managed,” Karu says. The low margins of today also do not support this approach. ERP systems, which in the past have been used to connect purchasing with production operations, are also not capable of managing the complex interactions between service providers and pharmaceutical companies, according to Palmquist. Furthermore, to meet the demand of emerging markets, pharmaceutical companies must be very responsive and need solutions quickly. ERP systems generally take about 18 months to get up and running, and often by that time the opportunity has been lost.

One of the key issues for bio/pharmaceutical companies is the lack of visibility into contract manufacturers. Often pharma companies do not find out about issues that can impact the delivery of API or finished drug product until much later because the suppliers are trying to solve the problem. The common response, according to Palmquist, is to try and stay on top of potential problems by constantly contacting the suppliers via phone or e-mail, which is not a practical, sustainable, or effective approach.

“The challenge lies in the need to manage a whole host of different suppliers at the same time that the customer base is changing dramatically and bringing an entirely new set of customer expectations. The key to this puzzle is to obtain visibility on both the supply side and the value side, from inventory to quality excursions to government fees,” Palmquist asserts.

Gaining visibility
Cloud-based services give bio/pharmaceutical companies the ability to extend their visibility into all parts of the value chain, while at the same time enabling vendors to access the information they need in order to provide optimum services. Raw materials suppliers, contract research organizations, contract manufacturers, brokers, and distributors can all interact simultaneously under very controlled conditions that ensure that important information gets to the only the right people when it needs to, according to Palmquist.

More benefits of the cloud
There are several other practical advantages of using cloud-based systems, according to Karu. Because cloud-based software systems are developed by software experts, they are consistent for all users. Maintenance and upgrades are provided on a continual basis, as well as any necessary validation procedures to meet special compliance requirements for the pharmaceutical industry. There is also no need for investments in extensive information technology infrastructure; the servers are maintained by large companies (think Google and IBM). In addition, redundant systems located around the world ensure non-stop operation.

Perhaps most importantly, though, is the controlled nature of the interactions through cloud-based systems. “Generally the information that is being shared using cloud-based systems is already being shared via phone calls and e-mails. There are, however, much stronger controls in place in cloud-based systems that ensure that information only goes to the people who should see it. There are no such controls around the use of e-mails with file attachments,” Karu explains

Achieving assurance of supply
Overall, according to Palmquist, cloud-based systems offer bio/pharmaceutical companies assistance with achieving assurance of supply. All business activities can be integrated in the cloud and important issues, exceptions, and problems flagged automatically, so that efforts are appropriately focused on resolving potential issues. Not only purchasing systems, but logistics and quality management systems can be linked through the cloud so that the bio/pharmaceutical company is always up to date on what is happening and can readily share information that impacts multiple vendors.

“Moving an established quality system to the cloud and sharing it with raw material suppliers and contract manufacturers makes it possible for these vendors to exchange information immediately. In addition, these vendors can be directly included in specific activities, such as investigations of excursions and remedial actions, leading to much more rapid resolution of problems,” Karu comments. Similarly, cloud computing can benefit other aspects of supply chain management and aid in the rapid response to any type of possible interruption in the supply, from natural disasters to manufacturing malfunctions to distribution issues.

Collaboration is key
“The key to success for bio/pharmaceutical companies with such complex supply networks is collaboration across the value chain. Cloud computing is an effective way to enable such relationships,” Karu says. “There is definitely a growing realization in the pharmaceutical industry that suppliers must be thought of as extensions of the company. To be truly successful, we believe that the relationships between bio/pharmaceutical companies and their suppliers should be viewed more like joint ventures, with real transparency of information,” adds Palmquist.

The idea of allowing vendors to see into their business operations is the most challenging aspect of cloud computing for biopharmaceutical companies. “Most companies are at least initially very resistant to letting suppliers see their company information. It is not possible, however, for vendors to effectively participate in quality investigations, audits, and remediation efforts without two-way communication. He adds that the pharmaceutical industry tends to be very conservative about adopting new technology, in part due to concerns about acceptance by regulatory agencies, and cloud computing is no exception. “Both pharmaceutical companies and their suppliers are interested in cloud-based solutions, but neither is convinced that the other is willing to implement them. The greatest challenge at this point, therefore, is to convince the various members of the pharmaceutical industry supply chain to take the first step.

Early adopters
Companies that have already moved forward with the use of cloud-based services are those that have been pushed fastest towards emerging markets and have realized that ERP systems are insufficient and leave them “flying blind,” according to Palmquist. Pfizer is one example. “Pfizer needed to figure out a way to not only maintain but grow its revenue stream despite having 9 of its blockbuster drugs lose patent protection¾a Herculean task,” she says. Not only did the company need to better manage the supply side, it also needed help tracking costs (taxes, fees, etc.) on the value side in detail, something that was not a concern in the past with high-margin products.

“We expect that more companies will be in this same position and looking for solutions that enable simultaneous, multidirectional communications with numerous members of the value chain. As that occurs, there will also be greater realization that any dollars spent in the supply chain ultimately comes from the pharmaceutical company,” says Palmquist. In the past, it was easy for manufacturers to separate supplier costs from their costs because margins were high. That will no longer be the case as the industry becomes a low-margin business. “As we see in the consumer electronics industry, where every penny is tracked throughout the supply chain, it will be necessary for bio/pharmaceutical companies to look at supplier costs as their costs in order to maximize profits. Connect with suppliers through cloud-based systems will help not only control costs, but also quality and all other aspects of their operations,” she concludes.

For those reasons, Karu anticipates an explosion in demand for cloud-based services in the pharmaceutical industry. “The many-to-many relationships that are possible with cloud-based systems provide a much more efficient mechanism for processing information and managing interactions, which will be critical to the success of pharmaceutical companies in the increasingly challenging business environment they are facing,” he says.


Almost three-quarters of big companies to increase outsourcing

September 30th, 2014

Almost three quarters of global businesses will increase their investment in outsourced services, according to research by KPMG.Outsourcing37

The research also indicates that more firms are taking advantage of global delivery models including functions such as finance, procurement and HR delivered centrally, often offshore.

KPMG’s survey found that 72% of big businesses plan to increase outsourcing spending, while 61% said they will increasingly use global shared services for IT and business processes over the next two years, with offshore services accounting for a larger portion of both.

In its report, The State of Services & Outsourcing in 2014: Things Will Never be the Same, carried out with HfS Research, KPMG said that, on average, enterprises plan to increase their offshoring activities by 20% to 30% over the next year.

The report said integrated global services models that incorporate internal shared services and outsourcing are the core focus for most enterprises, with 56% are already increasing investments in centralised functions to manage a mix of service delivery models.

Dave Brown, KPMG’s head of global lead, shared services and outsourcing advisory, said outsourcing is at a “crucial juncture between providing genuine value and low-cost staff augmentation.”

He said suppliers today must go beyond providing people to carry out standard business functions.

“Providers need to prove they can do more than basic operations, otherwise outsourcing runs the risk of becoming a staff augmentation model for flexing operations as opposed to a strategic partnership between provider and buyer that can add more skill, technology, and analytical capability for clients.”

Buyers also have to consider where to have services delivered from. The global business service delivery map is changing with a wide choice of locations today.

For example, when pharmaceuticals giant AstraZeneca decided to reduce the amount of IT it outsources, the company decided to retain the advantages of the offshore delivery model through a captive centre in India. The company is also planning to open delivery centres in Eastern Europe and California.

The recent 2014 Global Services Location Index, from AT Kearney, revealed the best places to outsource services and set up global delivery operations.

Asian countries dominate the management consultancy’s index of the top 50 global locations, with India (1), China (2) and Malaysia (3) making up the top three. Eastern and Central Europe also feature in the index: Bulgaria (9), Poland (11), Romania (18), Hungary (31), Czech Republic (33) and Slovakia (35).

Latin America has two of the top 10 outsourcing locations with Mexico (4), Brazil (8), Chile (13), Costa Rica (24) and Columbia (43) also in the index. The Middle East and North Africa region featured Egypt (10), Tunisia (28), Morocco (34) and Mauritius (36) in the index.


Swedish IT staffing company opens website development training center in Poltava

September 29th, 2014

Beetroot, a Swedish information technology staffing company, on Sept. 19 opened an academy in Poltava to train website developers on the WordPress platform. Twelve students will undergo a three-month course after which they will be fully employable within Ukraine’s expanding IT sector, reads the company news release. Outsourcing36

Called Beetroot Academy, the frontend developer center is supported by the Swedish International Development Cooperation Agency through the Swedish embassy in Ukraine.

Ukraine’s $2 billion outsourcing market has been experiencing double-digit growth in recent years. Worldwide there is a shortage of programmers, and 95 percent of the development work conducted in Ukraine is for foreign clients.

Beetroot employs some 40 people in Ukraine. Its base of operation is in Odesa, but also employs people in Kharkiv, Kyiv and now Poltava. Having roots in startups, the Swedish IT-resource company matches developers and designers from Ukraine as well as Moldova with Scandinavian and American emerging  IT-oriented companies.


Cloud Computing Solutions and the IT Budget

September 29th, 2014

Cloud computing solutions may be disrupting today’s IT budgets. New research has found that various technologies are affecting how much IT departments are spending.Cloud computing concept.

Outsourcing Falls

A new survey by Computer Economics discovered that, for the second year in a row, IT outsourcing has fallen while new IT resources are growing. About 10.2 percent of companies’ spending was allocated to outsourcing, a decline from 10.6 percent in 2013 and from 11.9 percent in 2012. Meanwhile, IT operational budgets rose 2.4 percent this year. Outsourced help desk, desktop support and application maintenance functions are on the decline, while IT security work and web operations services are seeing growth.

According to the results featured in ZDNet, IT managers want plug-in, ready-made services that are available thanks to cloud computing. They understand they can be ready with their solutions in just hours or even minutes. The study also pointed out that the classified use of software-as-a-service as a form of application hosting outsourcing is on the rise. The cloud is expected to continue to have an impact on both traditional outsourcing and in-house operations.

Investing in Infrastructure

Firms from all industries seek cloud computing solutions to increase collaboration and improve productivity; it is what IT professionals are budgeting for when investing in new infrastructure. At the end of the day, the benefits and risks of cloud computing affect how firms manage their IT infrastructure costs. Midsize firms often turn to public clouds since they do not have the same security risk and legacy IT restrictions as large enterprises.

When IT professionals at midsize firms aim for innovative cloud solutions, they aim to gain better-aligned technology spending that is in sync with business needs. At smaller firms, the money spent on IT is often aimed at maintenance and security areas, so it is easy to overlook the value of the cloud. IT professionals that fail to recognize the benefits of well-thought-out cloud strategies will not invest, and that can affect potential gains. By consulting with experienced cloud vendors, smaller firms can implement the right solutions that align with their business goals.

Spending Future

IT spending is outpacing outsourcing spending, and according to new research cloud has a lot to do with it. It is a trend that more midsize firms migrating to the cloud will see firsthand as the confidence in cloud solutions continues to take off in the marketplace.


AusPost weighs up outsourcing end user IT

September 29th, 2014

Union leaps to defend cut-weary workers.Outsourcing32

The Communication Workers Union (CWU) has disclosed its knowledge of tentative plans inside Australia Post to outsource the organisation’s end user computing functions.

The union today warned that any decision to go ahead with the proposal would cast a shadow over 300 workers that manage end user computing within the organisation’s 1200 strong information, digital and technology unit.

The EUC team currently oversees the day-to-day tech needs of a 32,000 strong Australian workforce.

The CWU claimed in a statement that any losses would add to the 900 jobs in management, administration and support areas – including IT – that are already facing the axe before June 2015.

It also criticised senior management for looking towards its outsourcing options before it attempts to cut down on the proportion of contract staff on its books.

For the people in Retail Technology Transformation this will be their second restructure in 12 months.  Once again there was no mention of reducing the number of contractors.

- CWU statement.

Australia Post, however, insisted that it has yet to commit to any outsourcing or offshoring strategies, and said it will keep staff up to date as it moves through the evaluation of any options.

“No decisions have been made in relation to our EUC function,” a spokeswoman told iTnews.

“Just like many businesses, Australia Post is operating in a challenging business environment. We will continue to assess our services against the market to ensure we are delivering value to our business and our customers.”

The organisation is undergoing a very public struggle with an increasingly outdated business model and fast declining mail numbers.

Chief executive Ahmed Fahour has invested in several technology programs – such as digital mailboxes and a developer centre for e-commerce sites – in an effort to protect its revenue base.


Silicon Valley gets taste of Ukraine’s IT world during UTGem conference

September 26th, 2014

The first Ukrainian Tech Gem conference was held in the heart of Silicon Valley, an event that on Sept. 18 showcased an emerging market’s technology ecosystem to more than 500 potential partners and customers.Outsourcing29

In attendance were American and Ukrainian information technology firms, venture capital funds and startups. They came to hear a message that was as simple as a 140-character tweet: despite Russian military aggression and the tough economic situation, Ukraine has innovative potential, tech talent, and is open to cooperation.

Three stages ran simultaneously.  The main stage held panel disccussions, IT companies showcased their products and services in the exposition zone, and the smaller demonstration stage had brief presentations.

UTGem was privately funded and did not receive financial support from the government, said co-organizer Igor Shoifot, chairman of Happy Farm and the U.S. representative of TMT Investments venture fund. Software developer EPAM, European Business Association, and U.S.-Ukraine Business Council were the other co-organizers.

Ecosystem’s two nuclei

The conference agenda combined two of the most prominent parts of Ukraine’s technology business: outsourcing software developers and players from the venture business infrastructure, including funds, business angels, startup accelerators and entrepreneurs.

The software developers — SoftServe, ELEKS, Ciklum, and EPAM — spoke first on a panel focused on the Ukrainian outsourcing business. Setting the tone for the whole 10-hour long event, Ciklum’s head Torben Majgaard reassured the audience that “the war has not disturbed business from the productivity point of view,” while the other panelists added that the major outsourcers in Ukraine still have more clients in the pipeline than they are able to handle.

In the next sessions, IT professionals discussed cloud technologies, innovations in digital production, venture capital, agile scaling of business, education technologies, as well as the growth stage of companies.

Software development in Ukraine is the only IT sector that is a bona fide industry. The 25 biggest companies employ more than 27,000 people in a $2 billion market. The venture part has a long way to go, speakers said.

The launching of UAngel, a network of affluent investors, is the latest positive development here. Talking at a panel discussion, the network’s chairman Nataliia Berezovska said the group’s task is to “educate our angels and de-mystify the process of angel investment.”

A traditional startup contest was held toward the end of the day. Out of five startups that gave three-minute pitches to judges, Petcube won three mentorship sessions with Happy Farm’s mentors. It is a gadget that allows pet owners to remotely play with their dogs or cats by using a laser pointer. In 2013, it raised more than $250,000 on Kickstarter, but is four months behind schedule on product delivery. Petcube co-founder Yaroslav Azhnyuk says that shipments will start in the end of October.

Attention to education

Speaking about how fast Ukrainian outsourcing software development companies are growing, Ciklum’s Majgaard said: “If I win a customer here today, I will go to Ukraine and hire a team of programmers from somebody else. There’s not going to be more programmers in Ukraine just because I get a customer, so we’re not helping Ukraine here.”

Majgaard places special hopes with the Brain Basket Foundation, an education initiative that aims to train 100,000 programmers in the next five years. Roman Khmil, Ciklum’s former chief operating officer, manages the initiative.

“Americans say, in 2020 the world will be short of a million programmers. If Ukraine brings in 100,000 people, everybody will still have a job. So stop promoting Ukraine, start producing programmers,” Majgaard added.

Grand plans

Organizers of UTGem are already planning for next year’s conference. It is expected to draw 1,000 attendees and will include an investment auction and other “involvement devices,” Shoifot added. He also expressed hope that much more local venture capitalists and angel investors will show up.

AndriiDegeler is the Kyiv Post’s information technology reporting fellow. Degeler has been covering the IT business in Ukraine and internationally since 2009. His fellowship is sponsored by AVentures Capital, Ciklum, FISON and SoftServe.


IT stocks gain on Accenture results

September 26th, 2014

Following Accenture reporting better-than-expected numbers for the quarter ended August and saying it expected better profitability going ahead, information technology-stocks gained on the BSE. For the quarter ended August, net revenue stood at $7.8 billion, anOutsourcing30 increase of 10 per cent, the first double-digit revenue growth in about two years. While new bookings stood at $8.3 billion, consulting revenues were $4 billion, up six per cent compared to the year-ago period. Outsourcing revenue stood at $3.8 billion, up 15 per cent.

Till the previous quarter, the consulting segment had been a drag on the company.

The rise in outsourcing revenue presents a positive picture for other IT companies, too; the growth in consulting revenue means discretionary spends are back, a big positive for Infosys.

The Accenture management said the company would continue to see similar momentum in growth. “On revenue growth, by type of work, outsourcing…in our guidance, we’re thinking in the high single-digit to low double-digit range. For consulting, probably relatively consistent with this year, it could be a click lower or a click higher…in that kind of a general range,” said Chief Financial Officer David Rowland.


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