Frine Carbonell, Outsourcing Relationship Manager, Talecris; Jim Takes, General Manager Industry and Healthcare Verticals, North America, Siemens; Anjali Arya, Director Applications Managed Services, Siemens Marshall Sizemore, Account Executive, Siemens; Jim Engle, CIO, Talecris; Ed Wylonis, Senior Director, IS Strategy and Innovation, Talecris; Julie Hellofs, Senior Director Information Solutions Business Operations, Talecris; Tim Buehler, Senior Director Enterprise Solutions, Talecris; George James, Solution Architect, Siemens
Best Partnership: Talecris Biotherapeutics, Inc. and Siemens IT Solutions and Services, Inc.
Awards Criteria: Both parties must demonstrate partnership behaviors in how they make decisions about challenges and opportunities and in how they drive the relationship to achieve value for both parties. In addition, the relationship must qualify for at least three other awards categories.
Talecris Biotherapeutics started life as a spin-out from Bayer HealthCare. The new company had a target date of December 31, 2006 to transition the IT systems from Bayer. At the start of this relationship, "our goal was just to get the company up and running," says Jim Engle, Chief Information Officer, Talecris Biotherapeutics.
Talecris outsourced five IT towers to Siemens IT, which were all mission critical.
- Data center management
- Network management
- Service desk
- End-user computing
- Application development and maintenance (ADM)
Because of time pressures, "we had to go down a path of finding a single service provider," says Engle. The new company selected Siemens because "we had the most confidence that the service provider could effectively support the five towers." The two signed their outsourcing agreement in June 2006, giving the partners six months to create a new IT environment.
The time frame was not the only challenge. The Bayer IT environment was highly complex and required a significant level of knowledge transfer. "When we separated, there were approximately 400 old applications and a dated version of SAP," says Julie Hellofs, Senior Director of IS Business Operations for Talecris. "This added multiple layers of complexity to the start-up process." Also adding to the complexity was the mandate to ensure that all processes and systems met the extensive regulatory compliance requirements.
In addition, Bayer performed many of the business processes internally or at the corporate level. Talecris had to build its own processes and systems along with internal competencies to manage mission-critical applications such as global pharmacovigilance, contract management, and government reporting. "This made the complexity even greater," says Engle.
Due to the risk associated with the complexity and compressed time frame, the new company's leadership had significant concerns about the outsourced relationship's chance of success. As a result of the strong partnership, the carve-out from Bayer and the transition to Siemens was successful with no negative impact to the business.
The next big challenge came right on the heels of this initial success.
Creating 69 plasma centers
According to Engle, the two partners worked diligently to achieve a successful separation. The time to celebrate was short lived. Three weeks after transition, Talecris decided to invest in a whole other business. "We finally had our infrastructure stabilized and then we received this wild card," says Engle.
Historically, Bayer, now Talecris, purchased its plasma; this was the business model for the new company. Talecris senior management was proactive and made the strategic decision to build its own vertical supply chain.
To address the challenge, Talecris acquired 58 plasma collection centers from International BioResources (IBR).Then Talecris had to build additional new centers across the United States to supplement the plasma required to meet its needs.
Talecris asked Siemens to deploy resources almost immediately to visit the plasma centers it had just acquired to build the infrastructure necessary to support this strategic initiative. "We asked Siemens how its team could help us. Together, we came up with a strong plan to address these needs," says Engle.
The two partners rallied around getting the business functioning, he adds. He says they had to put many of their original projects on the back burner to support the critical needs of the new plasma business.
A big question was how to address the new services in accordance with the existing master services agreement. "We clearly had different views of how best to manage this," says Engle. "But we came up with a workable solution for our business." The partners agreed to treat the plasma support services as a change order under the parameters of the original contract. This allowed both parties to meet aggressive timelines without the burden of an extensive rewrite of the existing contract.
Hellofs says this agreement was possible because of the trust factor. "Even though we were early in our business partnership, Siemens recognized we had a critical business need we had to meet. They were willing to do what they could to help us meet that need, and we trusted that they would do whatever was needed to get the job done," she says.
Once again, the Talecris and Siemens partnership demonstrated its ability to successfully take on a challenge and deliver significant business results.
Why this relationship works
From day one, the senior management at both Talecris and Siemens committed to creating a culture of partnership and collectively embraced the daunting challenges they faced. As an example, Siemens knew Talecris had a tight time frame for its planned transition. According to Engle, the Siemens team "became actively involved in our planning even before we had a letter of intent."
Engle says Siemens went above and beyond expectations as a service provider. Instead of just outsourcing, Siemens demonstrated it was capable of "build-sourcing," enabling Talecris to construct the critical systems infrastructure required to support a start-up company and the associated growth.
Engle says contracts are wonderful. "But one of the most positive aspects of our relationship is we checked the contract at the door," he reports.
When the challenge of building the new plasma collection business arose, Engle went to his Siemens counterpart and they jointly developed a strategy for execution. "From there we basically managed downstream all levels of management to get everyone focused on what we needed to accomplish," says Engle. "We've been able to maintain that relationship to date. There is clean alignment and accountability throughout the ranks of both organizations."
He says he began building his relationship with his counterpart at Siemens during the request for proposal process. "I was fortunate to build a strong relationship with the Siemens senior person who was responsible for our account. We maintain that relationship today," says Engle. This senior relationship is the model they replicated throughout all levels of both organizations. As a result of these strong relationships, Talecris and Siemens have engaged in ongoing teambuilding events that further serve to enhance the partnership.
Another key success factor in this relationship was Siemens's willingness to adjust its internal processes. Siemens agreed to change its processes to meet the heavy regulation of the biotherapeutics industry. "Siemens is very much into quality and compliance. But they had to step that up even further to support our quality expectations," says Engle. He adds Siemens "invested in whatever they needed to successfully address our needs."
Governance is also critical. Together the partners created a process called "the roadmap." According to Hellofs, it enables Talecris to keep a pulse on the key priorities because of their visibility. "We agree to those key priorities jointly," Hellofs says. The roadmap is a good way to collectively make sure we're aligned and execute on things that are of the highest business value," she continues. Siemens has now adopted that roadmap process with other customers, she adds.
Last, but not least, a key component of the partnership is a willingness to teach and learn from one another. For example, Talecris was instrumental in providing guidance to Siemens in its efforts to enhance its overall regulatory compliance program. In return, Talecris has benefited from Siemens' Lean Six Sigma program and its processes that support continuous improvement.
In partnership, Talecris and Siemens have been successful in achieving Talecris's strategic objectives. "Based on the complexity of our challenges going in, we never, ever expected the level of success we've had," says Engle. "The outcome provides our business with a reliable, compliant, and cost-effective IT infrastructure that supports the day-to-day operations of our business."
This robust infrastructure has been instrumental in supporting the growth of the company. Last year it had revenues of $1.5 billion, up 50 percent since separating from Bayer, making it the third largest global biotherapeutics company. It now has 4,700 employees worldwide; the company started with just 1,800.
The path forward is to continue to challenge the status quo where both companies "working together assess where we can improve," says Engle. To ensure ongoing improvements, the partners have formalized their continuous-improvement program to drive measurable results.
For example, Talecris would like to advance its use of technology. It is creating a virtualization strategy for the Talecris data centers jointly with Siemens. "Based on their experience, they're trying to leverage their virtualization model to drive further efficiencies," says Hellofs.
Another example of continuous improvement is the transition of Talecris's on-shore model to selective offshoring. Eighteen months into the relationship, Siemens moved a number of activities offshore. Moving offshore has reduced IT costs by 25 percent relative to the pre-Siemens environment "while improving quality, scope, predictability, scalability, and capability," says Engle.
A key motivator for continuing to improve efficiencies is the gain-sharing component of the relationship. Talecris and Siemens share the savings when there is innovation. Offshoring is one example. Talecris is redirecting the savings back into the company's strategic project portfolio.
Summing up, Engle says "Our partnership, teamwork, and drive for success have been phenomenal. We remain committed to further driving the value of IT in supporting the future of OUR company."
Lessons from the Outsourcing Journal:
- Committing to creating a culture of partnering from day one significantly enhances the chances of success.
- Creating relationships during the RFP process helps create trust and can accelerate results in a new outsourcing relationship.
- Trust is crucial when business challenges appear. It allows the partners to jointly embrace challenges and commit to doing whatever it takes to solve problems.
- Creating a process roadmap helps the governance process by providing visibility into key areas of the relationship as well as priorities.
- Formalizing a continuous improvement program will drive service delivery and cost improvements on an ongoing basis.
- Outsourcing buyers in heavily regulated industries need to be sure they select a service provider with processes that comply with industry regulations.