US Pharma industry has always been open to adopting state of art technology solutions to improve sales force effectiveness. Many large companies have adopted multiple solutions to address all their needs around CRM. They are however realizing that the total cost of ownership (TCOs) of the software investments made, are getting to be disproportionate to the benefits derived. This, combined with the fact that product margins are under severe pressure (partly due to onslaught from generics), is forcing many US companies to review their CRM software investments.
In this blog, I am discussing
- What has led to the TCO s being what they are
- What are the main considerations that a company has to bear in mind
- What options are being considered by these companies
Why is the TCO what it is?
The industry is going through sea changes on multiple fronts. One of the main concerns for the Pharma industry is that a medical rep is no longer the main source of information to a practicing physician. Social media and the world- wide web have taken over.
For the pharma companies, keeping the Physician-MR relationship relevant and necessarily compliant is an onerous task. That has led to innovative CRM practices (such as E-detailing), and higher costs of software that MR s use.
Unfortunately for the industry, many CRM software vendors offer products that can mainly help in “core” field activity and compliance, and do not cover the whole gamut of features that companies need. This results in the need to use a multitude of other applications for Master Data Management (MDM), Travel and Expenses (T and E), Events (CME s), E-Learning, Coaching and Retail Prescription Audits. This is another factor which is pushing up the TCO.
A third factor that drives TCO up is that some CRM vendors have built their applications on platforms such as SFDC. And so, in addition to SaaS costs, there are platform costs per user.
TCO per user per month=IaaS cost+Paas Cost + SaaS cost
What are the valid considerations to bear in mind, while doing optimization of TCO?
According to one industry expert that I met in the US recently, today for pharma companies, there are 2 major considerations to meet in their sales force:
- They must be “effective” i.e. they need work on maximizing prescription generation with optimal effort
- They must be compliant with internal processes, and the acts that govern pharma industry
A compliance officer in a multinational pharma company told me once: “If you think costs to comply are high, wait till you incur costs for not complying”!
What are the options that companies are considering to reduce TCO?
First and foremost, companies are all moving to cloud based CRMs that are industry specific. This, in itself, does not optimize costs, since they still seem to need a few other applications additionally. What, then is the solution?
US pharma industry is seriously considering software applications that can meet 3 major criteria.
- Does the software skip PaaS and (hence the associated cost) without compromising quality and features?
- Does the application have all “surround modules” (MDM, T&E etc) built in? If it does have, additional costs are avoided
- Is the vendor able to offer customization at affordable costs?
The good news is that the industry is finding vendors and products that meet these 3 criteria. Recently, a large US MNC short listed 3 vendors for a global implementation, and all were cost effective products meeting above criteria and came from the developing world.
I expect more and more Tier 1 US companies, and all the Tier 2 and 3 companies, to seriously explore similar options. In an industry affected by reducing margins, and potentially expensive compliance breaches, good cost effective and end to end applications that have affordable TCO are hitting the top of vendor short lists fighting off the rest.