Pharmaceutical regulations enter the 21st century

FDA has just issued a final report, "Pharmaceutical CGMPs for the 21st century — A Risk-Based Approach." If you work in an FDA-regulated industry, you should read it.

What it is
This FDA initiative was launched a couple of years ago specifically to review the good manufacturing practices regulations (CGMP) for the drug industry, which have not been updated since 1978. As such, these regulations do not reflect many of the best practices that have been developed since that time, such as use of a risk-based approach and new technologies, such as process analytical technology (PAT), that improve quality but are difficult to implement under the current regulations. The agency felt that the CGMP as a whole needed to be reviewed.

The working groups of this initiative have done a lot of good work, much of which has already been published in various working papers and other documents that can be found on the FDA web site for the CGMP initiative.

Electronic records and electronic signatures
Of interest to information systems professionals, the final report describes its review of 21 CFR Part 11, the FDA regulation that governs the use of electronic records and electronic signatures. FDA has already issued new guidance on Part 11, which I described last year. FDA has been taking public comments on Part 11 earlier this year. The final report indicates that a draft revision of Part 11 itself will be issued for public comment in 2005.

FDA to practice its own preaching
In the final report, there is one section that caught my attention. Under the heading, "Adoption of Quality Systems Model for Agency Operations," it says, in part,

At the outset of the initiative, FDA conveyed its goal of bringing an integrated quality systems orientation to all Agency activities and programs. A specific goal was the development and implementation of a more systematic approach to regulating pharmaceutical quality, as well as more integration and collaboration among the different components of the Agency that are involved in pharmaceutical quality. The Quality Systems Framework Working Group...developed such a model for the CGMP initiative, referencing key recognized external quality and risk management standards....FDA will now be using a quality systems approach to improve the predictability, consistency, integration, and overall effectiveness of our entire regulatory operation. This quality systems model, now incorporated into the FDA Staff Manual Guide, Quality Systems Framework for Internal Activities, defines the essential quality elements to consider as part of any system that controls an internal FDA regulatory activity.

As we all know, part of FDA's mission is to develop and enforce regulations that mandate implementation of quality systems in food, drug, and medical device manufacturing. Therefore, it might come as a surprise that, until now, FDA itself has not had a quality system to govern its own internal operations. So now FDA will practice what it preaches.

I'm guessing there are a lot of industry folks that are thinking, "It's about time."

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What went wrong with HP's SAP migration?

Computerworld has an interview with Gilles Bouchard, CIO and EVP of global operations at Hewlitt-Packard (H-P), regarding lessons learned from the problematic SAP consolidation at HP's enterprise servers and storage group. CEO Carly Fiorina blamed problems in the migration for a revenue shortfall in HP's performance.

In his interview, Bouchard points to several causes behind the migration problems, all of them internal to HP and not reflective on SAP as a vendor.

These problems are in three major categories. One we call "working across silos." The team that was driving this program had to work with other parts of the company. And working across these seams proved difficult. ...

Secondly, there were a lot of data-integrity [problems]. Orders fell out between the legacy front-end system and SAP on the back end, which required a lot of manual intervention. ...

The third element was increased demand. This migration had to do with our Intel-based server business. The demand really increased for those products, and it's still very high right now, which is good news. But it put even more pressure on the whole system. We should have had a contingency plan for four, five or six weeks

Computerworld has the story.

At the risk of oversimplifying what was, no doubt, a complex and difficult project, I think that Bouchard's last point is the most important. With any migration of this magnitude, there has to be a fall-back or contingency plan in the event that the migration does not go as smoothly as planned, so that the business is not adversely affected. It's one thing for the project to have a cost overrun. It's another thing altogether to impact the business itself.

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Big three vendors target small companies

In a clear indication that new deals in large companies are getting harder to come by, all three of the major enterprise system vendors--SAP, Oracle, and PeopleSoft--now have special programs for small businesses.

Oracle is the latest vendor to announce such an offering. The new offering, called Oracle E-Business Suite Special Edition, provides functionality for financials, purchasing, inventory management, order management, discrete manufacturing, sales, and business intelligence, bundled with a special deal for Oracle's database.

It sounds like a good deal. According to CNET,

Under the new program, Oracle introduced a reduced entry-level price for its database software. The new pricing is $149 per user, or $49.95 per central processing unit, for a maximum to two processors. The price of the E-business Suite Standard Edition is approximately $2,000 per user, according to an Oracle representative.

Oracle has also set up a team of partners to market the suite, including Abaris, Baytree Associates, Core Services, Favored Tack, Lucidity Consulting Group, Oto Global Solutions, Vertex Systems and Whitbread Technology Partners.

Licenses are available for a minimum of 10 users and a maximum of 50 users, Oracle said. Its partners, which will implement, host and support the new package, will decide on the pricing.

The other Tier I vendors, SAP and PeopleSoft, have small company offerings similar to Oracle's, but Oracle is the only one to offer essentially the same product to large and small customers. SAP's small business offering is its SAP Business One product, which is a totally different code base from SAP's flagship offering, MySAP.

Similarly, PeopleSoft's approach to small companies is to position its older JDE World product, which runs on the IBM iSeries (formerly AS/400) hardware platform. The product is bundled with hardware and services as an offering dubbed World Express, and it is being offered exclusively through IBM resellers.

But in the small company marketplace, SAP, Oracle, and PeopleSoft will probably find that their greatest competition is not from each other, but from Microsoft. Microsoft's strategy for enterprise applications is to dominate the small company market, and it is not going to sit by while the big three attempt to gain a foothold.

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EU to clear Oracle bid for PeopleSoft?

Citing unnamed sources, the Financial Times of London is now reporting that the European Commission is set to clear the Oracle's hostile bid for PeopleSoft.

Mario Monti, the European Union competition commissioner, is expected to announce the clearance before he steps down at the end of next month. Though he still has to consult the EU's national antitrust regulators, it is unlikely that he will change his position.

People familiar with the case said the Commission had been leaning towards a clearance of the offer for months, long before a US court approved the bid in early September. They said the Commission was still concerned about the possible impact of the takeover on competition but it had realised its case would not withstand a legal challenge in the European court.

If true, this is one more hurdle cleared by Oracle in its quest for PeopleSoft. Remaining hurdles include PeopleSoft's poison pill, PeopleSoft's civil lawsuit against Oracle, and willingness of PeopleSoft's shareholders to tender shares to Oracle.

The Financial Times article has more.

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ERP implementation: putting processes and people first

Yesterday afternoon, PeopleSoft arranged for me to interview Ken Meidell, CIO at Cascade Designs, an early adopter of PeopleSoft's Enterprise One system. But, as it turns out, the interview interesting for me more in terms of implementation lessons learned than it was in terms of learning more about PeopleSoft's software.

Cascade Designs is a manufacturer of outdoor equipment mainly for backpacking, camping, and other outdoor activities. The company first implemented Enterprise One in 1998, when it was known as J.D. Edwards One World. Those that remember know that, to be charitable, JDE One World then was not quite ready for prime time. Nevertheless, Cascade had a well-organized effort and accomplished implementation of the full suite of functionality. They later upgraded to the XE version in 2001 and plan to move to v8.11 in 2005.

I asked Ken what improvements he saw in the business after the implementation, and he described the firm going through three stages:

• Visibility of costs. The system gave them a much better understanding of their cost structure. This allowed management to begin making decisions based on fact, instead of gut feel. It also allowed users to move from a "data entry relationship" with the system to the role of knowledge workers. Managers began looking to the system for evidence in decision making.



• Process simplification. Within two years of the initial implementation, the company acquired a competitor that had some expertise in lean manufacturing. Learning from the acquired company, Cascade began an effort to simplify operations on the shop floor and to institute principles of lean manufacturing. Ken feels that the new system was flexible enough to allow the transition to lean manufacturing. He also plans to use some of the new demand driven manufacturing functionality in the new release of Enterprise One to further enable lean manufacturing.



• Automation. Now that operations have been simplified, the focus is on automation, using technologies such as bar-coding and electronic data interchange (EDI). These will provide further cost reduction and closer connection to trading partners.

Ken had a good story to tell regarding effective use of Cascade's investment in new systems. So, as we wrapped up, I asked Ken what advice he might give to companies that were about to undertake implementation of a new system. Here's what he said,

• Be willing to change your business processes. Software often embodies better ways of doing things. "Build process improvement into your implementation plan, and don't be afraid to change business processes," Ken said.



• Be willing to help people change. The new system will become, using Ken's term, "the heart and lungs of your company," essential to running your business. But getting there can be painful, and people resist change. For example, when implementing the new system in an overseas plant, Ken sent a team of eight super-users from the U.S. to help the new users in their adoption of the new system. "It wasn't that there was anything wrong with the software," he said. But he knew that people would have problems at first. Building practical actions for change management into the implementation plan, such as sending power users to help users in other plants, can make a big difference.



• Appreciate the need for a good user interface. Ken thinks that the traditional way of selecting software puts too much emphasis on features and functions and not enough on ease of use. "The most simple-minded user has used the Web to order a book from Amazon. That's the standard for ease of use that people expect," he said. Therefore, ensuring that the user interface is friendly is important to getting new users to adopt the system.

Although Ken's advice was based on his experience in implementing and maintaining PeopleSoft EntepriseOne, I think that his advice is applicable no matter what system is being implemented.

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PeopleSoft trying to shout above Oracle takeover "noise"

I'm attending the PeopleSoft Connect conference this week in San Francisco. Here are some of my impressions from CEO Craig Conway's keynote presentation this morning, and a PeopleSoft press conference that I was able to attend.

Much of the press in attendance has been waiting for some reaction from Conway to the U.S. Federal court's ruling that it would not block Oracle's hostile takeover bid. If so, they were disappointed when Conway indicated that, per instructions from PeopleSoft legal counsel, he could not say anything more on the subject than is in the firm's SEC filings. Conway's only comments relative to Oracle's hostile bid were that the past year has been "like a bad dream that will not seem to end," and that the court's ruling means that the bad dream will continue for now.

Conway, along with other PeopleSoft executives that I spoke to this morning, seem genuinely frustrated that what they see as major accomplishments has been drowned out by what Conway calls "noise" and "static" surrounding Oracle's takeover bid. Too many reporters seem overly focused on the takeover, as evidenced by one reporter who said he expected this week to be more like a funeral than a user conference. PeopleSoft's challenge is to focus on the positive.

In that theme, Conway pointed to several accomplishments that PeopleSoft has made in the past year:

1. Improving the total ownership experience (TOE). PeopleSoft's vision is to bring innovation not just to product functionality, but to ease of use and cost of maintenance as well. Conway claims that under its TOE initiative, it now takes 25% less time to install the application, 20% less time for implementation and 80% fewer steps to apply application updates. If true, these are significant improvements.



2. Successfully integrating the JDE acquisition. Conway looks at the J.D. Edwards acquisition not as a consolidation but as an addition, and points to the subject matter expertise in asset-intensive industries and manufacturing along with JDE's major presence in the mid-market as positives for PeopleSoft. Conway pointed to new functionality for Enterprise One (the JDE One World product), such as RFID, kanban support, incorporation of lean technology through the acquisition of JCIT, and integration with PeopleSoft CRM and supplier relationship management (SRM) products). He also claims to have significantly improved service to JDE World (the JDE host-based product) customers, including roll out of a web front end and 140 enhancements to functionality.
   
   On the other hand, Conway admitted that they fumbled the ball, somewhat, in offering enterprise-based pricing to JDE customers. Many customers interpreted that the new pricing scheme meant that they would no longer be able to pay for the product based on number of users and that it most likely would mean higher maintenance fees. Conway claimed that was never PeopleSoft's intention, but it appears the firm lost some good will with the JDE installed base, at least temporarily, in how this was communicated.



3. New products. Conway pointed to PeopleSoft's offering for Sarbanes-Oxley (SOX) compliance, dubbed "The Enforcer," as well as new functionality for enterprise learning management, CRM, and HR, as evidence that the company is moving forward in a positive way in spite of the threat of the Oracle takeover.



4. Service oriented architecture (SOA). A significant part of Conway's keynote address, as well as the press conference, was devoted to discussion around PeopleSoft's move to a service oriented architecture, which in principle should make it possible to build composite applications from a combination of PeopleSoft software components, third party components, and internally developed components, using open standards such as web services. Several analysts after the keynote, however, pointed out that much of the software industry is already moving in this direction, such as SAP with its Netweaver initiative, and, as I pointed out, even smaller vendors, such as IFS, which has been working on such an SOA for at least a year now.

The big news so far in the conference, however, is the announcement of a new joint PeopleSoft/IBM alliance that goes beyond anything the two firms have done together in partnership in the past. PeopleSoft will standardize its applications on IBM middleware, and the two firms will collaborate on several new industry solutions, while working together to ensure interoperability of PeopleSoft's products with other vendor solutions based on open standards. There was some degree of skepticism expressed in the press conference as to whether this alliance was much different than what IBM has done with other application vendors, such as Siebel, Intentia, QAD, and even JDE in the past. But Conway, along with IBM representatives, indicated that the letter of intent spells out specific commitments that the two firms are making to each other in terms of budget and headcount to deliver solutions under this agreement. A figure of $1 billion was mentioned a couple of times, which got the attention of the financial analysts in the room.

Many of the analysts and users were looking to IBM as a possible "white knight" for PeopleSoft, in light of Oracle's takeover attempt. But as one analyst remarked in the hallway, before the press conference, if that was going to happen, IBM would have announced it was submitting its own tender offer this morning, not that it was doing an "alliance." IBM, which has built its entire strategy around open standards, has a lot to lose if PeopleSoft gets swallowed up by Oracle, a fierce IBM competitor for databases and tools. But it's not clear that IBM's alliance will do much in the way of frustrating Oracle's intentions, unless there is something more to the story than I realize.

Update, Sep. 23: Application Development Trends magazine has a good summary of the PeopleSoft/IBM alliance, and includes a quote from yours truly.

Update, Sep. 27: Sarah Lacy at Business Week is skeptical that the IBM/PeopleSoft alliance really means much.

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Lawson joins earnings disappointment club

Lawson Software is the latest enterprise system vendor to warn that its latest quarterly earnings would come short of expectations. The company is forecasting that sales will drop almost 7% for the quarter, with new license sales falling a whopping 43%. Lawson stock dropped over 12% on the warning.

Lawson is echoing the rationale of other vendors, claiming that prospects are taking longer to make buy decisions, a weak excuse in my opinion. My experience indicates that many of those deferred decisions will never materialize.

During the anti-trust lawsuit to block Oracle's takeover of PeopleSoft, Lawson boasted that Oracle, in its defense, claimed that Lawson was a viable alternative to Oracle, PeopleSoft, and SAP in the high end financial and HR applications market. This latest earnings warning now takes most of the wind out of Lawson's sails.

Still, as I've indicated previously, only SAP seems to be exempt from a general downturn in license sales in enterprise applications.

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Oracle profit up, but applications sales down

Oracle reported quarterly earnings this week, which showed a 16% increase in profit over the same quarter a year ago, on a revenue increase of 7%. Oracle is now a $2.22 billion company.

That's the good news. The bad news is that new license sales of Oracle applications (E-Business Suite) fell 36%. An increase of 18% in sales of Oracle's database software apparently was enough to overcome the drop in application software sales.

Oracle CFO said that the shortfall was not due to Oracle's protracted takeover battle with PeopleSoft. He said that it was due in part to a few deals that didn't close in the first quarter but are expected to close in the second quarter. We're starting to hear this explanation more and more from software vendors. What they never say, however, is whether some deals in the next quarters might also be "delayed."

Oracle's fall off in application sales puts Oracle in the same position as just about every other application software seller lately, except SAP. One big difference, of course, is that Oracle has a huge business in database and tools to counteract weakness in the application business.

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Infor acquires process ERP vendor, IncoDev

Just a few days after changing its name from Agilisys, Infor Global Solutions is back on the acquisition trail, picking up process ERP vendor IncoDev.

Okay, I'll admit it. Until reading Infor's press release, I had never heard of IncoDev. It just goes to show how many enterprise software vendors there still are out there, in spite of the consolidation currently underway in the industry.

Some background on IncoDev. The company, founded in 1982, is headquartered in Hamburg, Germany. The press release says that it "provides ERP software to large and midsized companies within the chemical, dyes and paints, life science, food and beverage industries." It sells direct in Germany and through partners in other western European countries. It claims over 200 customers

IncoDev's software offering, Blending 5.7, provides functionality for financial management, production planning and inventory management for specific process industries. They also claim that it is "certified for the pharmaceutical industry" (although it is not clear by whom.) The solution also includes integrated quality management, a Laboratory Information Management System (LIMS) and hazardous materials management.

Addition of IncoDev's offerings strengthens Infor's process industry credentials, which were already established through its original product, Adage, which it inherited from its spinoff from SCT.

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Flash: Court refuses to block Oracle takeover of PeopleSoft

This news hit the wire just a few minutes ago. U.S. Judge Vaughn Walker has ruled that the Department of Justice (DoJ) has failed to prove its antitrust case against Oracle. He therefore declined to issue an injunction to block Oracle's takeover bid for PeopleSoft.

The court's ruling does not mean the deal goes through, however. There are several reasons:

1. DoJ may appeal the ruling. There's no indication yet if DoJ will do so, however.



2. The European Commission has opened its own review of the takeover bid, which presents another obstacle to Oracle.



3. PeopleSoft has sued Oracle in California state court seeking damages from Oracle for hurting its business.



4. Oracle still needs to overcome PeopleSoft's poison pill provisions.

Nevertheless, this is a huge step forward for Oracle's ambitions.

In after market trading today, PeopleSoft is up 15% on the news. I should have bought some PeopleSoft stock earlier this week, when I pointed out that PeopleSoft shares would probably rise no matter how the court ruled.

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Agilisys changes name to Infor Global Solutions

Agilisys, which recently acquired European software vendor Infor, is now changing its trade name to Infor Global Solutions. Agilisys, as a trade name, has only been in existence for a couple years, when SCT spun off its Adage ERP system as its own company, and it needed its own name. Since then, Agilisys has made several acquisitions, including Infor, which apparently has a more widely recognized name, globally, than Agilisys.

The new name is certainly easier to spell. In the past, everytime I've written about Agilisys I've had to check whether it is "Agilysis" or "Agilisys." I still get confused.

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Court's decision due regarding Oracle bid for PeopleSoft

The judge's decision should be coming any day now in the Department of Justice's lawsuit to block Oracle's hostile bid for PeopleSoft.

Wall Street analysts are predicting a short term bump in share price for PeopleSoft, no matter which way the decision goes. The reasoning is that if the court blocks the takeover, PeopleSoft deals will finally be free from the uncertainty surrounding a potential takeover. On the other hand, if Oracle gets the green light, its tender offer of $21 per share is at a substantial premium to PeopleSoft's current price of $17-something.

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Rumor: QAD cuts 30 heads

A Spectator reader just sent me the following information regarding headcount reductions at QAD, following disappointing quarterly results last month. The reader stresses, however, that this information has not been verified:

I just heard that QAD let go about 30 people in all. Most were long term employees who were at the top of the salary range. I understand that the cuts were largely in the R&D organization. QAD is the process of outsourcing at least some of the development to China. [name withheld], the guy who set up the outsourcing agreements, was one of the people axed.

As I’ve pointed out recently, QAD is not alone among application software vendors in hitting a rough spot in financial performance lately. QAD’s action shows just how sensitive publicly held software vendors are these days to short term financial results.

On the other hand, maybe the financial results just gave QAD management an excuse to reduce headcount in the U.S., if in fact QAD is offshoring some software development to China. However, if that were the case, I would expect the reductions to come from lower level developers, not guys near the top of the R&D organization.

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Microsoft Longhorn cutbacks threaten Project Green

A few days ago, I wrote about Microsoft's decision to scale back the features of its next generation operating system, Longhorn. Now we are seeing the far-reaching consequences of that decision.

Most importantly, for readers of the Spectator, there are serious implications for Project Green, which is Microsoft's program to merge the code base for its four ERP systems: Great Plains, Axapta, Navision, and Solomon. Project Green was, most recently, scheduled for release in 2008, following delivery of Longhorn in 2007. But with the feature set of Longhorn being cut, Project Green's delivery schedule is now uncertain.

The dependencies between Longhorn and Project Green are complicated. Project Green was to be built upon a new set of developer tools and software classes called the Microsoft Business Framework (MBF). MBF, in turn, depends in part on Microsoft's new WinFS file system, which Microsoft just decided to cut from Longhorn.

With WinFS being deferred until some unspecified date after Longhorn, it is uncertain when MBF will be delivered. I suppose it's possible that MBF could be released using elements of existing Microsoft technology, which means that MBF could be released ahead of Longhorn. That might allow Microsoft to release Project Green earlier. It depends on whether delivery of MBF was on the critical path for Project Green prior to Microsoft's decision--I don't know, but I doubt it.

For more details of the impact of Longhorn cutbacks, read Mary Jo Foley's summary.

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Sarbanes-Oxley spotlights need for controls in IT

Sarbanes-Oxley (SOX) mandates implementation and documentation of internal controls throughout public companies. The information systems function is not exempt from this requirement. Although internal controls in various departments are often automated by means of information systems, IT professionals are just now beginning to understand that the SOX requirement for internal controls also applies to the IT function itself.

Writing for Datamation, George Spafford has a good basic overview of the concept of "controls."

Spafford explains the difference between preventive, detective, and corrective controls, and why all three are needed in IT. He also discusses the need for both manual and automated controls, and he points out that controls must go beyond merely writing IT policies and procedures.

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