IT Governance: The Under-Leveraged Discipline

When revenue gains soften, costs start to attract greater executive attention. And so it is with Pharma. It’s widely acknowledged that the pressure to control and reduce costs is the next major challenge facing companies contributing to the Pharma industry’s global value chain. Growing generic competition, imminent patent expirations, and shorter pipelines are all contributing to eroding margins.

But as part of their efforts to improve financial performance, many pharmaceutical companies are finding it hard not to turn the cost-cutting spotlights on IT. And for good reason; not only does the Pharma industry, according to recent research, spend six times more on IT than the average U.S. industry (15% of revenues vs. 2.5%) but many companies are still waiting to chalk up measurable IT-driven business value from this huge and growing investment. It’s little wonder that pharmaceutical executives are asking why IT costs so much and yet seems to deliver so little.

Given the trends reshaping the industry and the extent to which pharmaceutical companies will be increasingly dependent on IT capabilities, success—and, for some, survival—depends in great measure on “getting IT right.”

The challenge today is often acute: despite IT’s growing implications for strategic areas, far too few pharmaceutical companies have a well-defined IT governance capability in place. What many pharmaceutical executives don’t realize is that the building blocks of an effective IT governance capability are already embedded in their organizations: many of the same business practices that are used to reduce cycle times, lower costs and ultimately improve bottom-line performance can also be applied to better manage the IT organization.

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