When Incremental IT Change Won't Cut It

No business technology buzzword gets worn out quite like "transformation," but there's no other way to describe what Indian pharmaceutical company Cipla is embarking on.

The 77-year-old company, publicly traded but family controlled, is one of the world's largest generic drug makers, with a presence in more than 170 countries (half its revenue comes from India). But until six months ago, it didn't have a CIO and was the poster child for shadow IT. Each company department negotiated with tech vendors on its own, deployed its own systems, and then looped in the IT department -- which consisted of only 17 core internal people, serving a company with 20,000 employees.

Enter Arun Gupta, whom Cipla recruited earlier this year from retailer Shoppers Stop to bring discipline and vision to the company's IT. I caught up with the soft-spoken Gupta earlier this month at Interop Mumbai, where he put his IT transformation efforts into the context of a broader business restructuring underway at Cipla, which has also brought in new chiefs of HR, supply chain, international marketing, strategy, legal, and other functions over the past half year.

Early on, in talking with colleagues and employees about their views of the company's IT, Gupta says he heard three main complaints: IT doesn't deliver what we need; we can't get the information we need when we need it; and we have too many systems that don't interoperate.

It's not for lack of investment. Cipla spends about 1% of its $1.4 billion in annual revenue on IT, and it's "not shy about investing in people, processes and manufacturing facilities," Gupta says. The problem was lack of coordination and oversight of the company's myriad IT vendors and systems.

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Gupta's first major step was to consolidate Cipla's six data centers to a single collocated one and revamp its network around a mix of multiprotocol label switching (MPLS) and metro Ethernet links. The company's ongoing application rationalization is a "bit more complex," he says. The plan is to reduce more than 600 database servers to 100 and reduce the company's scores of ERP, CRM, HR, document management, laboratory information management and other pharma-specific apps to about 15 total. Gupta says he's also fixing Cipla's "broken" implementations of Pilgrim (quality assurance and compliance) and IBM Cognos (business intelligence) software.

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Looking to make a difference on the frontlines, he's focusing on Cipla's medical reps: the employees who sell the company's products to doctors. Already, Cipla is one of the few pharma companies that doesn't pay its reps based on sales, he says, and it wants to enhance its reps' engagement with doctors with a new off-the-shelf software tool that lets them share information on clinical trials and medical studies. The goal is to increase the average time a rep spends with a doctor from one minute to five, a small but significant increase. Gupta estimates that the new tool also helps reps save as much as three hours a day on planning and reporting activities: accessing customer data, tracking sales activity and filing expense reports.

Cipla plans to replace the 8,000 laptops its reps use with 10,000 Windows 8 tablets. It will pilot the tablets with about 200 reps over the next few months before rolling out the devices, from multiple OEMs, next year.

Gupta is also trying to get his arms around Cipla's sprawling supply chain of distributors and resellers to improve on-time delivery, which he estimates was in the low teens when he took the job. Cipla's starting with process improvements, adopting theory of constraints methodologies before turning to technology.

Next up is a big bang SAP ERP implementation -- starting with financial accounting, sales and distribution, production planning and materials management, and purchase and order management -- to replace 40-plus custom systems. "Every process will change," Gupta says. "There will be disruption from day one." The rollout is due to start in January and finish by 2015.

Meantime, Gupta is building up Cipla's in-house IT capabilities. A goal over the next 12 months is to add 35 IT specialists beyond those 17 in the core IT group. For example, a SAP lead will join the company next month and hire his own team; same for a chief information security officer Gupta is recruiting. In the process, Cipla will gradually wean itself off its dependence on IT vendors, integrators and consultants -- much like CIO Randy Mott is doing at General Motors under his own recently launched IT "transformation" effort, though that's on a much larger scale.

Gupta, like Mott, realizes he doesn't have the luxury of making incremental changes. He figures Cipla is 10 to 15 years behind others when it comes to IT best practices, and all Cipla executives are under pressure to accelerate company growth to the 30% to 35% range.

In the past, Cipla was averse to doing such a massive ERP implementation, for instance, "but now there's no choice" Gupta says. "If we don't do it, it will start impacting the business."