IT Transformation in the Pharmaceutical Industry
Leading pharmaceutical company becomes a pioneer in sourcing IT services
Our client is a global pharmaceutical company and is one of the major players in the industry with sales of almost 40 billion euros.
Objective: Optimization of conditions in IT procurement
The company initiated a comprehensive transformation across all areas of the business with the aim of remaining competitive. The most important thing here was to achieve a high degree of digitization and switch to automated business processes. To finance this, costs were to be significantly reduced in the procurement of standard IT services. We were commissioned to identify optimization potential and achieve significant savings for the three largest IT service contracts, which together accounted for a total spend of €100 million.
Approach: Further development of processes and increase in supplier loyalty
The three largest service contracts in the client’s IT landscape were for end-user support (help desk), applications and IT infrastructure. Changes on the service provider side in these critical areas can have a major impact – if problems occur, all 100,000 employees worldwide are affected. Accordingly, the supplier pool that can manage contracts of this size is limited.
Our consultants started by analyzing the contracts and specifications. This revealed that synergy potentials were previously unused. By merging the contracts for applications and the IT infrastructure, considerable potential could be tapped. We conducted a detailed market analysis to determine which providers could actually manage large contracts of this type and what prerequisites would be necessary for a change of provider. This revealed that the topic was too complex to inquire about other new providers in view of the tight time frame. In the further process, we therefore focused on the three existing providers and began conversations with all of them in parallel.
Since all three providers would in principle have been able to serve all the requested service areas, competition was the greatest lever in the negotiations. After all, the providers had the prospect of tripling their sales with the pharmaceutical company. We also kept the process flexible and dynamic from the outset and communicated this openly. We kept it open as to how many (partial) packages would ultimately be awarded and reserved the right to enter into exclusive negotiations with one provider at any time.
The discussions with the providers were very valuable for both sides. Co-construction workshops, in which we brought together the expertise of the providers with the specialists from our client and were able to refine the specifications and the scope of the services, very also very helpful Since the bids were very different at the beginning, we introduced structural assumptions. The providers had to describe their underlying assumptions and evaluate the financial impact. This allowed us to more clearly identify and financially evaluate the differences in the bids and finally eliminate the structural assumptions to make the bids more comparable.
An important lever for realizing cost potential lay in automation. Instead of continuing the existing contracts on a 1:1 basis, the IT service providers were to automate their processes wherever possible, which not only led to considerable savings for our client, but ultimately also to process optimization. For example, automated, faster problem resolution can prevent downtime in production.
In the end, our client decided to continue working with two partners. In the future, application management and infrastructure will be bundled under one roof, while another provider will be responsible for end-user support. This bundling, coupled with the optimization of contract terms, enabled us to significantly optimize the procurement and operating processes for IT services and achieved savings of over €200 million spread over the next five years – money that our client can in turn invest in the digitization of the company.
- Optimized specifications
- Significant savings in the procurement of IT services
- Increase in the degree of automation and thus stabilization of operating processes
- Further development of supplier relationships
- Long-term added value through professional structures and processes