For pharmaceutical and biotech drug development sponsors with outsourcing needs, the debate between ‘one-stop shopping’ and ‘a la carte’ specialty outsourcing partners rages on. The issue has been explored in this publication for some time. Proponents of one-stop shopping claim that this approach offers convenience, scalability and increased response to the demand for supply-chain efficiencies. However, opponents argue that “vertically integrating” disparate functions does not always make the best scientific or business sense and essentially surrenders the benefits of outsourcing strategic process components.

A solution that breaks this logjam is the development and participation in eBusiness communities (EBCs). EBCs offer sponsors a platform to interact with individual outsourcers in a coordinated way, to communicate and to manage data. This allows sponsors the convenience of one-stop shopping with the flexibility of choosing the individual (or groups of) vendors that best meet the project’s needs.

What Exactly are EBCs?
An EBC is a kind of ecosystem in which the inhabitants depend on their interactions with fellow members for survival. Various outsourced components of the drug development process represent the inhabitants of this ecosystem,with some members (the more vertically integrated providers) depending less on others. For now, let’s consider an extremely simplified ecosystem to be the sum of its inhabitants, rather than examining the internal and external forces that act upon and within it. As we see in Diagram 1, entities such as CMOs, CROs, IRBs and clinical labs all participate in the ecosystem. Networks or “communities” are already forming around logical clusters of inhabitants through either alliances, acquisitions or agreements to participate by exchanging data and other forms of information.

Some companies in the clinical trial space (such as Phase Forward) are using the concept of networked communities to link successfully their core data management services with major clinical labs and CROs. Some companies in this sector are also continuing to expand the number of networked participants in their communities, thus increasing the strength of their overall networks. Other companies, such as Quintiles and Covance, have formed their own internal EBCs to integrate companies and services they have acquired, building an overall package of services. Other start-up companies are developing strategic plans around this concept of managing, as well as participating in, networked communities.

EBCs offer the convenience to sponsors of one-stop shopping by integrating the various process components within or between outsourcers, such as data management and selective file sharing. For example, a sponsor may work primarily with a full-service CRO, but may wish to choose “a la carte” services from other vendors as part of a single trial. A common instance of this is when investigators prefer a specific clinical lab, whether or not it is integrated into or networked with their CRO. The sponsor, as well as the investigator, wants the data and administrative flow to be seamless. Alternatively, smaller, highly-focused outsourcing organizations may wish to “virtually integrate” to offer a package of services to sponsors. This would provide maximum selection flexibility to sponsors while minimizing the administrative burden of searching for and managing data streams.

A single company needs not own and manage all of the services provided! On the contrary, by participating in an EBC, sponsors can better manage and support an a la carte approach in which a virtual all-star team of services can be assembled. EBCs also offer the smaller inhabitants of the drug development ecosystem a chance to band together as a virtually integrated entity to offer a select or complete package of services to sponsors. This eliminates the need to vertically integrate and allows each company to continue focusing on its strengths, while still finding a ready market for its services. A theoretical EBC for sponsors and the drug development outsourcing industry would serve as a platform to allow participants (with appropriate security considerations and permissions) to share the following elements:

The Case for EBCs
Much (maybe too much) has been written about the old economy vs. the new economy. For drug development this transition has few direct impacts on the essential “What” of conducting business; it doesn’t change from the mission of bringing new drugs to market as efficiently and safely as possible. The effect on the “How” of conducting these activities is another story, however. Three major forces are responsible for moving the old economy to the new (see Diagram 2).

Enterprises/Applications to Business Networks /Communities
The shift from the ‘old economy’ to the ‘new economy’ is not about a shift from ‘brick and mortar’ companies to dot.coms; rather, it is about previously ‘stand-alone’ companies forming business networks and EBCs in order to compete and serve customers better. There is decreased reliance on companies as ‘islands’ as well as ‘killer apps’ within companies to solve all problems. It is true that we have all integrated some killer apps of the recent past, such as e-mail and spreadsheets, into our daily routines. In fact, many businesses have used enterprise software with great success to streamline their processes and return their attention to building core competencies. However, businesses do not exist in a vacuum and it was never reasonable to think that any single application would be able to fix an entire set of problems.

Throughout the previous two decades, companies in all industries focused diligently on process improvement, spending huge amounts of resources on various initiatives. Although the names of the initiatives differed (TQM, reengineering, etc.), the basic concepts remained the same. Processes were examined and reexamined in an effort to identify radical and then incremental improvements. New technologies and tools were deployed to streamline operations and improve cycle time while increasing quality and reducing costs. However, businesses have discovered that ‘reengineering,’ even when supported by the best technology solutions, is not the panacea for all corporate ills.

The internet is yet another highly-touted (some would argue, ‘over-hyped’) tool that has dramatically increased the degree to which businesses can be connected or networked to each other. Instead of relying on processes (and reams of paper!) to move information along, the adoption of the internet as a business platform has placed more information than ever before in the hands of individuals. Obtaining and acting on data need no longer be the cumbersome process it once was.

This presents every business with a pair of interesting challenges:

1. How to identify and exploit the promise of increased connectivity, whether by augmenting existing business models or developing new ones, and

2. How to shift corporate attention away from leviathan-like processes in order to focus on individual users (or groups of users, known as audiences).

Process-Centric to People-Centric
This challenge—reorganizing systems around people instead of around processes—can be especially difficult, just as it can be especially rewarding for businesses that do it well. Getting relevant information into the right hands enables decisions to be made “better, cheaper, faster”—the mantra of any drug development team. In addition to having their own roles to play within an overall process, different audiences have their own specific needs, including context (work environment, how they process information, etc.) and relevance (what information helps drive their decisions). Because people are individuals, focusing on people-centric processes increases the importance of placing relevant information into the right context and getting it into the right hands as quickly as possible. Companies must constantly think of new ways to use information to add value to the on and off-line experiences of all their constituents: customers, employees, vendors, shareholders and alliance partners.

Products and Services (or, This Isn’t Your Father’s Oldsmobile)
The process of obtaining a mortgage is not as painful (initially) as it used to be. Several companies (eLoan, iOwn) have treated this process as a specific event and have packaged the services surrounding this event into a single product. This is an example of the “productization” of services. A key feature of this concept is that it is not accomplished by buying all of the respective businesses and vertically integrating them into a single company. Rather, the industry has evolved by building networks of participants offering the services that contribute to the final ‘product.’ Consumers are provided with knowledge resources and tools to evaluate the offerings of the various participants and find the package that best meets their individual needs.

At the same time, there’s been a shift to the “servicization” of products on the web. For example, buying a car (as well as buying groceries) can now be done much less painfully on-line, with consumers receiving a range of services (insurance, extended warranties, maintenance reminders) and delivery options at their homes or offices at pre-set times.

What Differentiates EBCs from Other Sites?
Different types of web initiatives have arisen in response to differing dominant forces and structures influencing their composition and function.

Merchants (Storefronts)
Merchants can carry (or provide access to) a variety of products and services, or they can focus on just one. For example, Amazon sells just about anything, while CDNow focuses solely on audio products. Merchants can also target a specific audience (Pets.com) or multiple audiences (Walmart.com).

Vertical Marketplaces
Chemdex is an example of a highly successful vertical marketplace. The company focuses on selling products and services to laboratories in all industry segments: corporate, clinical and academic.

Corporate Intranets and Extranets
Most larger companies and institutions have developed some form of an intranet to communicate with employees, share information and manage selected internal processes. Some intranets provide functionality as simple as telephone and address directories, while others provide more complex functionality, such as project management, file sharing, timekeeping and benefits management.

Corporate intranets are also frequently created to integrate the business components of several merged companies, providing internal functionality and a unified face to employees, independent of physical location.

Extranets are frequently used to manage relationships with customers, allowing them access to information not available to the general public. Extranets are also often formed to assist with the development and management of alliances and partnerships, allowing partners to share leads and coordinate efforts when targeting customers.

eBusiness Communities
eBusiness communities represent the most complete convergence of products and services to create new solutions for businesses and consumers. As we discussed earlier, the ‘productization’ of services and the ‘servicization’ of products has resulted in the need for a new type of web initiative, the EBC. EBCs facilitate these more robust product and service offerings by providing a platform that allows buyers and sellers to exchange knowledge, collaborate and communicate, analyze and compare information on different offerings and finally, conduct transactions.

EBCs do not have to form around complete processes, but rather can focus on specific events and audiences. For drug development outsourcing, for example, an EBC can be created to address a specific grouping of events, such as a particular clinical trial. A pharma company may develop an EBC for data collection from investigators on a large-scale trial. Tools could include protocol updates, discussion boards, conference proceedings, supply reorder capability and research paper collaboration.

EBCs can also be formed to address an entire series of events and multiple audiences, such as managing a clinical trial from patient recruitment through NDA. Phase Forward, a clinical trials software company, has assembled many of the components for capturing and managing information across the entire clinical trial process. It is using EBCs to link community participants with its partners (such as Parexel and MedTrials) to supplement its own capabilities.

Quintiles and other companies use EBCs as well as mergers and acquisitions to increase their capabilities across the drug development continuum, offering services from manufacturing to trial management to regulatory filing.

However, one of the most interesting EBC structures (for the purpose of the highly fragmented drug development industry) is a more informal, ad hoc structure in which groups of outsourcers form EBCs to offer a la carte packages of services to sponsors. This does not appear to be a widely used mechanism at this time.

Create or Participate?
To be a successful participant in a community, businesses will need to determine the type of community they wish to establish as well as the role they wish to play. The answer to both depends largely on the provider’s overall strategic plan and direction, not necessarily on its expertise in technology or familiarity with the internet. Larger organizations may play several roles within the same community. For example, they may wish to play the role of “integrated service provider” for some projects while, for others, they offer only a specific service as part of a package of services integrated with the offerings other community participants. Thoroughly analyzing the particular marketplace and competitive situation will also help in determining the most appropriate positioning and role for participating in an EBC.

EBC Benefits
At its simplest, information-sharing EBCs minimize data gathering/management and administrative hassles, resulting in increased efficiency and decreased time to market. More complex EBCs can create new value for companies by allowing them new “marketplaces” to buy and sell services. For example, CMOs and CROs are sometimes faced with excess capacity due to unexpected cancellations of large clinical trials (think Quintiles in 1999). An exchange community could facilitate the selling of this capacity to sponsors through mechanisms such as auctions, fee-for-service, etc. Another example of new value for companies would be the creation of new revenue streams by charging participants transaction or subscription fees to use the network.

Although the benefits of EBCs are widespread and tangible, it is true that standard metrics for investment decisions, such as ROI and payback may be difficult to measure. Consider, however, the implications of increasing customer loyalty as well as strengthening relationships with suppliers and alliance partners. Building an EBC also requires gaining or developing a new set of competencies in several areas, including insuring that users have a consistent experience, both online and off.

EBCs are powerful and flexible tools that should be a part of every contract service provider’s tool kit. EBCs have specific and immediate application for service providers wishing to ‘virtually integrate’ with other inhabitants of the drug development ecosystem to develop flexible service offerings. More widespread use of ‘ad hoc’ EBCs will increase competition with vertically integrated companies and offer drug development sponsors increased choice for their outsourcing needs.