Transcript Merck ESS Strategy

ESS Face to Face
February 28th, 2005
Agenda
> Introduction
•
ESS Organization Update
•
IT Strategy Communication
> IT Shared Services
-
Hugh Sheridan
> Offshoring, Project SDI -
Frank Vastano
> 2005 Objectives and Themes
> Merck News
Page 2
ESS Shared Service Model
February 27th 2005
Page 3
2005 Objectives
> Shared Services – IT:
•
Complete the implementation of the IT shared services operating model including
organizational design, service levels, operating procedures and funding model
(4Q).
•
Realize approximately $750k in operating expense savings through application
co-location and the elimination of redundant activities (4Q). (Scope: Finance/HR
Trans Systems, Owner/Plan: Sheridan, Establish Engineering/Ops capability:
Piscitello, Id/Effect Opportunities: Lotier/Blair) – (stratmap intersection:
OPEX/Internal Process)
Page 4
Value Proposition
Value
Proposition
Economies of scale through common demand
and leveraged knowledge expertise
Page 5
2005 Plan
1Q05
Operating
Model
Savings
Opportunities
2Q05
4Q05
Org Design, Processes, Governance, Service Levels, Funding Model
Application Co-location and Elimination of redundant activities
Implementation of Integration, Decision Support and IM Services
Canada JDE
Consolidation
Finance
3Q05
Global Consolidation
Plan
Consolidation
Restructure IT
Support for PTP
Finance IS Integration
EZ-Expense
Upgrade for Corp
HRIS
Integration
HR
EZ-Expense Upgrade for USHH
Global Consolidation
Plan
Consolidation
MRL PeopleSoft time tracking supporting CLPA
US PeopleSoft time and labor implementation for US
PeopleSoft Payroll for US requirements, development and testing for 1Q06
Global
Infrastructure
New Shared
Service
Integration with GI Shared Services
Plan and Implementation of Integration, Decision Support and IM Shared Services
Page 6
IT Strategy Map Strategic End State
Drive
Innovation
Financial
Perspective
Deliver Business
Value
Strategy
Operate with
Excellence
Manage Investment
Manage
Risk
Drive Efficiencies
“If we succeed, how
will we look to the corporation as a whole?”
High Value/High
Strategic
IT will Merck assess our contribution
Cost Structure to its success?)
Use of Assets
(How
Return Initiatives
Focused
Optimized
Optimized
Focused
Customer
Perspective
Worldwide Service Attributes
BusinessQuality
Driven
“To
achieve Focused
our vision,
Relationship
Image
how must we look to our customers?”
Value-Driven
Integral
(How will our customers understand
our
contribution?)
Trusted
Predictable,
Reliable &
Responsive
Internal
Process
Perspective
CostEffective
Partner
Architecture &
Breakthrough
Portfolio &
Information
“To satisfy
our customers
and the
Opportunities
Governance
Management
End-to-End
Service
corporation
Delivery
at which processes must we excel?”
& Innovative
Regulatory &
as a whole,
Compliance
Continuous Improvement
Organizational
Capabilities
Perspective
“To achieve our
Leadership
Business &
Engineering &
Innovative Thinking
vision,
what capabilities must we Operational
put in place?”
Technical Acumen
Discipline
Adaptability and Diversity
Page 7
Shared Services Benefits
Benefits
Benefits
Business Clients
ESS
Budget
Financial Savings
Cost Efficiencies
High Service Quality
Reuse and Integration
Time savings
Time Efficiencies
Quality of service
Delivery time-to-market
Page 8
Benefits Realization
Benefits
Financial Savings and cost efficiencies
Year
Activity
Savings
Status
2005
HRIS Integration
600K
Completed
2005
Finance SLAs and SOPs
550K
In Progress
2005
PeopleSoft Payroll Puerto Rico
100K
In Progress
2005
JDE North America consolidation
300K
In Progress
2005
Global JDE Licensing Optimization
200-400K
In Progress
2005
Document Management Shared
Services
300K
Planned
2006
PeopleSoft Payroll US
500K
Planned
2006
PeopleSoft Banyu integration
100K
Planned
Page 9
Organization Models (Industry Trends)
Hybrid Approach
Organization
Model
2007
Basic Model
Marketplace Model
Advanced Market
Place Model
Independent
Business Model
* Consolidation of
transactional and
administrative work
* Includes professional
and advisory
services
* Client choice of
supplier
* Separate business
entity
* Focus on economies
of scale
* Separates
governance and
service functions
* Market based pricing
* Profit is retained
* Services charged out
to recover fully
loaded costs
* Services charged to
recover fully
loaded costs
* Possible external
sales if surplus
capacity
* Multiple
organizations as
customers
* Objective is to reduce
costs and
standardize
processes
* Objective is to reduce
costs and improve
service quality
* Objective to provide
clients choice of
most cost effective
supplier
* Objective is to
generate revenue
and profits for
service company
Page 10
ESS Professional Services Operating Model
IT Shared Services
Integration Management
Office
Clients
Account
Management
Program
Management
ESS
Shared
Services
GI
Shared
Services
Page 11
Organization
Model
Operating Model
Business
Corporate Functions
HR
Legal/PA
Procurement
MRL
MMD
HH
(Development & Maintenance)
Run Services
Application Services
HH
Prog. Mgmt.,
Engineering &
Implementation
Client Services
A&IT
Build Services
RIS
Relationship
Management
Corporate
Support
Division IT
Define & Refine
Services
Enterprise Architecture
Finance
Business Divisions
Architecture Services
Manage GI Strategy
ESS
Global Infrastructure
IT Process Management
Page 12
Organization
Model
ESS Organization Structure
Client Services
Finance, Global
Procurement, Legal,
IS & Public Affairs
• Business
Relationships
• Account /
Demand
Management
• Portfolio
Management
• Business
analyst
Client Services
HR
• Business
Relationships
• Account /
Demand
Management
• Portfolio
Management
• Business
analyst
Architecture
Services
Application
Services
• Application and • Project
Information
Management
Architecture
• Application
• Architectural
Engineering
strategy and
(inc web
plan
application & IM
development)
•Application
Support
• Service
Management
Information
Management
Services
• Policies &
Procedures
• Standards
development
• Usage
guidelines
• Training &
Education
• Enterprise IM
requirements
• IM Strategy
and planning
• Enterprise
reference
consultation
• IM Innovation
Consultation
ESS
Services
• Financial
management
• Comm.
• Human
Resources
Administration
processes
• Measurement
and Reporting
Page 13
Shared Service Model Services
Services
External Shared Services
Enterprise Client Services
Enterprise Application Services (Engineering and Support)
Enterprise Information Management Services
Enterprise Decision Support Services
3Q05
ESS Internal Shared Services
ESS Architecture Services
ESS Project Services
In Progress
ESS Integration Services
Page 14
External Shared Service Definition
Client Services
>
Responsible for partnering with the
relevant clients. This included
participating in Strategic Planning
process and aligning IT and client
strategies, as well as supporting
Portfolio management processes
Services
Information Management Services
>
Responsible for development and
rollout of information
management strategies for
Corporate and Business Divisions
clients. This includes
development of an “information
management” culture, enabled by
deployment of common
standards, policies and
procedures, usage guidelines,
training and education
Page 15
External Shared Service Definition
Services
Application Services
Decision Support Services
>
>
Responsible for providing
consistent and reliable decision
support reporting services to
ensure the integrity, operability
and availability of Merck’s
information asset.
>
Responsible for supporting the
design and development of data
warehouses and the necessary
supporting data marts.
>
Responsible for supporting the
integration of Merck’s information
across these data marts into the
reporting solutions
Responsible for management,
development and support of all
new applications / enhancements.
Applications include enterprise
and corporate application, web
based applications and
information management
products. Project Managers will
be deployed to define, manage
and deliver projects. Service
Managers will provide specific
product / service expertise and be
responsible for delivery of service
as defined in Service Level
Agreements
Page 16
Internal Shared Service Definition
Architecture Services
> Responsible for management
of Application and Information
Architecture. This will include
developing a architectural
strategy and plan in response
to changes in business or
functional strategies.
Services
Integration Services
Responsible for providing policies,
procedures, reusable assets and
specific solutions in support of
Merck’s enterprise integration
needs.
Page 17
Internal Shared Service Definition
Services
Project Services
>
Responsible for managing and deploying shared compliance, system testing,
release management and resourcing (staffing) services to ESS Projects.
Compliance will be monitored according to both regulatory and internal Merck
requirements. Release Management is the coordination of the overall release
of new technologies / functionalities. Resource Managers will
“administratively” manage and deploy resources from a single resource pool.
Deployment will be based on matching resource competency with client
demand. Resource managers will not be responsible for formal staff
(performance / development) management functions
Page 18
Shared Services Next Steps
> Professional Services – Phase Two
> Enhanced Service Definitions
> Global Infrastructure Integration
> Detailed Consolidation Plans
Page 19
Professional Services Implementation Team Members
> Bisschops, Marcel;
> Callahan, Brian T;
Assess
> D'Angelo, Dawn M.;
> Griggs, Ken;
> Hsi, Amy;
Recommend
> Hsiou, Yu;
> Kamel, Sherif;
> Mure, Michael;
Enhance
> Sa, Vilma;
> Schwab, Rosanne C
> Semanchik, Scott M.;
> Sheridan, Hugh
> Vastano, Frank L.;
Page 20
PSM Implementation Team Meeting Outcome
> Assess education/skill relevant to role
> Invest in team building
> Capture lessons learned and develop action plans (continuous process
improvement)
> Define workflows by projects in relation to project size and roles
> Work with Global Infrastructure to strengthen integration points
> Build and leverage shared service capabilities (testing, PMO,…)
Page 21
Proposed Development Team Structure
X-Small
Small
ESS
Client
ESS
Client
AM/PM
PM/Dev
Medium
Architect
GI
ESS
Client
AM/PM
BA
Architect
AM/PM
BA
PM
GI
TL
PM
TL
Dev
Team
Dev
Team
GI
Dev
Team
Page 22
Proposed Development Team Structure
Large Program
ESS
Client
GI
TL
Dev
Team
PM
PM
AM
BA
PrgM
Architect
TL
Dev
Team
PM
TL
Dev
Team
Page 23
Proposed Operations Team Structure
ESS
Client
GI
PrM
Architect
Ops
Team
Page 24
If You Have Questions About PSM
Talk to any
of the PSM Reps
Page 25
Enterprise Systems & Services (ESS)
IT Off-Shoring & Project SDI …
… How Does It Impact ESS?
February 28, 2005
Off-Shoring Project SDI
1
What Is Project SDI?
2
How Does SDI Support The ESS PSM?
3
How Does SDI Support Career Development In ESS?
4
Project SDI Next Steps
Page 27
Merck’s Goals For Off-Shoring
Page 28
Pharma Industry Is Getting Aggressive About Offshoring
Top 10
Pharma - 1
Activities
Location
Vendor
Comments
• Applications for mainframe,
AS/400, Lotus Notes, Domino,
SAP
• India
• Tata Consultancy
Services (TCS)
• 400-700 FTEs in IT worldwide
by beginning 2006
• Data management for clinical
trials
• Systems development,
maintenance and support
• Dedicated offshore
development center
• Montevideo
(Uruguay)
• Tata Consultancy
Services (TCS)
Top 10
Pharma - 2
• Data management for clinical
trials
• India
• Accenture
Top 10
Pharma - 3
• Applications maintenance and
development for select
applications
• India
• mPhasis
Top 10
Pharma - 4
• Application management
services
• India
• Infosys
Top 10
Pharma - 5
• IT systems management
• India
• Satyam
Top 10
Pharma - 6
Top 10
Pharma - 7
• 20 million of IT services
• TBD
• TBD
• Application development and
maintenance
• TBD
• TBD
• mPhasis
• Dedicated offshore
development center for
application management
Page 29
Source: McKinsey research; expert interviews
Pharma Industry Leveraging IT Offshoring
Activities Offshored
• Application management
Location
Operating Model
Vendor
India
Outsourced
mPhasiS
India
Outsourced
Infosys
India
Outsourced
mPhasiS
• IT systems management
India
Outsourced
Satyam
• Dedicated offshore
development center
India
Outsourced
TCS
Montevideo
Outsourced
TCS
• Dedicated offshore
development center for
Application management
services
• Application
• Applications for mainframe,
AS/400, Lotus Notes,
Domino, SAP
• Data management for
clinical trials
• Systems development,
maintenance and
outsourcing
(Uruguay)
Page 30
Source: Press research, expert interviews
Project SDI (Systems Development India)
• A project team was appointed (Terry Jacklin, Fred Puelle, Nick Riccio, and Frank Vastano)
by the ISLT in November, 2004 to review work completed earlier in the year that identified
opportunities to shift Merck IT spend to more strategic initiatives
• An approach was designed, with the help of McKinsey consultants, to focus on commodity
activities that are being performed by contractors and project-based vendors
• An implementation plan was developed that properly balances savings realization and
risks by setting forth an aggressive vendor selection timeline, but allowing sufficient time for
knowledge transfer and dual operations
• Target spend was identified in ESS, USHH, MMD, and Infrastructure (DBAs) that could be
offshored to realize $2.8 to 5.1 million of expense savings in 2005
• Nine vendors were engaged to bid on an RFP that was issued on January 10, 2005, which
used a modular structure to enable the selection of 2-3 vendors for the initiative
• Vendor selection is targeted for March 7, 2005
Page 31
Focus Of Current Effort
Labor spend, $ Millions
Focus to date
Additional opportunity to
investigate
Capital
Contractor
~100
Expense
~90
• Identified 2.8-5.1 in
contractor expense savings
• Need to identify additional
opportunities in this
category
Employee
~50
~275
• Later we would look to
expand into capital work
Page 32
Approach For Identifying Off-Shoring Candidates
Division
applications/
activities
Other IT activities
supporting
Division (e.g.,
DBAs)
>Project groups
>Activity groups
>Project
work
>Maintenance
work
>“Filter” to
identify
offshorable
projects
>“Filter” to
identify
offshorable
activities
>Projects to
offshore
>Activities to
offshore
Page 33
RFP Module Definition
FTEs
>Module
>Web Dev/
Support
>Testing
>ESS
>ESS
>USHH
• Web Support: 4.5
>Total
20.5
• Web Dev: 16
• Project Charlotte:
20
•
•
•
•
• Sales Portfolio
Testing: 30
50
CIM: 6
EZ-Buy: 4
Finance: 3.2
HR: 16
>USHH
Helpdesk
>USHH
Support
29.2
• Helpdesk: 34
34
• Portfolio
Applications
Support: 60*
60*
• MMS Impact: 3
>MMD/
Infrastructure
Total
>MMD-A&IT
>Infrastructure
DBA
• DBA: 7
14
7
207.7
• QRIS – LIMS: 4
69.7
124
7
Page 34
Off-Shoring Project SDI
1
What Is Project SDI?
2
How Does SDI Support The ESS PSM?
3
How Does SDI Support Career Development In ESS?
4
Project SDI Next Steps
Page 35
The ESS Professional Services Model
ESS Professional Services Roles:
Project SDI
• Account Managers
• Program Managers
• Resource Managers
Candidate
• Budget Planning
• Day-To-Day
Activities
CLIENT
• Organizational
Support
• Large Capital
Projects
• Small Projects
(Capital Or
Expense)
Concept
Requirements Design
A
c
c
o
u
nt
M
a
n
a
g
er
Construction Installation
Operation
Retirement
ESS Centers
Of Excellence
Program
Manager #1
Program
Manager #2
Technology
Contractors
Other Merck
Centers Of
Excellence
Package
Vendors
Offshore
Vendors
Page 36
Off-Shoring Project SDI
1
Recent Activities
2
Current Vendor Ranking
3
How Does SDI Support Career Development In ESS?
4
Project SDI Next Steps
Page 37
Common Platform Organizational Transition (Phase I)
Professional Services Model
(PSM)
Portfolio Management Model
(PMM)
Operational Support
Common Platform Development
Project SDI
50%
Grade 4
Concept & Requirements
Grade 5
30%
Candidate
Grade 4
Grade 5
Promotions
Grade 6
Grade 6
Grades 7-9
Grades 7-9
Contractors
Page 38
Common Platform Organizational Transition (Phase II)
Professional Services Model
(PSM)
Portfolio Management Model
(PMM)
Operational Support
Common Platform Development
Project SDI
Candidate
Grade 4
Grade 5
Grade 4
Design & Development
Grade 5
Grade 6
Grade 6
Grades 7-9
Grades 7-9
Strategic
Outsourcing
Page 39
Off-Shoring Project SDI
1
Recent Activities
2
Current Vendor Ranking
3
Preliminary Financial Analysis
4
Project SDI Next Steps
Page 40
Project SDI Next Steps
> March 2, 2005 – Team Decision Meeting &
Reference Calls
> March 3, 2005 – Recommendation Memo To
Sponsors
> March 7, 2005 – Decision From Sponsors
> March 8, 2005 Thru March 9, 2005 – Prepare Vendor
Communication
> March 10, 2005 Thru March 11, 2005 – Announce
Decision To Vendors
> March 12, 2005 – Knowledge Transfer Phase Begins
Page 41
2005 ESS Objectives & Themes
Page 42
ESS 2005 Objectives and Themes
 Deliver Business Value through IT Enabled Solutions
 Finance Transformation
 Merck Production System
 Common Platform
 Integrated Talent Management and Global Compensation
 MRL CLPA
 Build and Create the ESS Global Shared Services Model
 Enterprise Document Management
 Strategic Sourcing, Project SDI
 ESS and GI Integrated Shared Services Model
 Quality Assurance, Program Management, Metrics, Communication, Change Mgmt
 Simplify and Standardize the Global IT Environment
 PeopleSoft – Banyu Integration, U.S. Payroll and Time/Labor
 EZExpense Upgrade
 Charlotte Technology Center
 Six Sigma Production Environment
Page 43