Global Pharmaceutical Company: Bundled Outsourcing

Accenture’s innovative, bundled outsourcing arrangement is playing a key role in helping this Global Pharmaceutical Company reduce costs and control overhead expenses. Accenture estimates that the 10-year outsourcing arrangement will allow the company to reduce the costs previously associated with the delivery of shared services by up to 40 percent annually.

Client Background
This Global Pharmaceutical Company is a global pharmaceutical and related health care products company and is a leader in the research and development of lifesaving and life-enhancing treatments.

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Patents on several of the company’s best-selling products were expiring, thereby opening those drugs to generic competition and threatening to chip away at the company’s revenues and profits. In response to this challenge, the organization launched an ambitious program to dramatically cut costs and reduce its overhead expenses.

As part of this effort, the company expanded its shared services model to other operations, specifically Human Resources and Finance. To drive further cost savings and better align processes for these operations, the company opted to outsource its shared services. According to the company’s CIO, “We had reached a plateau in our ability to drive our unit costs lower. We began looking at how we could leverage a global workforce to help us do that.”

This strategic move toward outsourcing is supported by Accenture’s research into the characteristics of high-performance businesses, which found that 42 percent of health and life sciences companies outsource some portion of their IT functions. By entrusting outsourcing providers to manage information technology and business processes, leading companies can focus on driving profitable growth.

The Global Pharmaceutical Company initially planned to select individual service providers for each of three functions: application management; human resource operations and payroll; and finance processing. Accenture however proposed a market leading approach: award a contract to a single vendor that would assume responsibility for all three areas. This would allow the company to simplify the governance process, improve performance, take advantage of business synergies and reduce redundancies and operational costs. Accenture estimated this bundled outsourcing approach would help reduce costs by 30 to 40 percent.

Convinced they could attain strong results, the pharmaceutical company teamed with Accenture and became the first global pharmaceutical company to adopt a bundled outsourcing arrangement. Accenture offered deep skills in each business area, proven ability to integrate multiple business processes and IT systems, a global delivery network, and a track record for helping pharmaceutical companies achieve high performance through outsourcing. Because of previous work with Accenture, the organization also knew the two companies shared similar values and cultures.

To launch the 10-year initiative, Accenture developed an integrated transition plan to migrate responsibilities in waves over an eight-month period, tapping global resources from its industry and application outsourcing practices as well as Accenture Finance and Accounting BPO Services and Accenture HR BPO Services. To enable consistency and capture synergies, it established a team to handle common functions in finance, technology, contract management, communications, HR and governance.

Accenture relied heavily on the Rapid Transition Suite contained within the Accenture Delivery Suite for Outsourcing. It is a powerful combination of proven methods and tools, such as service transfer plans and automated knowledge transfer tools. In a smooth and rapid transition involving more than 500 of its employees, Accenture moved:

Application development and management services to Accenture Delivery Centers in Delaware, Brazil and the Philippines, which support the SAP ERP application, more than 370 non-SAP applications, HR applications, the employee data warehouse and the employee portal. Accenture recently added maintenance for nearly 30 applications related to the client’s R&D organization to the Accenture Delivery Center in Bangalore, India.

Regional finance processing services to Accenture Delivery Centers around the world, including Houston, Manila, Bratislava, Shanghai and Curitiba. Accenture Finance and Accounting BPO Services is managing accounts payables, inter-company transfers, travel & entertainment expenses, fixed assets and value-added taxes. The team is also managing vendors and maintaining master financial data.

HR operations to Accenture Delivery Centers in Houston and Curitiba. Accenture HR BPO Services maintains HR master data, oversees staffing administration and resume processing, and delivers US payroll, payroll taxes and accounting services.

To manage the shared services, Accenture uses an innovative, Web-based approach to standardizing service management and integration capabilities called the Accenture Service Management Suite. The suite provides a standard framework for building and delivering solutions reliably and quickly. The Accenture Service Management Suite improves quality and reduces operating costs by driving process compliance and automating workflows. In addition, the Global Pharmaceutical Company uses the Accenture Performance Management Suite to monitor Accenture’s performance. For the initial transition, as well as subsequent scope expansions, the move from delivery to operating teams has been effectively executed using Accenture’s Run Entry Framework. This framework ensures applications are operated and maintained to sustain the business capability benefits, providing a smooth transition to support.

Accenture’s innovative, bundled outsourcing arrangement is playing a key role in helping this Global Pharmaceutical Company reduce costs and control overhead expenses. Accenture estimates that the 10-year outsourcing arrangement will allow the company to reduce the costs previously associated with the delivery of shared services by up to 40 percent annually.

Since completing the transition, the integrated delivery of application management, human resource operations and payroll and finance processing has allowed Accenture to focus on providing service enhancements and establishing global standards to achieve consistency and additional cost savings. Because Accenture supports the BPO applications that are used in the bundled outsourcing arrangement, each business area benefits from a greater degree of coordination and deeper understanding than if different providers handled each operation.

The integration not only generates synergies in day-to-day activities but in bigger installation projects. For example, application support employees developed the SAP modules during the regional order-to-cash implementation. “Having Accenture play both roles allowed us to transition order-to-cash seamlessly from delivery into operations,” notes the Global Pharmaceutical Company’s CIO.

The bundled outsourcing arrangement’s success has led the organization to steadily transfer more operations to Accenture, including finance processing for Latin America and Japan and SAP applications management for Latin America.

Additionally, beginning in March of 2007, this Global Pharmaceutical Company expanded the scope of the bundled services arrangement by incorporating Application Management and BPO services for its R&D organization. As part of this initiative the company transitioned support of three major functions to Accenture which included application support of over 100 R&D applications, business process outsourcing for data management and clinical programming functions provided by over 120 Accenture resources as well as a Pharmacovigilance capability established in India. These three major capabilities encompassing over 350 resources in the US, Brazil and India were deployed between March and August 2007 and the new operating model is expected to result in cost reductions of more than 50 percent across all three functions.

The ability to leverage the bundled sourcing arrangement’s pre-existing infrastructure allowed the R&D program to be accelerated with work going live only nine weeks after contract signature. Furthermore, due to effective recruiting, training and collaboration with the Global Pharmaceutical Company, the program was able to realize an early reduction in the reliance on clinical research organizations, enabling the company to realize additional cost savings.

Each business area is also realizing positive efficiencies:

Overall, approximately 375 applications are managed, an average of 1,800 help-desk tickets per month are resolved and about 60 enhancements per month are completed.

Accenture processes more than 840,000 invoices per year on a global basis with a combined value of more than US$2.6 billion annually and reconciles 1,800 balance-sheet accounts a month. At the same time, it has standardized the accounts reconciliation process globally. It has also centralized and standardized inter-company reconciliations and completed the migration of finance operations across Asia-Pacific business units to a single center.

Accenture supports over 46,000 domestic and international employees on a monthly basis, processes more than 45,000 paychecks and direct deposits monthly, resolves an average of 4,500 cases and requests a month and processes more than 79,000 resumes annually.

Within the R&D Global Clinical Development function, Accenture is targeted to process more than 1,000,000 case report forms prospectively and perform medical encoding for 36,000 verbatim terms.

Accenture is constantly looking for ways to streamline operations, enhance applications and processes, and improve service delivery. In all these ways, Accenture is demonstrating its long-term commitment to helping this Global Pharmaceutical Company achieve high performance.