Description
In thinking about ideal alliance partners, Microsoft and Apple may not immediately spring to mind. But in fact, these often fierce competitors have a surprising history of collaboration; take for example, Office for Mac 2011. Working with, rather than against Apple, “Microsoft has once again made the Mac OS X version of its world-dominant productivity suite jive a lot more closely with the latest Windows version” (Hiner, 2010).
In “Finding the Ideal Partner,” Kwicien (2012) asserts that many organizations can grow only by forming business alliances. HR executives are increasingly being called upon to find suitable alliance partners. When considering potential alliance candidates, Kwicien emphasizes the need to think originally, or “outside the box.” He provides seven characteristics of the ideal alliance partner. One way for HR to encourage original thinking would be to ask the C-suite to consider new factors not previously considered when evaluating potential alliance partners. Drawing on the Required Resources and your own additional research, suggest three other plausible ways for HR to facilitate new ways of thinking about potential alliance partners.
Do you see any risk for the HR department in leading the charge of thinking outside the box in this regard? From a risk versus reward perspective, how might the HR department fail the organization by selecting non-traditional candidates?
With these thoughts in mind:
Write a cohesive and scholarly response based on your readings and research this week that addresses the following:
- As an HR executive charged with finding ways to expand an organization, conduct additional research on characteristics of ideal alliance candidates.
- Describe a successful partnership that you found in your research. Would you characterize it as ideal relative to Kwicien’s seven characteristics?
- Cite an example of a partnership that initially appeared to be ideal, but failed to come together as hoped.
- Describe how it has progressed thus far.
- If less-than-ideal partnerships can succeed, what is the lesson in that for HR professionals?
- Accepting Kwicien’s premise about “thinking outside the box,” suggest at least three ways for HR to facilitate original thinking in searching for alliance partners.
- Justify the use of a limited HR budget in pursuing “outside the box” alliance partners.
- What are possible negative consequences for HR in encouraging original thinking in the search for ideal alliance partners?
I have included some resources for your reference. All work must be original and in APA format.
Are you in or are you out?
Bridgeford, Lydell C . Employee Benefit News ; Washington Vol. 25, Iss. 3, (Apr 1, 2011): 26.
ProQuest document link
ABSTRACT (ABSTRACT)
“As a business, we have to make a decision as to whether we want to increase our staff due to the additional
compliance requirements under the health law or partner with third-party vendors.” [John Thompson] explains. The
PPACA provisions are pretty generic in that they apply to most employers in the same way. In addition, the
compliance requirements coming down the pike are very suitable for outsourcing.
Under the health law, over-the-counter medicines are no longer eligible for reimbursement under health flexible
spending accounts without a prescription or if the drug is insulin. Before PPACA, the outsourcing team that
managed flexible spending accounts would substantiate the claim and ensure reimbursement pursuant to the
rules. This meant making sure the expense was for medical purposes. PPACA’s provision on OTC medicines
means the outsourcing vendor has to change its system to reflect that claims should be backed up by a doctor’s
prescription.
“From our analysis, organizations that outsource their health and welfare administration, and have a contract with
associated pricing that was agreed to three-to-five years ago, may have an immediate opportunity to extend or
renegotiate their contract at lower rates,” [Peter Hirano] says. “This can effectively lock in a lower price now in
exchange for a longer contract. However, if an organization has recently renegotiated with their vendor or made a
transition to a new vendor, they should anticipate that costs may go up with renewal.”
FULL TEXT
HighRoads, a Boston-based compliance and benefitsmanagement firm, conducted a survey months after approval
of the Patient Protection and Affordable Care Act, finding that, in general, employers believed that outsourcing
costs for health benefits administration will increase because of the law.
Analysts polled 62 companies that employ approximately 2.7 million workers, with the average respondent having
just fewer than 50,000 employees.
The employers reflect a wide variety of industries, with 17% in manufacturing, 8% in health care and 6% in
automotive and banking. The remaining labor sectors included aerospace and defense, retail, transportation,
electronics, food and beverage, and leisure.
The survey found that 35% of organizations administer their health and welfare benefits internally, while 65% relied
on outsourcing. Of those employers that manage benefits administration internally, 30% report that PPACA
regulations will make them more inclined to consider outsourcing, while 69% believe the law will have no affect on
their desire to outsource.
Peter Hirano, principal at HighRoads, thought the number would be higher, reasoning, “If I am insourcing it today,
then wouldn’t it be easier to have someone else do it for me, along with the ongoing administration?”
“In today’s world, employers have to be compliant to a host of regulations issued by two or more federal agencies.
It’s clear that with the health law this administration is going to step up the requirement around compliance,” says
John Thompson, director of employee benefits at FMC Corporation, a Pennsylvania-based chemical manufacturing
company.
The company, which employs about 5,000 workers worldwide, with 2,400 in the United States, outsources its
health and welfare benefits, 401(k) and pension administration to three different parties.
For Thompson, outsourcing, especially in the wake of health reform, comes down to whether a vendor truly has the
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people and technology solutions in place to offer the company a decent value proposition.
“As a business, we have to make a decision as to whether we want to increase our staff due to the additional
compliance requirements under the health law or partner with third-party vendors.” Thompson explains. The
PPACA provisions are pretty generic in that they apply to most employers in the same way. In addition, the
compliance requirements coming down the pike are very suitable for outsourcing.
Therefore, Thompson and his team are not looking to add staff because of the law’s requirements, but instead will
focus on partnerships with third-party vendors that are well-versed in health insurance compliance under PPACA.
“Each employer is going to have different opportunities and challenges about outsourcing. The ultimate solution
for any given company is going to be based on the complexity factor and the organization’s need to control data,”
says Thompson.
Under the health law, over-the-counter medicines are no longer eligible for reimbursement under health flexible
spending accounts without a prescription or if the drug is insulin. Before PPACA, the outsourcing team that
managed flexible spending accounts would substantiate the claim and ensure reimbursement pursuant to the
rules. This meant making sure the expense was for medical purposes. PPACA’s provision on OTC medicines
means the outsourcing vendor has to change its system to reflect that claims should be backed up by a doctor’s
prescription.
“Employers count on outsourcing vendors to make all of this work, but things have gotten much more complicated
from an administrative perspective, because the age-26 dependent coverage means more individuals are on plan,
and there is tougher compliance on reimbursement of OTC medicines,” Jennifer Henrikson, an outsourcing
consultant with Aon Hewitt.
Adds Christi Rager Wise, senior vice president of management and marketing at Fidelity Investments: “We are
curious to see if we are going to see more interest in outsourcing through health reform because about half of
larger employers still insource. There is a good mix of companies trying to navigate this landscape on their own.
We recognize they are probably having some challenges because there are so many things to accomplish.”
For the HR/benefits outsourcing community, PPACA is the gift that keeps on giving, considering that the law is
rolled out over so many years, says Linda Merritt, research analyst of HRO at NelsonHall.
Merritt believes the law will spur a short-term uptick in HR outsourcing, but forecasting long-term growth in
problematic due to the uncertainty of the law.
“The law is good for business, but we may see a delay of when that really starts to turn into bankable revenue,” she
adds. Still, employers realize that certain parts of the law are here to stay.
Some employers who have been on the fence about outsourcing may now head in that direction. It’s a competitive
market, so pricing pressure is there among vendors. Companies should feel comfortable that they are getting
services at fair rate, Merritt adds.
Analyzing market consolidations
The HighRoads survey also wanted to test employers’ reaction to the wave of consolidation in the benefits
administration outsourcing market that has occurred within the last year – the Aon and Hewitt consolidation, and
the Workscape and ADP acquisition, just to name two.
Nearly 60% of firms that outsource their benefits administration programs were unsure whether industry
consolidation in the outsourcing space will affect their costs or their service over time, while 30% believe they will
see higher prices when they plan to renew or rebid their benefits administration work, according to the survey.
According to a survey by Towers Watson, the volume of merger and acquisition activity among benefits
outsourcing vendors was high in 2010. Nearly 44% of large employers, companies with 15,000 or more workers,
surveyed use vendors affected by merger activity.
Employers that manage their programs internally acknowledged that certain factors would cause them to
outsource benefits administration, such as the ability to react in a quick and cost-effective manner to change
requests (27%), lowering the cost of service (24%), and access to better technology (14%).
“From our analysis, organizations that outsource their health and welfare administration, and have a contract with
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associated pricing that was agreed to three-to-five years ago, may have an immediate opportunity to extend or
renegotiate their contract at lower rates,” Hirano says. “This can effectively lock in a lower price now in exchange
for a longer contract. However, if an organization has recently renegotiated with their vendor or made a transition
to a new vendor, they should anticipate that costs may go up with renewal.”
Credit: By Lydell C. Bridgeford
DETAILS
Publication title:
Employee Benefit News; Washington
Volume:
25
Issue:
3
First page:
26
Publication year:
2011
Publication date:
Apr 1, 2011
Section:
Feature Story
Publisher:
SourceMedia
Place of publication:
Washington
Country of publication:
United States, Washington
Publication subject:
Business And Economics–Labor And Industrial Relations
ISSN:
10446265
Source type:
Trade Journals
Language of publication:
English
Document type:
News
ProQuest document ID:
859583699
Document URL:
https://ezp.waldenulibrary.org/login?url=https://search.proquest.com/docview/859
583699?accountid=14872
Copyright:
(Copyright c 2011 SourceMedia, Inc. All Rights Reserved.)
Last updated:
2012-01-09
Database:
ProQuest Central
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Perspectives on Outsourcing
Build Versus Buy in the Current
Biotech Market Environment
Factors such as production scale and intellectual property must be considered
when deciding whether to build your own capacity or buy it from a CMO
THE CURRENT MARKET
In 2009, many small- to medium-sized biopharmaceutical companies struggled to raise
funds for their product development and manufacturing projects, while large, financially
stable companies reigned in spending and
reassessed their pipelines. The building of new
manufacturing facilities decreased, possibly
reflecting changes in business philosophies as
well as a reduced ability by the pharmaceutical
and biotech companies to progress with construction.1,2 At the
same time, the global CMO market
declined to approximately $2.6 billion, a reduction from years past. 3
In general, CMOs saw a drop in
requests for proposal, more sensitivity to pricing from potential clients, and there was (and continues
to be) increased level of competitiveness
amongst CMOs. At least
Maria Lusk is a director of client
one
CMO
closed its doors (QSV
management at Eden Biodesign, a part
of the Watson Group, Liverpool, UK, Biologics). Mergers and acquisi919.806.4234, tions also changed the landscape
maria.lusk@edenbiodesign.com. of the CMO business, as CMOs of
18
BioPharm International
www.biopharminternational.com
all sizes and capabilities were integrated into
larger pharmaceutical or biotech companies
(Watson Pharmaceuticals/Eden Biodesign;
Merck/Avecia; Recipharm/Cobra).
Today, the business environment seems to
be on the rebound: interest in pipelines including biologics remains strong, and for companies considering outsourcing, CMO capacity
is broadly available (though, perhaps because
of the acquisitions of 2009, capacity may not
remain readily available). Process economics
continue to improve through leaps in productivity and the acceptance of new production
technologies. There is a wider array of product
types requiring cGMP manufacture, including the emergence of biosimilars as originator
product patents expire. But the industry has
learned some valuable lessons as a result of the
tumult of 2009. Companies remain cautious
when evaluating requirements for risk sharing, product quality compliance, and business
partner compatibility. Cost-containment is still
paramount and everyone is looking to manage
their project budgets efficiently.
HOW TO DECIDE
When deciding whether to build your own
capacity or buy it from a CMO, prioritization
of what is most important to you as a company should be key. Although your available
budget and the return on investment must be
considered, your choice shouldn’t be made on
potential costs alone. Several factors should be
weighed before you make your choice:
• Risk tolerance: Are you willing to put some
(or all) of the responsibility for product
development and manufacturing into the
hands of a trusted partner?
• People/expertise/core competencies: Can
you assemble a team to execute various project tasks, or do you require support from an
September 2010
Don Farrall/Getty Images
A
fter your R&D team has had a “Eureka!”
moment, the first order of business is
to engage in process development and
production of the product for clinical supply.
Perhaps that moment came a few years ago and
now you need to ensure that you can supply
enough product to meet commercial demand.
Do you choose to build or retrofit your own
manufacturing plant or do you buy via outsourcing to a contract manufacturing organization (CMO)? This complex decision shouldn’t
be made lightly because it could affect nearly
everything about your business, including your
company’s financial situation, intellectual property position, and business and product goals.
Perspectives on Outsourcing
Before making the decision to buy, get to
know your potential CMO partner. Ask questions
and be prepared to answer some, too.
external source for things like
basic process development and
manufacturing, or for specialized
activities like fill-and-finish?
• Manufacturing scale and production forecast: How much of
your product will you need to
complete your clinical trials or
to support commercial demand?
Will your company have available capacity at the proper production scale to meet your needs?
• Technology: What technologies
will be required to manufacture,
test, and finish your product?
Do you already have the appropriate science and equipment in
place? Do you have the budget
and time to obtain the required
technology, or is partnering with
a CMO the best option?
• Timelines: Is there pressure
from investors or the market to
achieve a clinical or commercial
milestone by a particular date?
How will the required project
tasks fit with the expected timeline? Will building or retrofitting
a facility fit with the timeline, or
do you need to use a CMO to
achieve your milestones?
• Geography/cultures/currencies/
communication: Does closer
necessarily mean better? Are
currency exchange rates critical
to your project budget? Are you
prepared to communicate across
various time zones and possibly
cultural influences?
• Regulatory affairs (RA)/clinical
sites: What is your target market
and will you need to include
several locations around the
globe in your plan to submit a
regulatory filing? Do you need
20
BioPharm International
to have your own facility and
RA staff in the same location
as the clinical sites? Is there a
CMO out there that can fully
support your regulatory plans?
• Intellectual property/control:
Does your company wish to
control its IP completely, or are
you willing to share your knowhow with a trusted CMO partner? Will you grant a license to
a business partner who will take
your product through to commercialization, or do you prefer
to maintain control, including
manufacturing, throughout the
product’s lifecycle?
• Number of products and their
development/clinical phase: You
should plan for success, but the
“what ifs” of failure also need
to be considered. Do you have
one or two products in the early
phase of development, or is your
portfolio well balanced with
products in all stages of clinical
development and clinical trials?
It does not make sense to build
a new facility if your pipeline
cannot support it.
GREENFIELD OR RETROFIT?
If you have the option to build a
facility from scratch (“greenfield”)
or to retrofit an existing space, you
must carefully scrutinize what is
available to support the production
of your product. A greenfield facility will be fit for purpose from the
beginning, but various challenges
may arise for a company that choses to build, including keeping to
the construction budget and timeline; employing people with the
proper background to ensure that
www.biopharminternational.com
September 2010
the facility is fit for purpose; and
training staff to install, validate,
and operate equipment. On the
other hand, it may be more difficult to retrofit an existing space
because the existing space must
be able to accommodate the new
equipment while perhaps maintaining (and re-validating) some
of the legacy infrastructure (e.g.,
clean-in-place and steam-in-place
skids, utilities, tanks, water supply).
Any compromises in facility design
will need to be weighed against
planned production and regulatory
requirements.
If you do decide to build, consider
that there are several manufacturing
technologies to choose from:
• Disposable, single-use, or limiteduse manufacturing equipment:
Some of the benefits of these
components and systems include
a low initial capital outlay, fast
installation, and reduced routine
operating costs, because these can
reduce or eliminate the requirement for cleaning or cleaning
validation. Although the use of a
completely disposable production
train is not common, biotechnology companies are beginning to
investigate this as an option.4 For
particular types of products such
as viral vaccines, disposables are
indispensable.
• Stainless-steel systems only :
Stainless-steel systems are proven
for manufacturing products reliably and reproducibly; the technology is common, so process
transfer between manufacturing sites (internal and external)
is relatively straightforward,
and these systems can support
various types of products. But
consideration should be given
to budget and timeline requirements for installation because
they tend to be expensive and
time-consuming to order, install,
and validate. Cleaning will be
a continuous challenge for the
lifetime of the system.
Perspectives on Outsourcing
• Hybrid systems consisting of disposable and stainless-steel components: This option seems to be
the most popular for manufacturing biopharmaceutical products.4 Systems can be designed
to meet your facility and product requirements, using a “best
of both worlds” approach.
Before making your decision
to build or retrofit, consider that
regardless of the equipment you
choose to install, maintenance
and materials supply will be a
continuous endeavor. Planning
for time and costs to operate and
maintain these systems should be
included in your overall product
lifecycle design.
ARE CMOS THE ANSWER?
An alternative to building or retrofitting a facility is to partner
with a CMO. Indeed, innovator
companies have started looking
at the strategic benefits of engaging CMOs to support their products throughout their lifecycle:
in general, it is likely that the
CMO’s facility and quality systems a l ready meet reg u lator y
requirements, including international regulations; an innovator
company can choose a CMO in a
particular location (or locations)
as there continues to be signific a nt C MO b u si ne s s d e ve lop ment in Singapore, Israel, Japan,
and the BRIC countries (Brazil,
Russia, India, and China); CMOs
are differentiating themselves by
increasingly offering specialized
technologies and ser vices, and
several major CMOs are engaging the innovator companies by
explor ing a lter nat ive business
models. In addition, companies
have access to CMOs t hat are
already prepared to not only manufacture a myriad of products,
but also provide you with technologies and personnel already in
place to “hit the ground running”
in support of your project needs.
Expression Systems
O ne of t he b enef it s of worki n g w it h a C M O i s t h at i n
some i nsta nces t he I P holder
for a particular expression system is the CMO
(for e xa mple, G -Pe x/Cata lent;
GS/ L on za; BI – H E X/ B oher i nger
I nge l h ie m; C H E F -1/C MC
Biologics), or a technology may
be available to the CMO (SURE
( S e l e x i s), U C O E ( M i l l ip o r e)/
Eden Biodesign) and accessing
it through the CMO may allow
your company to obtain preferential business terms. Discussion
of available options that may be
most appropriate for the production of your product should be
based on your company’s supply
requirements (current and future);
your available budget; any target
product delivery date(s); and your
compa ny ’s r isk tolera nce a nd
regulatory strategy.
NICHE TECHNOLOGIES
There are a few areas of specialization that commonly are outsourced by innovator companies,
including those who have their
own internal manufacturing capability. These include:
• Product characterization: This usually includes highly specialized
analytical techniques such as
mass spectrometry, amino acid
analysis and post-translational
modification analysis. Because
these analytical methods usually
require expensive equipment and
highly skilled technicians, many
companies choose to engage the
services of an external contract
testing house.
• Drug product fill-and-finish: This
can include vial fill and lyophilization, combination products,
and transdermal patches.
• Viral product production:
There are several product types
in development requiring specialized knowledge and expert ise. E xa mples include v ira l
September 2010
vaccines, gene therapies, and
cell culture products comprising or made using baculov iruses, adenoviruses, or a wide
variety of other viruses. Some
innovator companies choose
to outsource the production of
these types of product because
of constraints in their existing
facility (e.g., segregation of production suites and air handling
units), technical expertise, or
regulatory requirements.
FINAL THOUGHTS
Before mak ing the decision to
buy, get to k now you r potential CMO partner. Ask questions
and be prepared to answer some
too. You should understand and
then share what your expectations are for working with your
chosen CMO, a nd you shou ld
have an understanding of how its
capabilities stack up against your
internal capabilities and project
requirements.
In general, those who choose to
build tend to be the large pharmaceutical and biotech companies that
have sturdy pipelines and plenty of
cash on hand. Smaller companies
with fewer products and less cash
often outsource production of their
products. But regardless of who you
are, the choice to build or buy is one
that could have a significant impact
on your present and future business success, and therefore should
be made very carefully. ◆
REFERENCES
1. Langer E. Build or Buy? Strategic
Choices in Biomanufacturing.
2010 BIO International Convention.
Chicago, IL. 2010 May 3–7.
2. Bush L. Build or Buy? Strategic
Choices in Biomanufacturing.
2010 BIO International Convention.
Chicago, IL. 2010 May 3–7.
3. Liu C, William D. State of the bioCMO market. Contract Pharma.
2010;12(3).
4. Hoffman M. Trends in bioprocessing.
Bioprocessing and sterile
manufacturing 2010 survey. Pharm
Tech suppl. 2010;34(3):s4–s7.
www.biopharminternational.com
BioPharm International
21
Reproduced with permission of the copyright owner. Further reproduction prohibited without permission.
Finding the ideal partner
Kwicien, Jack . Employee Benefit Adviser ; New York Vol. 10, Iss. 2, (Feb 2012): 44.
ProQuest document link
ABSTRACT
For example, if your business currently offers group benefits and you see that your firm is currently passing up a
huge opportunity by not offering voluntary benefits, perhaps partnering with a firm that specializes in these
product lines would make sense. The alliance partner presumably has: domain expertise; carrier relationships;
technological capabilities; and sales channel partners, for example. And the alliance partner candidate in turn may
be looking to affiliate with a larger firm that has: benefits plan design expertise; access to different carrier
relationships; and a large number of group benefits clients who are undoubtedly making plan changes that create
benefits gaps which could be satisfied by voluntary benefits offerings. Clearly these two businesses would be
synergistic, and could greatly benefit from each other’s expertise and relationships. That would also be true of
businesses such as a property and casualty broker, a retirement planning firm, a human resource consulting
practice, or even a small payroll company.
Don’t be afraid to “think outside the box” when it comes to considering potential alliance candidates. Today’s
competitor or administrator or vendor may be tomorrow’s ideal strategic partner depending upon what you are
trying to accomplish. Think broadly and strategically about what will benefit your clients and customers most in
the future. Don’t focus on the way you conduct business today. Think about how you want to be conducting
business two or five years from now and the roadmap that will get you there.
As we talk with benefits advisers all over the country, the forward thinking, select few are looking at their existing
customer base, capabilities, and their own business models and are contemplating methods to adapt their
practices. They are evaluating their client value proposition in light of today’s market realities and emphasizing the
expertise and capabilities that they possess and that will be relevant today and several years from now. I think
there is real value to this kind of self-examination. If you do not think your firm can be objective in evaluating its
capabilities, contact us and we will assist you. An ideal alliance partner candidate would possess some or all of the
following characteristics:
FULL TEXT
Many of us are growing tired of the colder weather just as we grow weary of the grind of health care reform
updates and downdrafts. And all of us are ready for the economy to improve in a meaningful and sustained
manner. In some respects it is our winter of discontent. Not to mix literary references, but it is the best of times
and it is the worst of times. Which will it be for you? That depends on whether your glass is half empty or half full.
And it depends on whether you have a plan to succeed.
Last month we discussed business planning and the need for a succession plan. That seems to have resonated
with a number of you given that so many readers are grappling with how to morph their business model while
growing their revenues. We provided the rationale for having a written business plan and explained that it is both a
strategic and tactical exercise that serves a multitude of purposes. We provided an outline of the potential content,
and we discussed succession planning.
This month, we want to address strategic alliances as one aspect of business planning, expanding your
capabilities, and adapting to the market conditions. In an ideal world, a strategic alliance will permit you to
enhance your value proposition and your client offering without having to build or buy the resources, skills and
capabilities. And ultimately, your alliance partner might be a great merger candidate at some point in the future.
Consequently, developing an alliance might be your personal succession plan or even your exit strategy. So
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selecting the right alliance partner requires focused consideration of the attributes of the ideal partnering
relationship. The strengths and opportunity areas of your business will determine who the ideal candidate will be.
Evaluating potential candidates is about finding business partners that have complementary practices. This way
both businesses benefit from not having to spend time or money on building a new entity.
Self assessment
As we talk with benefits advisers all over the country, the forward thinking, select few are looking at their existing
customer base, capabilities, and their own business models and are contemplating methods to adapt their
practices. They are evaluating their client value proposition in light of today’s market realities and emphasizing the
expertise and capabilities that they possess and that will be relevant today and several years from now. I think
there is real value to this kind of self-examination. If you do not think your firm can be objective in evaluating its
capabilities, contact us and we will assist you. An ideal alliance partner candidate would possess some or all of the
following characteristics:
* Complementary domain expertise
* Synergistic products or services
* Carrier relationships (preferably not of the duplicative variety)
* Compatible technological capabilities
* New sales channels or markets
* Compatible management style, business model, structure and corporate culture
* Shared vision for the future of both of the businesses involved
Invariably the best place to start is with an honest assessment of the strengths and weaknesses of your business
today. Only you are likely to really know where the gaps in your firm’s capabilities exist and how to bridge those
gaps. And be honest with yourself. Treat it as though your life depended upon it, because in many respects, your
financial livelihood does.
The ideal partner
Depending upon the nature of the strengths and deficiencies of your business will largely determine who the ideal
alliance partner candidate will be for your specific business practice. So the evaluation of potential merger
candidates is largely about finding business partners that have complementary or synergistic business practices,
wherein both businesses benefit from not having to build a new practice with all the attendant time and expense
associated with the creation of a new business entity.
For example, if your business currently offers group benefits and you see that your firm is currently passing up a
huge opportunity by not offering voluntary benefits, perhaps partnering with a firm that specializes in these
product lines would make sense. The alliance partner presumably has: domain expertise; carrier relationships;
technological capabilities; and sales channel partners, for example. And the alliance partner candidate in turn may
be looking to affiliate with a larger firm that has: benefits plan design expertise; access to different carrier
relationships; and a large number of group benefits clients who are undoubtedly making plan changes that create
benefits gaps which could be satisfied by voluntary benefits offerings. Clearly these two businesses would be
synergistic, and could greatly benefit from each other’s expertise and relationships. That would also be true of
businesses such as a property and casualty broker, a retirement planning firm, a human resource consulting
practice, or even a small payroll company.
The state of ultimate compatibility may not be achievable in all cases, but the parties should strive to come as
close as possible to approaching the business and the strategic alliance with a single and like-minded purpose.
After all, you may all be working together for another 10-15 years and you are certainly linking your financial
fortunes together in a nearly inextricable manner. You may as well be comfortable with each other and enjoy
working together while presumably making yourselves wealthier. Clearly you would not ally yourself with another
firm unless you were convinced that the financial rewards were significantly greater than going it alone. But on the
other hand, there is no reason to pursue greater wealth if you will be miserable in the process. This comes under
the heading of ‘life is too short.’
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Value proposition
Here are some of the key strategic benefits that can result from a strategic alliance:
* Strengthen the management team
* Acquire new skills and expertise
* Broaden the product set
* Increase the top-line revenue potential and accelerate growth
* Achieve operational efficiencies
* Improve profitability
* Qualification for more lucrative carrier contracts and contingencies
* Enhance technology capabilities
* Perpetuate one or both businesses
* Provide an exit strategy
All these are valid reasons to consider a strategic alliance. Which applies to your business? Is there more than one
reason that applies to your circumstances?
Don’t be afraid to “think outside the box” when it comes to considering potential alliance candidates. Today’s
competitor or administrator or vendor may be tomorrow’s ideal strategic partner depending upon what you are
trying to accomplish. Think broadly and strategically about what will benefit your clients and customers most in
the future. Don’t focus on the way you conduct business today. Think about how you want to be conducting
business two or five years from now and the roadmap that will get you there.
Yesterday’s message will not
Bridgeford, Lydell C . Employee Benefit News ; Washington Vol. 25, Iss. 3, (Apr 1, 2011): 26.
ProQuest document link
ABSTRACT (ABSTRACT)
“As a business, we have to make a decision as to whether we want to increase our staff due to the additional
compliance requirements under the health law or partner with third-party vendors.” [John Thompson] explains. The
PPACA provisions are pretty generic in that they apply to most employers in the same way. In addition, the
compliance requirements coming down the pike are very suitable for outsourcing.
Under the health law, over-the-counter medicines are no longer eligible for reimbursement under health flexible
spending accounts without a prescription or if the drug is insulin. Before PPACA, the outsourcing team that
managed flexible spending accounts would substantiate the claim and ensure reimbursement pursuant to the
rules. This meant making sure the expense was for medical purposes. PPACA’s provision on OTC medicines
means the outsourcing vendor has to change its system to reflect that claims should be backed up by a doctor’s
prescription.
“From our analysis, organizations that outsource their health and welfare administration, and have a contract with
associated pricing that was agreed to three-to-five years ago, may have an immediate opportunity to extend or
renegotiate their contract at lower rates,” [Peter Hirano] says. “This can effectively lock in a lower price now in
exchange for a longer contract. However, if an organization has recently renegotiated with their vendor or made a
transition to a new vendor, they should anticipate that costs may go up with renewal.”
FULL TEXT
HighRoads, a Boston-based compliance and benefitsmanagement firm, conducted a survey months after approval
of the Patient Protection and Affordable Care Act, finding that, in general, employers believed that outsourcing
costs for health benefits administration will increase because of the law.
Analysts polled 62 companies that employ approximately 2.7 million workers, with the average respondent having
just fewer than 50,000 employees.
The employers reflect a wide variety of industries, with 17% in manufacturing, 8% in health care and 6% in
automotive and banking. The remaining labor sectors included aerospace and defense, retail, transportation,
electronics, food and beverage, and leisure.
The survey found that 35% of organizations administer their health and welfare benefits internally, while 65% relied
on outsourcing. Of those employers that manage benefits administration internally, 30% report that PPACA
regulations will make them more inclined to consider outsourcing, while 69% believe the law will have no affect on
their desire to outsource.
Peter Hirano, principal at HighRoads, thought the number would be higher, reasoning, “If I am insourcing it today,
then wouldn’t it be easier to have someone else do it for me, along with the ongoing administration?”
“In today’s world, employers have to be compliant to a host of regulations issued by two or more federal agencies.
It’s clear that with the health law this administration is going to step up the requirement around compliance,” says
John Thompson, director of employee benefits at FMC Corporation, a Pennsylvania-based chemical manufacturing
company.
The company, which employs about 5,000 workers worldwide, with 2,400 in the United States, outsources its
health and welfare benefits, 401(k) and pension administration to three different parties.
For Thompson, outsourcing, especially in the wake of health reform, comes down to whether a vendor truly has the
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people and technology solutions in place to offer the company a decent value proposition.
“As a business, we have to make a decision as to whether we want to increase our staff due to the additional
compliance requirements under the health law or partner with third-party vendors.” Thompson explains. The
PPACA provisions are pretty generic in that they apply to most employers in the same way. In addition, the
compliance requirements coming down the pike are very suitable for outsourcing.
Therefore, Thompson and his team are not looking to add staff because of the law’s requirements, but instead will
focus on partnerships with third-party vendors that are well-versed in health insurance compliance under PPACA.
“Each employer is going to have different opportunities and challenges about outsourcing. The ultimate solution
for any given company is going to be based on the complexity factor and the organization’s need to control data,”
says Thompson.
Under the health law, over-the-counter medicines are no longer eligible for reimbursement under health flexible
spending accounts without a prescription or if the drug is insulin. Before PPACA, the outsourcing team that
managed flexible spending accounts would substantiate the claim and ensure reimbursement pursuant to the
rules. This meant making sure the expense was for medical purposes. PPACA’s provision on OTC medicines
means the outsourcing vendor has to change its system to reflect that claims should be backed up by a doctor’s
prescription.
“Employers count on outsourcing vendors to make all of this work, but things have gotten much more complicated
from an administrative perspective, because the age-26 dependent coverage means more individuals are on plan,
and there is tougher compliance on reimbursement of OTC medicines,” Jennifer Henrikson, an outsourcing
consultant with Aon Hewitt.
Adds Christi Rager Wise, senior vice president of management and marketing at Fidelity Investments: “We are
curious to see if we are going to see more interest in outsourcing through health reform because about half of
larger employers still insource. There is a good mix of companies trying to navigate this landscape on their own.
We recognize they are probably having some challenges because there are so many things to accomplish.”
For the HR/benefits outsourcing community, PPACA is the gift that keeps on giving, considering that the law is
rolled out over so many years, says Linda Merritt, research analyst of HRO at NelsonHall.
Merritt believes the law will spur a short-term uptick in HR outsourcing, but forecasting long-term growth in
problematic due to the uncertainty of the law.
“The law is good for business, but we may see a delay of when that really starts to turn into bankable revenue,” she
adds. Still, employers realize that certain parts of the law are here to stay.
Some employers who have been on the fence about outsourcing may now head in that direction. It’s a competitive
market, so pricing pressure is there among vendors. Companies should feel comfortable that they are getting
services at fair rate, Merritt adds.
Analyzing market consolidations
The HighRoads survey also wanted to test employers’ reaction to the wave of consolidation in the benefits
administration outsourcing market that has occurred within the last year – the Aon and Hewitt consolidation, and
the Workscape and ADP acquisition, just to name two.
Nearly 60% of firms that outsource their benefits administration programs were unsure whether industry
consolidation in the outsourcing space will affect their costs or their service over time, while 30% believe they will
see higher prices when they plan to renew or rebid their benefits administration work, according to the survey.
According to a survey by Towers Watson, the volume of merger and acquisition activity among benefits
outsourcing vendors was high in 2010. Nearly 44% of large employers, companies with 15,000 or more workers,
surveyed use vendors affected by merger activity.
Employers that manage their programs internally acknowledged that certain factors would cause them to
outsource benefits administration, such as the ability to react in a quick and cost-effective manner to change
requests (27%), lowering the cost of service (24%), and access to better technology (14%).
“From our analysis, organizations that outsource their health and welfare administration, and have a contract with
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Page 2 of 4
associated pricing that was agreed to three-to-five years ago, may have an immediate opportunity to extend or
renegotiate their contract at lower rates,” Hirano says. “This can effectively lock in a lower price now in exchange
for a longer contract. However, if an organization has recently renegotiated with their vendor or made a transition
to a new vendor, they should anticipate that costs may go up with renewal.”
Credit: By Lydell C. Bridgeford
DETAILS
Publication title:
Employee Benefit News; Washington
Volume:
25
Issue:
3
First page:
26
Publication year:
2011
Publication date:
Apr 1, 2011
Section:
Feature Story
Publisher:
SourceMedia
Place of publication:
Washington
Country of publication:
United States, Washington
Publication subject:
Business And Economics–Labor And Industrial Relations
ISSN:
10446265
Source type:
Trade Journals
Language of publication:
English
Document type:
News
ProQuest document ID:
859583699
Document URL:
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583699?accountid=14872
Copyright:
(Copyright c 2011 SourceMedia, Inc. All Rights Reserved.)
Last updated:
2012-01-09
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Perspectives on Outsourcing
Build Versus Buy in the Current
Biotech Market Environment
Factors such as production scale and intellectual property must be considered
when deciding whether to build your own capacity or buy it from a CMO
THE CURRENT MARKET
In 2009, many small- to medium-sized biopharmaceutical companies struggled to raise
funds for their product development and manufacturing projects, while large, financially
stable companies reigned in spending and
reassessed their pipelines. The building of new
manufacturing facilities decreased, possibly
reflecting changes in business philosophies as
well as a reduced ability by the pharmaceutical
and biotech companies to progress with construction.1,2 At the
same time, the global CMO market
declined to approximately $2.6 billion, a reduction from years past. 3
In general, CMOs saw a drop in
requests for proposal, more sensitivity to pricing from potential clients, and there was (and continues
to be) increased level of competitiveness
amongst CMOs. At least
Maria Lusk is a director of client
one
CMO
closed its doors (QSV
management at Eden Biodesign, a part
of the Watson Group, Liverpool, UK, Biologics). Mergers and acquisi919.806.4234, tions also changed the landscape
maria.lusk@edenbiodesign.com. of the CMO business, as CMOs of
18
BioPharm International
www.biopharminternational.com
all sizes and capabilities were integrated into
larger pharmaceutical or biotech companies
(Watson Pharmaceuticals/Eden Biodesign;
Merck/Avecia; Recipharm/Cobra).
Today, the business environment seems to
be on the rebound: interest in pipelines including biologics remains strong, and for companies considering outsourcing, CMO capacity
is broadly available (though, perhaps because
of the acquisitions of 2009, capacity may not
remain readily available). Process economics
continue to improve through leaps in productivity and the acceptance of new production
technologies. There is a wider array of product
types requiring cGMP manufacture, including the emergence of biosimilars as originator
product patents expire. But the industry has
learned some valuable lessons as a result of the
tumult of 2009. Companies remain cautious
when evaluating requirements for risk sharing, product quality compliance, and business
partner compatibility. Cost-containment is still
paramount and everyone is looking to manage
their project budgets efficiently.
HOW TO DECIDE
When deciding whether to build your own
capacity or buy it from a CMO, prioritization
of what is most important to you as a company should be key. Although your available
budget and the return on investment must be
considered, your choice shouldn’t be made on
potential costs alone. Several factors should be
weighed before you make your choice:
• Risk tolerance: Are you willing to put some
(or all) of the responsibility for product
development and manufacturing into the
hands of a trusted partner?
• People/expertise/core competencies: Can
you assemble a team to execute various project tasks, or do you require support from an
September 2010
Don Farrall/Getty Images
A
fter your R&D team has had a “Eureka!”
moment, the first order of business is
to engage in process development and
production of the product for clinical supply.
Perhaps that moment came a few years ago and
now you need to ensure that you can supply
enough product to meet commercial demand.
Do you choose to build or retrofit your own
manufacturing plant or do you buy via outsourcing to a contract manufacturing organization (CMO)? This complex decision shouldn’t
be made lightly because it could affect nearly
everything about your business, including your
company’s financial situation, intellectual property position, and business and product goals.
Perspectives on Outsourcing
Before making the decision to buy, get to
know your potential CMO partner. Ask questions
and be prepared to answer some, too.
external source for things like
basic process development and
manufacturing, or for specialized
activities like fill-and-finish?
• Manufacturing scale and production forecast: How much of
your product will you need to
complete your clinical trials or
to support commercial demand?
Will your company have available capacity at the proper production scale to meet your needs?
• Technology: What technologies
will be required to manufacture,
test, and finish your product?
Do you already have the appropriate science and equipment in
place? Do you have the budget
and time to obtain the required
technology, or is partnering with
a CMO the best option?
• Timelines: Is there pressure
from investors or the market to
achieve a clinical or commercial
milestone by a particular date?
How will the required project
tasks fit with the expected timeline? Will building or retrofitting
a facility fit with the timeline, or
do you need to use a CMO to
achieve your milestones?
• Geography/cultures/currencies/
communication: Does closer
necessarily mean better? Are
currency exchange rates critical
to your project budget? Are you
prepared to communicate across
various time zones and possibly
cultural influences?
• Regulatory affairs (RA)/clinical
sites: What is your target market
and will you need to include
several locations around the
globe in your plan to submit a
regulatory filing? Do you need
20
BioPharm International
to have your own facility and
RA staff in the same location
as the clinical sites? Is there a
CMO out there that can fully
support your regulatory plans?
• Intellectual property/control:
Does your company wish to
control its IP completely, or are
you willing to share your knowhow with a trusted CMO partner? Will you grant a license to
a business partner who will take
your product through to commercialization, or do you prefer
to maintain control, including
manufacturing, throughout the
product’s lifecycle?
• Number of products and their
development/clinical phase: You
should plan for success, but the
“what ifs” of failure also need
to be considered. Do you have
one or two products in the early
phase of development, or is your
portfolio well balanced with
products in all stages of clinical
development and clinical trials?
It does not make sense to build
a new facility if your pipeline
cannot support it.
GREENFIELD OR RETROFIT?
If you have the option to build a
facility from scratch (“greenfield”)
or to retrofit an existing space, you
must carefully scrutinize what is
available to support the production
of your product. A greenfield facility will be fit for purpose from the
beginning, but various challenges
may arise for a company that choses to build, including keeping to
the construction budget and timeline; employing people with the
proper background to ensure that
www.biopharminternational.com
September 2010
the facility is fit for purpose; and
training staff to install, validate,
and operate equipment. On the
other hand, it may be more difficult to retrofit an existing space
because the existing space must
be able to accommodate the new
equipment while perhaps maintaining (and re-validating) some
of the legacy infrastructure (e.g.,
clean-in-place and steam-in-place
skids, utilities, tanks, water supply).
Any compromises in facility design
will need to be weighed against
planned production and regulatory
requirements.
If you do decide to build, consider
that there are several manufacturing
technologies to choose from:
• Disposable, single-use, or limiteduse manufacturing equipment:
Some of the benefits of these
components and systems include
a low initial capital outlay, fast
installation, and reduced routine
operating costs, because these can
reduce or eliminate the requirement for cleaning or cleaning
validation. Although the use of a
completely disposable production
train is not common, biotechnology companies are beginning to
investigate this as an option.4 For
particular types of products such
as viral vaccines, disposables are
indispensable.
• Stainless-steel systems only :
Stainless-steel systems are proven
for manufacturing products reliably and reproducibly; the technology is common, so process
transfer between manufacturing sites (internal and external)
is relatively straightforward,
and these systems can support
various types of products. But
consideration should be given
to budget and timeline requirements for installation because
they tend to be expensive and
time-consuming to order, install,
and validate. Cleaning will be
a continuous challenge for the
lifetime of the system.
Perspectives on Outsourcing
• Hybrid systems consisting of disposable and stainless-steel components: This option seems to be
the most popular for manufacturing biopharmaceutical products.4 Systems can be designed
to meet your facility and product requirements, using a “best
of both worlds” approach.
Before making your decision
to build or retrofit, consider that
regardless of the equipment you
choose to install, maintenance
and materials supply will be a
continuous endeavor. Planning
for time and costs to operate and
maintain these systems should be
included in your overall product
lifecycle design.
ARE CMOS THE ANSWER?
An alternative to building or retrofitting a facility is to partner
with a CMO. Indeed, innovator
companies have started looking
at the strategic benefits of engaging CMOs to support their products throughout their lifecycle:
in general, it is likely that the
CMO’s facility and quality systems a l ready meet reg u lator y
requirements, including international regulations; an innovator
company can choose a CMO in a
particular location (or locations)
as there continues to be signific a nt C MO b u si ne s s d e ve lop ment in Singapore, Israel, Japan,
and the BRIC countries (Brazil,
Russia, India, and China); CMOs
are differentiating themselves by
increasingly offering specialized
technologies and ser vices, and
several major CMOs are engaging the innovator companies by
explor ing a lter nat ive business
models. In addition, companies
have access to CMOs t hat are
already prepared to not only manufacture a myriad of products,
but also provide you with technologies and personnel already in
place to “hit the ground running”
in support of your project needs.
Expression Systems
O ne of t he b enef it s of worki n g w it h a C M O i s t h at i n
some i nsta nces t he I P holder
for a particular expression system is the CMO
(for e xa mple, G -Pe x/Cata lent;
GS/ L on za; BI – H E X/ B oher i nger
I nge l h ie m; C H E F -1/C MC
Biologics), or a technology may
be available to the CMO (SURE
( S e l e x i s), U C O E ( M i l l ip o r e)/
Eden Biodesign) and accessing
it through the CMO may allow
your company to obtain preferential business terms. Discussion
of available options that may be
most appropriate for the production of your product should be
based on your company’s supply
requirements (current and future);
your available budget; any target
product delivery date(s); and your
compa ny ’s r isk tolera nce a nd
regulatory strategy.
NICHE TECHNOLOGIES
There are a few areas of specialization that commonly are outsourced by innovator companies,
including those who have their
own internal manufacturing capability. These include:
• Product characterization: This usually includes highly specialized
analytical techniques such as
mass spectrometry, amino acid
analysis and post-translational
modification analysis. Because
these analytical methods usually
require expensive equipment and
highly skilled technicians, many
companies choose to engage the
services of an external contract
testing house.
• Drug product fill-and-finish: This
can include vial fill and lyophilization, combination products,
and transdermal patches.
• Viral product production:
There are several product types
in development requiring specialized knowledge and expert ise. E xa mples include v ira l
September 2010
vaccines, gene therapies, and
cell culture products comprising or made using baculov iruses, adenoviruses, or a wide
variety of other viruses. Some
innovator companies choose
to outsource the production of
these types of product because
of constraints in their existing
facility (e.g., segregation of production suites and air handling
units), technical expertise, or
regulatory requirements.
FINAL THOUGHTS
Before mak ing the decision to
buy, get to k now you r potential CMO partner. Ask questions
and be prepared to answer some
too. You should understand and
then share what your expectations are for working with your
chosen CMO, a nd you shou ld
have an understanding of how its
capabilities stack up against your
internal capabilities and project
requirements.
In general, those who choose to
build tend to be the large pharmaceutical and biotech companies that
have sturdy pipelines and plenty of
cash on hand. Smaller companies
with fewer products and less cash
often outsource production of their
products. But regardless of who you
are, the choice to build or buy is one
that could have a significant impact
on your present and future business success, and therefore should
be made very carefully. ◆
REFERENCES
1. Langer E. Build or Buy? Strategic
Choices in Biomanufacturing.
2010 BIO International Convention.
Chicago, IL. 2010 May 3–7.
2. Bush L. Build or Buy? Strategic
Choices in Biomanufacturing.
2010 BIO International Convention.
Chicago, IL. 2010 May 3–7.
3. Liu C, William D. State of the bioCMO market. Contract Pharma.
2010;12(3).
4. Hoffman M. Trends in bioprocessing.
Bioprocessing and sterile
manufacturing 2010 survey. Pharm
Tech suppl. 2010;34(3):s4–s7.
www.biopharminternational.com
BioPharm International
21
Reproduced with permission of the copyright owner. Further reproduction prohibited without permission.
Finding the ideal partner
Kwicien, Jack . Employee Benefit Adviser ; New York Vol. 10, Iss. 2, (Feb 2012): 44.
ProQuest document link
ABSTRACT
For example, if your business currently offers group benefits and you see that your firm is currently passing up a
huge opportunity by not offering voluntary benefits, perhaps partnering with a firm that specializes in these
product lines would make sense. The alliance partner presumably has: domain expertise; carrier relationships;
technological capabilities; and sales channel partners, for example. And the alliance partner candidate in turn may
be looking to affiliate with a larger firm that has: benefits plan design expertise; access to different carrier
relationships; and a large number of group benefits clients who are undoubtedly making plan changes that create
benefits gaps which could be satisfied by voluntary benefits offerings. Clearly these two businesses would be
synergistic, and could greatly benefit from each other’s expertise and relationships. That would also be true of
businesses such as a property and casualty broker, a retirement planning firm, a human resource consulting
practice, or even a small payroll company.
Don’t be afraid to “think outside the box” when it comes to considering potential alliance candidates. Today’s
competitor or administrator or vendor may be tomorrow’s ideal strategic partner depending upon what you are
trying to accomplish. Think broadly and strategically about what will benefit your clients and customers most in
the future. Don’t focus on the way you conduct business today. Think about how you want to be conducting
business two or five years from now and the roadmap that will get you there.
As we talk with benefits advisers all over the country, the forward thinking, select few are looking at their existing
customer base, capabilities, and their own business models and are contemplating methods to adapt their
practices. They are evaluating their client value proposition in light of today’s market realities and emphasizing the
expertise and capabilities that they possess and that will be relevant today and several years from now. I think
there is real value to this kind of self-examination. If you do not think your firm can be objective in evaluating its
capabilities, contact us and we will assist you. An ideal alliance partner candidate would possess some or all of the
following characteristics:
FULL TEXT
Many of us are growing tired of the colder weather just as we grow weary of the grind of health care reform
updates and downdrafts. And all of us are ready for the economy to improve in a meaningful and sustained
manner. In some respects it is our winter of discontent. Not to mix literary references, but it is the best of times
and it is the worst of times. Which will it be for you? That depends on whether your glass is half empty or half full.
And it depends on whether you have a plan to succeed.
Last month we discussed business planning and the need for a succession plan. That seems to have resonated
with a number of you given that so many readers are grappling with how to morph their business model while
growing their revenues. We provided the rationale for having a written business plan and explained that it is both a
strategic and tactical exercise that serves a multitude of purposes. We provided an outline of the potential content,
and we discussed succession planning.
This month, we want to address strategic alliances as one aspect of business planning, expanding your
capabilities, and adapting to the market conditions. In an ideal world, a strategic alliance will permit you to
enhance your value proposition and your client offering without having to build or buy the resources, skills and
capabilities. And ultimately, your alliance partner might be a great merger candidate at some point in the future.
Consequently, developing an alliance might be your personal succession plan or even your exit strategy. So
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selecting the right alliance partner requires focused consideration of the attributes of the ideal partnering
relationship. The strengths and opportunity areas of your business will determine who the ideal candidate will be.
Evaluating potential candidates is about finding business partners that have complementary practices. This way
both businesses benefit from not having to spend time or money on building a new entity.
Self assessment
As we talk with benefits advisers all over the country, the forward thinking, select few are looking at their existing
customer base, capabilities, and their own business models and are contemplating methods to adapt their
practices. They are evaluating their client value proposition in light of today’s market realities and emphasizing the
expertise and capabilities that they possess and that will be relevant today and several years from now. I think
there is real value to this kind of self-examination. If you do not think your firm can be objective in evaluating its
capabilities, contact us and we will assist you. An ideal alliance partner candidate would possess some or all of the
following characteristics:
* Complementary domain expertise
* Synergistic products or services
* Carrier relationships (preferably not of the duplicative variety)
* Compatible technological capabilities
* New sales channels or markets
* Compatible management style, business model, structure and corporate culture
* Shared vision for the future of both of the businesses involved
Invariably the best place to start is with an honest assessment of the strengths and weaknesses of your business
today. Only you are likely to really know where the gaps in your firm’s capabilities exist and how to bridge those
gaps. And be honest with yourself. Treat it as though your life depended upon it, because in many respects, your
financial livelihood does.
The ideal partner
Depending upon the nature of the strengths and deficiencies of your business will largely determine who the ideal
alliance partner candidate will be for your specific business practice. So the evaluation of potential merger
candidates is largely about finding business partners that have complementary or synergistic business practices,
wherein both businesses benefit from not having to build a new practice with all the attendant time and expense
associated with the creation of a new business entity.
For example, if your business currently offers group benefits and you see that your firm is currently passing up a
huge opportunity by not offering voluntary benefits, perhaps partnering with a firm that specializes in these
product lines would make sense. The alliance partner presumably has: domain expertise; carrier relationships;
technological capabilities; and sales channel partners, for example. And the alliance partner candidate in turn may
be looking to affiliate with a larger firm that has: benefits plan design expertise; access to different carrier
relationships; and a large number of group benefits clients who are undoubtedly making plan changes that create
benefits gaps which could be satisfied by voluntary benefits offerings. Clearly these two businesses would be
synergistic, and could greatly benefit from each other’s expertise and relationships. That would also be true of
businesses such as a property and casualty broker, a retirement planning firm, a human resource consulting
practice, or even a small payroll company.
The state of ultimate compatibility may not be achievable in all cases, but the parties should strive to come as
close as possible to approaching the business and the strategic alliance with a single and like-minded purpose.
After all, you may all be working together for another 10-15 years and you are certainly linking your financial
fortunes together in a nearly inextricable manner. You may as well be comfortable with each other and enjoy
working together while presumably making yourselves wealthier. Clearly you would not ally yourself with another
firm unless you were convinced that the financial rewards were significantly greater than going it alone. But on the
other hand, there is no reason to pursue greater wealth if you will be miserable in the process. This comes under
the heading of ‘life is too short.’
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Value proposition
Here are some of the key strategic benefits that can result from a strategic alliance:
* Strengthen the management team
* Acquire new skills and expertise
* Broaden the product set
* Increase the top-line revenue potential and accelerate growth
* Achieve operational efficiencies
* Improve profitability
* Qualification for more lucrative carrier contracts and contingencies
* Enhance technology capabilities
* Perpetuate one or both businesses
* Provide an exit strategy
All these are valid reasons to consider a strategic alliance. Which applies to your business? Is there more than one
reason that applies to your circumstances?
Don’t be afraid to “think outside the box” when it comes to considering potential alliance candidates. Today’s
competitor or administrator or vendor may be tomorrow’s ideal strategic partner depending upon what you are
trying to accomplish. Think broadly and strategically about what will benefit your clients and customers most in
the future. Don’t focus on the way you conduct business today. Think about how you want to be conducting
business two or five years from now and the roadmap that will get you there.
Yesterday’s message will not
Categories: