What are your company’s core activities? This is a key question for every sponsor and contract research organizations (CRO) on the clinical trial landscape. It’s time to move beyond buzz words and think strategically.

It’s not news that the growth of outsourcing can be attributed to more activities being defined as non-core. This reflects an ongoing evolution in the thinking of the industry. The conventional idea is that core business functions should be kept internal and any non-core activities are candidates to be outsourced or divested.

But the situation is fluid. Business processes that were once vehemently defended as core are now routinely viewed as outsourcing candidates. Data managers who used to strenuously defend their activities as core now recognize that more and more companies are routinely outsourcing such activities.

Some of this change is a reflection of an industry that is more comfortable with outsourcing. Some is a reflection of processes that are maturing and standardization that allows processes to be treated as commodities that any firm can handle.

Your Perspective?

Defining what is core in any company remains a profound challenge. The term is ambiguous and will vary depending on one’s place in the company’s organizational chart. “Core” is in the eye of the beholder. If you’re looking at marketing from the perspective of the board of directors, your view on the topic could be substantially different than from someone handling it every day.

For organizations having difficulty deciding what is core, there are two common approaches. One is to ask: what are the unique skills and capabilities of this business unit? In which markets do these skills yield competitive advantage? Items that are unique and provide competitive advantage are core. Others can be candidates for outsourcing.

The Deliverable

So some organizations may view pharmacovigilance as a core task that must be handled internally. Other firms are outsourcing call centers, case handling, and even safety signal-detection activities. Safety is an area that several outsourcing suppliers appear very eager to further develop, even in the developing world. Such eagerness may indicate enticing profit margins and the opportunity to transform a cost center into a revenue center.

A second, more nuanced approach is to view the function as a manufacturing line. What is the final deliverable? What are the steps in the process for generating this deliverable? What are the inputs required?

Word Games

Can any individual step or bundle of steps be carved out as an independent unit? Can each unit be sourced differently? In the world of clinical development, such evaluations may require considering the handoffs between functional teams and the associated managerial overhead to weigh the pros and cons of sourcing each unit in a piecemeal fashion. If done with what some may view as brutal candor, this exercise may reveal more candidates for new sourcing strategies.

In the end, defining “core” can become a semantic issue. Inside certain companies, the skillful use of language can position any set of activities as being unique and adding value—or just the opposite. At the extreme, it could be argued that the only items that need to be kept as core are the ownership of licensing rights and decision making.

One can easily imagine a company with a product that worked better for selected subpopulations thinking that biostatistics was non-core, only to belatedly discover that key insights were missed due to reluctance to run up bills requesting exploratory analyses that could have revealed additional target patient groups.

Indeed, outsourcing everything but the general counsel and the CEO may take a good idea too far. It may be helpful to ask a few more questions.

Keeping It Close

Does retaining a functional area within a company potentially add more value or at least have better or equivalent costs compared to outsourcing the function? Do the cost efficiencies rise to the level of being a competitive advantage? Is there a sufficiently high barrier to keep competitors from duplicating this efficiency? Can the advantage be maintained? If so, your organization may have a sustainable competitive advantage that should be kept within the company. In some cases, CROs and vendors may wish to consider if still greater value can be created by offering such processes as a service.

It can be tempting to outsource small areas within any company. After all, if it is a small functional unit, it is probably not core. When it comes to determining the appropriateness of outsourcing an activity, size does matter. But size alone is not the sole determinant.

For example, if the company team handling medical writing is small, there may not be enough economies to be realized by outsourcing it to justify the overhead of managing the outsourcing relationship, much less verifying that the work has been done to your standards. Paradoxically, some small areas should be kept within some companies.

Common Commodities

But it is generally correct to assume that if a function is small, an outside provider will be able to provide greater expertise and better management. It comes down to whether or not the tasks being completed by the function are a commodity or not. Help desks and call centers are clearly an area seen by most as a commodity service.

Fine, you may say. But what types of tasks constitute a commodity? A task can be considered a commodity when it is standardized and repeatable. So if the same processes work for both firm A and B, then they can be viewed as a commodity. But then what of control?

A Red Herring

I’ve often heard people in the life sciences argue that a process cannot be outsourced for concerns with loss of control. But the question again must be brought back around to value. Does keeping something inside the company provide sufficient value to justify a higher cost? Or does outsourcing provide sufficient savings to justify a reduction in control? This is where the process of defining what is “core” requires significant thought and analysis.

It’s worth emphasizing a reduction in control, not its loss. In our industry, there is a tendency to exaggerate how much control is sacrificed when outsourcing. The growth of the CRO industry is a testament to acceptable levels of control being negotiated across a range of projects, therapeutic areas and geographies. From a sponsor perspective, there are still contractual agreements and the power of the purse to keep suppliers accountable.

At the end of the day, deciding what is core requires assessing which sourcing option provides the greatest value. Keep the focus on value, and seeing what is core becomes almost ... easy.

.(JavaScript must be enabled to view this email address) welcomes feedback about the definition of “core,” the future of electronic data capture or other topics. He has more than 25 years of experience in the pharmaceutical industry, including data management, programming and IS support. He has personally witnessed the evolution from a pure paper process to the development of eclinical processes.

Editor’s note: ClinPage welcomes editorial contributions from the clinical trial community. This is what we’re seeking.

d9A2t49mkex