STRATEGIC OUTSOURCING
have different business models, cost Instead, successful partnerships require
structures, and capabilities. Companies
Relying on who has most
partners to work together to make
should use the negotiation process to
leverage at a given point in
decisions in the face of disagreement or
clarify their needs and goals (to the conflicting interests based on the merits
supplier, and with their own
time in a long-term relationship
– to focus on what they ought to do,
stakeholders) and to explore various
to resolve differences is bad
and how to meet each side’s needs in a
ways in which different suppliers can reasonable manner.
meet them.
business practice
• Work with CROs to jointly develop a
• Avoid traditional approaches to robust governance structure. The key to
“vendor” negotiation and
As for building and managing successful
designing effective governance is to take a
management. Many such approaches
outsourcing relationships, we can offer to
bottom-up, rather than a top down,
are simply inappropriate to
pharma company sponsors the following
approach. Too many companies treat
comprehensive outsourcing. Instead,
proven strategies:
governance as an issue of diagramming
these unique relationships must be reporting structures with boxes and lines,
thought of, and managed by both sides, • Negotiate sustainable deals. Sponsors and arguing over the composition of
as partnerships. need to analyse and be sure they committees. Outsourcing success begins
• Be careful not to under-invest in understand the economics of the deal with a consideration of the range of
change management. To date, few for the supplier and the incentives being scenarios in which customer and supplier
sponsors have made more than created for them over the life of the staff will need to work together and
perfunctory efforts to equip their contract. Customers have a great deal make decisions, and noting where
employees to make the fundamental of leverage when negotiating large conflicts or difficulties are likely to arise.
transition from doing work themselves, outsourcing contracts – but many use it Senior management from both sides can
to managing and supporting external unwisely and later regret it. Once the then work together to design, not only
partner staff to conduct work. This is deal is signed, significant leverage shifts governance structures, but also processes
one of the key reasons for the high to the supplier. Relying on who has and incentives, focused on enabling staff
costs associated with clinical most leverage at a given point in time from customer and outsourcing
outsourcing and also a primary cause in a long-term relationship to resolve provider(s) to collaborate as efficiently
of outsourcing failure. differences is bad business practice. and seamlessly as possible.
Figure 1: Spectrum of clinical development outsourcing
Task Project Trial Functional Programmatic
outsourcing outsourcing outsourcing outsourcing outsourcing
Cost savings
Low Low Medium Medium High
Conversion of f_ixed costs to
variable costs
Low Low Medium Medium High
Focus on capabilities that drive
competitive advantage
Low Low Medium Medium High
B
enef_its
Access to talent/expertise
Low Low Medium Medium High
Innovation
Low Low Medium Medium High
Supplier complacency
Low Low Medium High High
R
isks Supplier opportunism Low Low Medium High High
Management complexity High High High High High
Any approach to outsourcing entails risks as well as benefits. However, while the full benefits of outsourcing can only be achieved through a programmatic approach, the risks of
a truly comprehensive approach can in fact be largely mitigated, and at relatively low cost, through effective supplier contracts, governance and relationship management.
Source: Vantage Partners
www.scripnews.com/supplements Scrip 100
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