Transforming Research Through Outsourcing

The contract research environment is unpredictable for sustained incremental change and radical transformation is seen as an essential aspect of running a contract research organization (CRO). Companies could consider business transformation outsourcing (BTO) for a collaborative, risk-and gain-sharing relationship with an outsource business partner to drive enterprise transformation and improve significant performance quickly.

In traditional outsourcing, a sponsor awards its well-defined project to a CRO to run the project according to industry-accepted norms. The project contract would clearly define project scope and milestones, costs and service levels. The CRO is held accountable in the particular activity assigned with performance measures and gains or losses.

The contract research industry, functions and processes need to be upgraded speedily, as the performance baseline and metrics change constantly. With BTO, the outsourced domain is not a discrete appendage of the sponsor firm but it is linked to other business processes in rich and intricate ways. Both the sponsor and the CRO therefore need to be fully integrated together in a BTO program.

BTO is not about the incremental reduction in development costs that are affected by outsourcing to India or China, or about outsourcing non-core functions. BTO affirms the CRO as a business partner to transform the critical processes that could radically change the sponsor's way of doing business. BTO aims at quick results that shareholders could identify - share price, market share and return on investment.

BTO requires five essential ingredients:

• C-level leadership - Governance processes by leaders of the CRO and sponsor should have full visibility and be the top priority.

• Bold strategic agenda - The agenda of the BTO program should embrace unconventional, ground-breaking ideas that could change the contract research market.

• Innovative deal structure - Break the mould of conventional outsourcing and lay the burden of cost control on the CRO. Fullservice CROs can efficiently manage risk by sub-contracting to niche CROs.

• Collaborative outsourcing transforms critical processes - A skilled, incentivized and highly motivated CRO could drive a drug development program even more aggressively than the sponsor.

• Focus on enterprise outcomes - Focus on market dominance to get ahead of competition. This is made possible by targeting exponential growth in stakeholder value.


Steps in Executing a BTO Program

• Craft the deal The operating model may include thirdparty financing, new legal entities or equities that are designed to maximize benefits and distribute risk. The ideal CRO for BTO would possess the right skill set, robust strategic implementation and scalable operating capabilities. CROs with a good network could also bring the right subcontractors into the deal quickly. However, sponsors might want their preferred service providers to manage the subcontractors and be accountable for their performance. Open discussions could set the tone for better communication. This might sometimes mean a simple, public acknowledgement that the CRO deserves to make a fair margin. Ultimately, every sponsor wants a financially stable CRO partner to be involved in its drug development programs.

• Manage the transition After executing the deal, the sponsor and the CRO would begin allocating people and processes to the program; assign leadership and control in full visibility of all parties. For the BTO program to work, it is vital that the CRO should hold the reins and assume full accountability for its part of the deal.

• Transform critical processes This means transforming a routine process into a world-class operation. Systems and processes are converted into reliable and cost-effective platforms as resources are redirected toward new development with bigger gains. The sponsor and the CRO teams should have blur boundaries and talent pool hunts to hire skilled manpower. Employees need to work as a single team by leveraging new capabilities and acquiring competitive skills. A limited number of key metrics should be used to drive progress. These should be reviewed periodically with industry benchmarks so that the bar could be raised after every successful event. The sponsor needs to invite the CRO to the drawing board more often in order to tap from the CRO's expertise and perspectives. The relationship should inspire innovation continually in order to sustain value.

• Managing the Relationship Insist on trust and commitment. Proven performance enables partners to stay together. A strong BTO relationship needs strategic governance and adverse events where both teams could work together and forge deep bonds and understanding on how they work. If the scope of work is ill-defined and hierarchies do not exist, companies must rely intuitively on employees' integrity, discipline and the passion to succeed.