Twin-track IT strategy the best medicine for Pfizer’s profits

In the past dozen years, pharmaceutical firm Pfizer has ballooned from a $14bn (£7bn) operation to a $50bn (£25bn) company of staggering complexity, thanks to acquisitions of other firms, including Warner-Lambert and Pharmacia.


In the past dozen years, pharmaceutical firm Pfizer has ballooned from a $14bn (£7bn) operation to a $50bn (£25bn) company of staggering complexity, thanks to acquisitions of other firms, including Warner-Lambert and Pharmacia.

The continuing challenge for the pharmaceutical giant is streamlining operations, processes and technology to stay nimble and innovative in an industry where companies live and die by the discoveries they make and the patents they hold.

At the same time, Pfizer is under pressure to keep a lid on costs. In the past five years, the company has lost about $140bn (£70bn) in value while pursuing its growth strategy. And in June, the patent expired on one of its top-selling drugs, the antidepressant Zoloft, which contributed more than $3bn (£1.5bn) to Pfizer's top line in 2004.

To offset dips in revenue as patents expire on older drugs, Pfizer needs to keep costs down, while simultaneously ensuring a steady stream of new products and revenue growth.

For the IT department, it all adds up to striking a balance, says Vita Cassese, vice president of global business technology. "There are two opposing challenges," she explains. "We need to drive a level of consistency and standardisation to operate effectively while still fostering innovation."

Cassese adds that the scale and complexity of Pfizer's business makes for a huge diversity of information needs across the company. "In many ways, it demands different approaches to data demand and information management," she says. "That makes for very big challenges, because we also need to drive down the costs of managing this information."

To get there, Pfizer has a two-pronged IT strategy. It has centralised enterprise IT "plumbing" services – such as datacentre, networking, helpdesk and infrastructure support operations – into a corporate shared services organisation. But it has also co-located IT staff with business people across virtually all its worldwide operations. It is these IT staff who "provide the basic systems that drive the company's top-level growth and the systems needed for re-engineering business processes", Cassese explains.

Pfizer is something of a pioneer in bringing together technology and business staff, having co-located the two groups for at least the past decade. Every Pfizer corporate function, from finance to marketing, has at least one staff member from the business technology group based in the unit.

"It is what keeps IT so closely aligned with the overall business strategy," Cassese says. "We've always had a model to have IT tightly linked to the business. As a smaller company, that strategy was very effective. But now, as a much larger company, we need to correct the course a little bit."

"IT still needs to be close to the business and have a deep, deep understanding of the business, but we also need a deeper level of discipline around how we deploy technology." This is necessary to keep costs under control, she explains.

One change Pfizer is making is in the way it manages data. Until recently, individual business units had tended to manage their own information, but now there is a trend toward technology and information rationalisation.

"Pfizer has some real goals on driving costs out of systems, from our IT infrastructure to the everyday operation of systems," Cassese says.

Last year, for example, the company launched a project to consolidate more than 30 document management systems in a move aimed at streamlining regulatory submissions and cutting costs. The consolidation spans operations in 26 countries and various corporate groups, such as research and marketing, to create a single flow of information.

A continuing effort is also being made to standardise and narrow technology choices "in places where it doesn't matter so much", such as desktops, Cassese says.

"Over the last three years, we've standardised everyone in the company on one kind of desktop. It hasn't made a big difference in anybody's life, but there was great consternation when we decided to do it," she notes.

Where that effort has made a major difference, however, is in IT costs and complexity. "It has simplified our environment. Now, we don't have to test everything on seven or 20 different machines," she says.

Cutting costs and increasing efficiencies is especially important to Pfizer now, in the interval between patents expiring on some of its more profitable drugs and the introduction of new products, says Les Funtleyder, a healthcare strategist at investment firm Miller Tabak.

"Pfizer has a huge sales force, but Zoloft, Zithromax and Neurontin – all multibillion-dollar drugs for the company – have come off patent in the last 18 months," says Funtleyder. That means less sales revenue – and the way to squeeze more out of less is better use of IT. This would lead to lower selling, general and administrative (SG&A) expenses. "And the lower the SG&A," he says, "the better."

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