convergence betweeninformation technologies and...

HEC Executive Education & Ecole des Mines ParisTech

“Examining convergence between

Information and Operational Technologies:

Benefits and challenges

for pharmaceutical and biotechnology industries”

Professional thesis

Executive Mastère Spécialisé (EMS) -

Technologies and Information System management (MSIT)

Frédéric Pennerad – Class of 2013

http://www.exed.hec.fr/

https://www.facebook.com/photo.php?fbid=128020504083&set=a.434101669083.237605.124650154083&type=1

Professional thesis - “Examining convergence between IT and OT: Benefits and challenges for pharma and biotech industries”

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©2013 Frédéric Pennerad – HEC & Mines Paristech, EMS MSIT, class of 2013 Page 1 of 106


Executive summary

Gartner defines the convergence between Information Technologies (IT) and Operational Technologies (OT) as the technologies which measure and interact with the physical world. Forrester Research refers to it as “smart computing”, what spreads its influence to all solutions allowing interaction with operational elements and processing of operational data.

Pharmaceutical and biotechnology industries are facing huge transformation challenges exacerbated by the shortage of good medicines in their pipelines and by the ever increasing regulatory requirements (PriceWaterHouseCoopers, 2007). Because technological convergence offers companies tremendous opportunities, it is important to study how investments supporting this convergence can foster growth and value creation.

The boundaries of both worlds are not clearly defined and the literature on the subject is replete with numerous analogous concepts (e.g. IT, OT, smart technologies, M2M, sensor networks) which further complicate the understanding of this trend by professionals. The root of the phenomenon is found in the exponential decrease of electronic components price/performance ratio and physical measures (e.g. size, energetic consumption, electromagnetic and calorific emissions). This allowed the fast development of intelligent and connected objects no one expected would become so widely available so quickly.

The current qualitative study leveraging the interviews of nine professionals focuses on the pharmaceutical and biotechnology industries. The study also incorporates the interviews of professionals from other sectors to facilitate the identification of unique features of the life-sciences sector. The benefits identification framework, developed on the basis of Kaplan and Norton Balanced Scored Cards, makes the distinction between two expected terms of return on investment: the strategic investment time horizon and the operational investment time horizon.

The research reveals an interesting difference in the benefits ranking when we compare given expectations with given examples. This difference could be explained by the considered context, causing heterogeneous presentations of data by decision-makers. It is deducted thereof that change leaders intend to focus on reporting operational benefits when required to demonstrate security of returns on investment.

With IT/OT convergence, organizations are facing challenges around organizational transformation and the interoperability of the technical solutions. Organizations must identify and minimize security risks threatening their systems and products and adapt on an ongoing basis. The IT / OT convergence is actually a major phenomenon which finds numerous connections in other current IT concepts: Internet of Things, Big Data, Cloud computing, Smart computing, Bring Your Own Device or Shadow IT.



Solutions thus developed could support the acceleration of the integration and alignment between technological areas.



Research description

Research field: Convergence between Information Technologies (IT) and Operational technologies (OT)

Research question: What is the value proposition of the integration of IT and OT?

Research objectives:

Clarify definitions and concepts surrounding IT/OT convergence and IT business value

Understand how IT business value is generated Determine the most influencing factors for IT business value creation Determine what benefits organizations expect from IT/OT convergence Determine where IT/OT can result in a competitive advantage Determine how organizations are currently prioritizing investments

through value creation

Research area: Look at the Pharmaceutical/Biotechnology industry and provide openings on other sectors



Table of Contents

EXECUTIVE SUMMARY................................................................................................................... 2

RESEARCH DESCRIPTION.............................................................................................................. 3

TABLE OF CONTENTS..................................................................................................................... 4

CHAPTER I: INTRODUCTION.................................................................................................. 6

CHAPTER II: LITERATURE REVIEW......................................................................................7

II.1. CONVERGENCE BETWEEN IT AND OT..........................................................................7

1. Definition of IT and OT.............................................................................................................7

2. Features of IT/OT convergence..............................................................................................13

3. IT/OT convergence: Terms and definitions.............................................................................17

4. Sample of innovations resulting from IT and OT convergence.................................................19

II.2. IT BUSINESS VALUE......................................................................................................... 24

1. IT business value: Definition and Meaning.............................................................................24

2. IT business value creation process.........................................................................................27

3. Key factors influencing business value creation......................................................................29

4. Proposed framework for benefits identification.....................................................................30

CHAPTER III: FIELD RESEARCH................................................................................................ 35

III.1. FIELD RESEARCH: METHODOLOGY AND INTERVIEWEE PANEL.......................35

1. Methodology......................................................................................................................... 35

2. Target.................................................................................................................................... 36

3. Participants’ panel................................................................................................................. 37

II.3. FIELD RESEARCH ANALYSIS: OBSERVATIONS AND FINDINGS...........................38

1. Interviewees’ perception of the IT/OT boundary....................................................................38

2. Benefits expectations resulting from IT/OT convergence........................................................40

3. Operational costs reduction...................................................................................................41

4. Increased product and process knowledge.............................................................................45

5. Increase in revenues.............................................................................................................. 48

6. Increase in research and development productivity...............................................................49

7. Regulatory compliance.......................................................................................................... 51

8. Better risk management........................................................................................................ 53

CHAPTER IV: IMPLICATIONS: CHALLENGES AND OPPORTUNITIES.............................55

IV.1. ANTICIPATED CHALLENGES AND RISKS OF IT/OT CONVERGENCE.................55



1. Interoperability..................................................................................................................... 55

2. Security................................................................................................................................. 59

3. Facing the cultural change.....................................................................................................63

4. User experience..................................................................................................................... 69

IV.2. POTENTIAL IMPACTS ON THE PHARMACEUTICAL/BIOTECHNOLOGY INDUSTRY VALUE CHAIN............................................................................................................ 73

IV.3. CONNECTIONS OF IT/OT CONVERGENCE WITH OTHER IT TRENDS................73

1. Internet of Things.................................................................................................................. 73

2. Big data................................................................................................................................. 74

3. Cloud computing................................................................................................................... 74

4. Smart computing................................................................................................................... 75

5. Shadow IT.............................................................................................................................. 75

6. Bring Your Own Device (BYOD)..............................................................................................76

CONCLUSIONS................................................................................................................................. 77

ADDENDUMS.................................................................................................................................. 78

ADDENDUM 1. FIELD RESEARCH TARGET SCREENER....................................................79

ADDENDUM 2. FIELD RESEARCH INTERVIEWEES LIST.................................................80

ADDENDUM 3. FIELD RESEARCH TARGET ACHIEVEMENT...........................................81

ADDENDUM 4. FIELD RESEARCH ANALYSIS SUMMARY.................................................82

ADDENDUM 5. FIELD RESEARCH EXPECTED BENEFITS SUMMARY...........................88

ADDENDUM 6. FIELD RESEARCH OVERVIEW OF THE PHARMACEUTICAL/BIOTECHNOLOGY INDUSTRY VALUE CHAIN.................................90

ADDENDUM 7. TOP BENEFITS EXPECTATIONS FOR OUR FIELD STUDY PARTICIPANTS 91

ADDENDUM 8. MOST FREQUENT BENEFIT CATEGORIES USED FOR INVESTMENT JUSTIFICATION DURING OUR INTERVIEWS.........................................................................93

BIBLIOGRAPHY AND REFERENCES.......................................................................................... 94

ADDENDUM.1. FIGURES......................................................................................................... 103

ADDENDUM.2. TABLES.......................................................................................................... 105

WORDS OF THANKS................................................................................................................... 106

ABSTRACT..................................................................................................................................... 107

ABOUT THE AUTHOR................................................................................................................ 107



CHAPTER I: Introduction

For several years software was broadly considered to be exclusive to Information Technologies (IT) and IT were reduced to informatics used to automate calculations and to prepare reporting. Desktops, laptops and printers comprised the visible side of IT in the office, while mainframes or servers were hidden in access-restricted computer rooms. If some software was found in emerging programmable automation controllers, this software was labeled as proprietary and fell within the domain of specialized technicians.

Over the years things have changed.

Software is now virtually everywhere: in the office, on our desks, in computer rooms, in building automation, in lifts, in cars, in our phones we now call smart-phones. Often these are coded with open technologies and common programming languages, run on common platforms massively available worldwide regardless of the final function or destination of the product. The natural technical boundary between IT and Operational Technologies (OT), which used to be easily identifiable by organizations, has therefore become blurred and can no longer be considered clear cut.

Concurrently, computers have been deployed massively on the field of operations, allowing staff to update databases in real-time and to access operating procedures from their work-centers. Cashiers, for example, can automatically report price issues and consult business databases to retrieve customers’ details to ship merchandise or to credit loyalty cards.

The simple technological convergence described above, led us to reconsider the definition and the value of IT and OT. If many organizations have considered IT as a support function, a cost center separated from the business side, while OT was directly linked to value creation and revenues generation, the technologies convergence is pushing top management to reconsider the roles technologies are playing in the deployed business model.

“Today, information technology must be conceived of broadly to encompass the information that businesses create and use as well as a wide spectrum of increasingly convergent and linked technologies that process the information. In addition to computers, then, data recognition equipment, communication technologies, factory automation, and other hardware and services are involved.” (Porter & Millar, 1985)



CHAPTER II: Literature review

II.1. Convergence between IT and OT

1. Definition of IT and OT

Gartner has extensively researched the topic of IT and OT convergence and published a large number of reports thereon. Gartner proposes a definition for both technological areas (Gartner, 2010). We review the two definitions and consider them in light of other relevant publications.

1.1. Information Technologies (IT)Gartner gives us the following definition:

“IT is the common term for the entire spectrum of technologies for information processing, including software, hardware, communication technologies and related services. In general, IT does not include embedded technologies that do not generate data for enterprise use. The purpose of IT is to capture, retain, manage and present abstract business information.” (Gartner, 2010)

Embedded technologies are explicitly excluded here. It is the final use of the data created that is the most relevant. We are left wondering instead how embedded technologies, that do generate data for enterprise use, would be considered. We will try to answer this question later in this dissertation.

1.2. Operational technologies (OT)Gartner defines OT as follow:

“Operational technology (OT) is hardware and software that detect or cause a change through the direct monitoring and/or control of physical devices, processes and events in the enterprise.” (Gartner, 2010)

The most frequent real time assets controlling and monitoring operational processes are different in nature: micro-controllers, programmable logical controllers (PLC), physical quantities measuring instruments, barcode readers and cameras. Even actuators like motors, valves, pistons and pumps, now embed little pieces of software to facilitate their maintenance and to enable remote management. These components are then assembled in more complex automated systems such as vending machines, ATMs, automatic toll barriers, processing and packaging equipments, building automation and security controls.



For a long time considered as standalone systems, operating on their own with only the assistance of operator inputs, these OT application examples are more and more networked. They exchange data with external systems and allow remote diagnosis and remote control. For example, vending machines, now report the amount of money held and the quantity of goods remaining available. They automatically request resupply and maintenance operations by alerting field services through wireless communications.

As they require predominantly large geographical deployments, OT are asset-intensive and have higher maintenance costs.

A few examples of the IT/OT terminology are given in Table 1.

Business area IT OTManufacturing ERP, Schedulers Devices, Equipments, Process

automation, PLC, SCADA, DCSRetail ERP, Inventory management,

Yield managementCashers, barcode scanners,

weight scales, price tagsTransportation Revenue management, booking

systems, assets managementSigns, camera, speed control,

containers tags and tag readersTable 1: Commonly used words used for differentiating IT and OT in a few business areas

Over the past 20 years, equipments and devices have become increasingly complex causing embedded software to slide progressively from proprietary solutions to widely used and standardized IT. Given the fast adoption of common software technologies by OT, it would appear that technical solutions are no longer the criteria for differentiating IT and OT.

This leads us to the observation that a large number of Information Technologies are now present or emerging into Operational assets, as shown in Table 2.

Area TechnologiesOS Windows, LinuxCPU Intel x86, ARMConnectivity Ethernet, Wi-Fi, GPRS, UMTS/LTE, BluetoothStorage capacity Over a Tera-octet (To), limited only by hard-drives capacityProgramming languages C, C#, Java, .net frameworkUser Interfaces Web based, HTML5 codedTable 2: A few examples of common mature and emerging technologies observed within specifications of

operational assets

The influence of the IT department, owning the relevant IT skills and the relationships with suppliers of IT and therefore facilitating the adoption of software technologies, is naturally increasing, as shown in Figure 1.



Figure 1: The increasing complexity of embedded software in operational assets links gives rise to an increased CIO involvement (figure adapted from (Gartner, 2010)). Here “OS” means Operating System.

The emergence of connected technologies is also reported by Forrester research, which describes it as the “smart computing wave” (Forrester Research, 2012) and gives the following definition:

“Smart computing is a new generation of hardware, software, and network technologies that provide IT systems with real-time awareness of the real world and advanced analytics, mobile reach, and collaboration platforms to help people make more intelligent decisions about and create alternatives and actions that will optimize business processes and business balance sheet results.” (Forrester Research, 2012).

Forrester recently revised this definition after considering that “smart technologies” are either integrated or non-integrated. It extends Gartner’s definition by adding the systems required to process operational data, to share and to access them. In particular, it introduces the idea that the devices used to access data can be generic, i.e. not specialized for the execution of one particular operational function only.

IT infrastructure covers all the technical components and services required to handle and manage data. We acknowledge that IT infrastructure technologies are the underlying hardware and software layers being integrated with the purpose of building operational applications. This idea is represented in Figure 2.


Standalone embedded proprietary OS

Standaolone embedded commercial OS

Embedded commercial OS with proprietary access

Embedded commercial OS with standard Ethernet/IP access

Highest asset sophistication results in highest IT function involvement

Lowest asset sophistication results in limited or no IT function involvement


Figure 2: The same hardware and software components, forming the underlying Infrastructure, now support the integration of IT and OT

Further, we acknowledge that the convergence of IT and OT can actually improve two-way information flows between operations and its support functions (e.g. Maintenance, Engineering, Health-Safety-and-Environment, Supply chain, Human Resources) and other functions, which historically have not, or not much, collaborated due to existing organizational barriers and a misperception of actual operational processes.


IT OT

Operations m anagem ent

Business Process

M anagem ent

LIM S/M ES

Business intelligence

Data-warehousing

Process control

Real time analytics

Predictive control

SCADA/DCS

Event driven systems

Physical interfaces

Sensors and

m ettersCam eras Identifiers Localizers Actuators

Mobile devices

Collaborat-ion

platforms

IT Infra-structure

Infrastructure

Information & Control System

Figure 3: A representation of the Information & Control System architectureFigure 4: A representation of the different technical layers of the operational Information & Control system


Finally we propose that IT is the set of technologies valuing the immaterial assets of organizations whereas OT value physical assets by managing complex information and calculating optimal operational process response.

We observe that the intensity of investments in capital for deploying either IT or OT depends on the business sector of the organization, as reported by (Gartner, 2009) and (Forrester Research, 2012). We give a representation with Figure 5.

Figure 5: Examples of Operational Technologies reported per industry category (Figure adapted from (Gartner, 2009) and (Forrester Research, 2012))

1.3. Observable differences between IT and OT support functionsIn summary, OT is comprised of the technologies which interact directly with the physical world, while IT is limited to the processing and to the presenting of information. The IT / OT convergence allows human beings to react to these new cognitive signals and operational devices to execute an automated response based on the catch event. More and more, both IT and OT are run on hardware and software components using common standards and forming a unified underlying infrastructure.

Per their nature, OT assets need to be located close to the field of operations whereas IT core systems can be concentrated and centralized. In addition, unlike IT assets, OT assets are subject to the harsh physical environment (e.g. temperature,



dust, humidity, chemical aggressions, and electromagnetism). These two factors greatly influence the design specifications and the size of the asset pool to be managed.

Through experience gained over the years, people in charge of delivering and managing IT and OT have developed a specific understanding of what their function entails. Each set of experts possesses a unique and worthy knowledge and know-how. On one hand, OT staffs have developed a profound understanding of operational processes and of the impact of technologies. Their expertise is valued for risk management, system or service design, and change impact analysis. On the other hand, IT staffs have developed a natural ability for standardization, remote management and systems integration.

While integration of technologies is essential, the integration of people is therefore absolutely critical to reap the benefits of such convergence, keep costs under control and gain competitive advantage. Table 3 summarizes the key differentiating factors between the two areas.

IT OTPurpose Manage and present information Perform and Control OperationsInfluence Speed up decision making process Facilitate operations executionOutput Information ActionTechnologies Not a relevant criteria anymore -Location Centralized and consolidated in

data centersDistributed on the field of

operationsAccess Remote PhysicalOwnership CIO or CFO CEO or COOEducation background

Computer scientists, Network and Telecommunications engineers,

Software engineers, IT infrastructure engineers

Process engineers, Electrical engineers, Instrumentation

engineers, Automation engineers, Embedded software engineers

Table 3: Summary of the key differentiating factors between IT and OT (Table adapted from (Gartner, 2011))



2. Features of IT/OT convergence

2.1. A new wave of investmentsForrester has analyzed the trends in US IT investments from 1959 and reports that four “waves” can be observed and attributed to significant technological innovations, as shown in Figure 6.

Figure 6: “Smart computing is the new wave of tech innovation and growth” (Figure sourced from (Forrester Research, 2012), reproduced with authorization)

Forrester also estimates that US IT spending will double between 2010 and 2017, supported by strong investments in smart technologies, whose share of total IT spend will grow from 25% to 40% (Forrester Research, 2012). See Figure 7.

2009 2010 2011 2012 2013 2014 2015 2016 2017

85,6% 82,0% 78,6% 74,4% 69,3% 65,2% 60,2% 57,4% 51,4%

6,2% 7,8% 8,4%9,3% 10,7% 11,1% 11,3%

11,4%12,2%

0,8% 1,3%1,6%

2,4%3,7% 4,9% 6,9%

8,1% 9,3%

7,3% 8,9%11,5%

14,0%16,3%

18,9%21,7%

23,1% 27,1%

Smart computing industry solutions Smart computing process applications Smart computing platform technologyCurrent generation technology

$369 $395$443

$508$570 $615

$683$786$780



Figure 7: “Smart computing support the doubling of US IT spending”(Figure adapted from (Forrester Research, 2012))

Undoubtedly, we cannot expect all individual industry segments to adopt new technologies resulting from the IT/OT convergence early and quickly. However, industry analysts predict that all sectors would have embraced the related technological innovations by 2016, from Consumer electronics to Industrial systems (Forrester Research, 2012).

In the manufacturing industry, the convergence is currently best symbolized by the investments leading to the vertical integration of the Information System’s different functional levels.

Operations management systems like Manufacturing Execution Systems (MES) and Laboratory Information Management Systems (LIMS) are expected to be integrated with operational devices and equipments. MES products revenues hit $1.5 billion in 2011 (Gartner, August 2012) and could exceed $5 billion with a compound annual growth rate (CAGR) worldwide in double digits by 2018 (Frost & Sullivan, 2012).

Beyond the advance of such systems, increasing investment in process control systems is evidenced by the sustained growth in investments in SCADA/DCS and the consequent rise in expenses relating to services which could increase by 50%, in each industry sector and worldwide, by 2017 (Frost & Sullivan, 2011). These investments drivers are reported to be (i) the need for operational excellence and (ii) an increase in investments in Greenfields, both supported by an increased demand for holistic proposals (Frost & Sullivan, 2011).

2.2. The exponential drop of technologies costThe reduction in the cost and price of electronic products is the most important factor behind the convergence of IT and OT.

A look at the specifications of the latest trendy smartphone (i.e. Apple iPhone 5) provides an impressive list of electronic functions that can now be embedded in a device with a display that is just 4 inches long. Here are some of its key features sourced from the product sheet available at apple.com:

Up to 64Gb storage capacity Cellular and wireless communication chipset [supporting:

UMTS/HSDPA+/DC-HSDPA/GSM/EDGE and LTE; WI-FI 802.11a/b/g/n and Bluetooth 4.0]

Location chipset: Assisted GPS and GLONASS Multi-touch display with a 1136-by-640-pixel resolution at 326 ppi 8-megapixel camera allowing FullHD (1080p) video recording up to 30

frames per second and integrating a led flash Integrated sensors: three-axis gyro; accelerometer; proximity sensor

and ambient light sensor



Figure 8: Apple iPhone 5 available from$649, unlocked and without carriage contract (Snapshot was took at store.apple.com, last accessed February 23rd 2012)

To this amazing waterfall of embedded technologies, the competitor Samsung added, among other things, a barometer and temperature and humidity sensors in its new S4, launched on March 14th 2013, at an “Approximate Retail Value (“ARV”): $650” USD (Samsung, 2013) for a production cost estimated at $236USD (IHSiSupply Research, 2013).

These high-end handheld devices may be out of the reach of most people but a glance at wireless service offers is enough to understand that the same features can now be embedded at a relatively low price in any electronic device.

In 2012, around 500 million smartphones with a retail price of $100 or less were shipped, accounting for about 20% of all smartphones shipments for that year (Deloitte, 2012). The technology integration and the parallel price reduction we described above have been made possible by the ever-decreasing cost of the underlying electronic components, which dropped by more than 80% in a few years. Wi-Fi chipset prices have dropped from $25 to as low as $5 to $7 while at the same time the integration of accelerometer functionality, for example into patient monitoring devices, has decreased from a $5 to $7 range to a $1 to $2 range. In each case the price reduction are resulting from the strong growth in the smartphones market (Forrester Research, 2012).

Historical data shows to what extent technological innovations positively affect the price/performance ratio. The observable exponential increase of technological innovations supports the acceleration (Kuzrweil, 2001). Figure 9, Figure 10, Figure11, Figure 12, sourced from KuzweilAI.net and The Internet Systems Consortium, illustrate this trend.



Figure 9: Microprocessor cost per transistor cycle has been reduced exponentially since

early 70s (Figure sourced from (KurzweilAI.net))

Figure 10: The ratio price/performance of wireless chipsets follows the same exponential growth (Figure sourced from (KurzweilAI.net))

Figure 11: Exponential miniaturization of DRAM components develops OT potential

(Figure sourced from (KurzweilAI.net, 2005))

Figure 12: The Internet hosts growth is exponential too

(Figure sourced from (The Internet SystemsConsortium, 2012))

The dramatic downward trend in the price of smart embedded electronic features is also observable in wireless telecommunication services. In France, the traditional offering of established market leaders was shaken up in 2010 with the arrival of a new challenger, Free Mobile, which entered the market aggressively with a free subscription offer available to its almost 5 million Internet home broadband access service subscribers. This offer, removed the last existing cost barrier hindering the connection of home appliances to the Internet. It is now possible for consumers to purchase and easily install any home automation control system, designed to connect wirelessly with its control points, and consequently without the need for any wire, and then to connect it to the internet through the free subscription. Considering that companies in the home security business are already working on enabling their central alarm device to control all other home features such as blinds, lights, heaters, conditioning units and fridges, it seems plausible that they are only one step away from coming up with a magnitude of other possibilities.



Futurists argue that “technological change is exponential, contrary to the common-sense “intuitive linear” view.” (Kuzrweil, 2001) and will consequently last for at least two more decades, leading to a technical breakthrough that no one can predict. Moore’s law has not been disclaimed yet despite the challenges faced in the design of microprocessors. We can safely predict that, if the pace of the current technological development continues, the capabilities of the objects we use every-day will significantly change in the near future.

Finally, Forrester highlights that the convergence of technology leads consumers to expect smart connected products to act as a remote gateway for delivering high-value services to them (Forrester Research, 2012).

Figure 13: Three factors combine to raise the intelligence of products (Figure adapted from (Forrester Research, 2012))

3. IT/OT convergence: Terms and definitions

To make the understanding of the technological phenomenon we describe herein easier, we suggest below four key definitions based on our literature review.

3.1. ConvergenceConvergence describes the evolution trend leading IT and OT areas to merge and to co-produce value and benefits for organizations and people. It includes all observable consequences of the assimilation, integration and alignment of technologies, knowledge, skills, processes and practices.


Smarter product

s

Exponential cost reduction

Network interoperability

Enrich User Experience


“Convergence. The process or state of […] a number of things gradually change so as to become similar or develop something in common” (OxfordDictionaries, 2013)



3.2. AssimilationAssimilation refers to the organizational process of getting awareness and developing a common understanding of IT/OT convergence factors and consequences.

“Assimilation. [Applies to ones who] take in (information, ideas, or culture) and understand fully. (Usually be assimilated) [means] absorb and integrate (people, ideas or culture) into a wider society or culture.” (OxfordDictionaries, 2013)

3.3. IntegrationIntegration refers to the process of linking of systems, as well as people or organization knowledge silos. It results in the possibility for systems to interoperate, for people to collaborate and for business information to be processed and exchanged. It is there larger than the traditional definition used within software engineering.

“Integration. The process of combining software components, hardware components, or both into an overall system.” (IEEE, 1990)

IT/OT integration allows organizations to fill the gap between the two worlds. It generates value by removing the organizational barriers to the flow of information and by allowing a profound transformation of the business processes.

IT/OT integration will require significant investments to connect the different layers of the organization and efforts to lead people to give up in-house development and non-core business specificities (e.g. wording, inefficient practices) before the benefits of integration can be reaped.

3.4. AlignmentAlignment refers to the accordance of the IT and OT strategies and operational processes in the fields of technology, skills & talents, sourcing options, security and business continuity.

The IT/OT alignment should result in the development of common concepts, implications, scenarios, technologies roadmaps and supplier networks (Gartner,2011).

“Alignment. A position of agreement or alliance” (Oxford Dictionaries,2013)



4. Sample of innovations resulting from IT and OT convergence

Business area Applications Benefits sample Examples of solutionPharma/Biotech Predictive process control Reduction of quality issues

Overall Process EfficiencyMathematical models have been developed and published for batch-to-batch control by the MIT1

Perceptive Engineering LTD offers data-driven predictive control solutions2

Healthcare Remote diagnosticRemote careTelemedicine Increased reality / imagery

Better access to skillsImproved emergency services responseImproved patient securityRisk minimization

Remote surgery possibilities were opened in September 2001 with success of the Lindberg operations realized by the IRCAD3

An ambitious project of development of image guided surgery is leaded by French IHU4

Development of epidermal electronics, known as “electronic tattoos”, allow medical information to be stored with patients5

MEMS sensors already allow miniature medical devices to be integrated in contact lenses6

1 See example at http://web.mit.edu/braatzgroup/Integrated_batch_to_batch_and_nonlinear_model_predictive_control_for_polymorphic_transformation_in_pharmaceutical_crystallization.pdf 2 Learn more at http://www.perceptiveapc.com/ 3 Read the IRCAD event report at http://www.ircad.fr/event/lindbergh/index.php?lng=en 4 Read the project description, in English, at http://www.ircad.fr/event/20110331_IHU/?lng=en or in French on the IHU institute website at http://www.ihu-strasbourg.eu/presse_files/IHU_Strasbourg_fiche_synthetique.pdf 5 Read the University of Texas news report at http://www.ae.utexas.edu/news/archive/2012/nanshu-lu-recognized-as-top-innovator or read the report of the MIT technology review at http://www2.technologyreview.com/tr35/profile.aspx?trid=1326 6 Learn how MEMS sensors are used in the Glaucoma diagnosis at http://www.memsjournal.com/2009/02/applying-mems-technology-to-the-diagnosis-of-glaucoma-.html


http://www.memsjournal.com/2009/02/applying-mems-technology-to-the-diagnosis-of-glaucoma-.html

http://www2.technologyreview.com/tr35/profile.aspx?trid=1326

http://www.ae.utexas.edu/news/archive/2012/nanshu-lu-recognized-as-top-innovator

http://www.ihu-strasbourg.eu/presse_files/IHU_Strasbourg_fiche_synthetique.pdf

http://www.ircad.fr/event/20110331_IHU/?lng=en

http://www.ircad.fr/event/lindbergh/index.php?lng=en

http://www.perceptiveapc.com/

http://web.mit.edu/braatzgroup/Integrated_batch_to_batch_and_nonlinear_model_predictive_control_for_polymorphic_transformation_in_pharmaceutical_crystallization.pdf


Business area Applications Benefits sample Examples of solutionDistribution Consumers self-scanning and

self-checkoutCollection of actual consumer behaviorsManagement of inventories and restockingReal-time promotional events

Walmart “Scan & Go” service is available on iPhone7

Wireless digital price tags Reduction of update costReduction of price errors

Altierre Corp. is a fast growing company offering RF digital price tags8

Manufacturing [We detail several solutions available for life-science manufacturing later in this document]Transportation Real-time traffic monitoring Energy savings

Time savingsReduction of traffic jamsReduction of pollutionReduction of accident frequency

Millenium project conducted by the Berkeley university of California9

“Ville vivante” project from the city of Geneva, CH10

Traffic modeling Predictive analysis of traffic trends TRAM3 project from INRIA11 at Sofia Antipolis, FR, aims to improve traffic macro models12

Connected cars Easier navigationEmergency reactivityBetter travel experience

AUDI Connect13

Understanding of the urban space usage

Optimized urbanization planningInfrastructure design improvement

City of Geneva, Switzerland, has explored the potential of mining mobile phone roaming data14

Self-driving cars SafetyImproved user experienceTransport efficiencyOwnership cost reduction through development of car-sharing services

Google is experimenting self-driving cars with support of the Stanford University15

European community is sponsoring the SARTRE project for developing Safe Road Trains16

7 Read walmart service description at http://wm5.walmart.com/scanandgo/ 8 Visit Altierre Corp. website at http://www.altierre.com/index.html 9 Read about the project at http://traffic.berkeley.edu/ 10 See example of the “Ville vivante” experience conducted by the city of Geneva, CH, at: http://www.villevivante.ch/11 INRIA is intensively searching for development of complex mathematical models. Learn more at http://www.inria.fr/equipes/opale 12 Learn more about the project at http://www-sop.inria.fr/members/Paola.Goatin/tram3.html 13 See http://www.audi.com/com/brand/en/models/infotainment_and_communication/audi_connect_services.html 14 Watch the hypnotic dynamic animation available at http://www.villevivante.ch/ 15 Read the announcement and find extra information at https://plus.google.com/+google/posts/MVZBmrnzDio#+google/posts/MVZBmrnzDio 16 Visit the project’s official website at http://www.sartre-project.eu/en/Sidor/default.aspx


http://www.sartre-project.eu/en/Sidor/default.aspx

https://plus.google.com/+google/posts/MVZBmrnzDio#+google/posts/MVZBmrnzDio

http://www.villevivante.ch/

http://www.audi.com/com/brand/en/models/infotainment_and_communication/audi_connect_services.html

http://www-sop.inria.fr/members/Paola.Goatin/tram3.html

http://www.inria.fr/equipes/opale

http://traffic.berkeley.edu/

http://www.altierre.com/index.html

http://wm5.walmart.com/scanandgo/


Business area Applications Benefits sample Examples of solutionSport/Entertainment Workout health meters Increased physical performance

Increased health, better lifeFun

Numerous smartphone applications like SportyPal17 now report and record data from health sensors and allow sportsmen to actively manage their performance.Nike as designed Nike+18, a sensor to be integrated into its sport shoes for measuring sportsmen efforts and reporting data through smartphone.

Security Face recognition Contactless authenticationAutomated suspect tracking

Face recognition solution products are widely available, from Facebook pictures “tag suggestion” feature to public area monitoring19

Object recognition Automated controlAutomated fee charging

Automated plate reading20

Crowd monitoring Prevention of dangerous situation (overcrowded area, robbers)Better security forces coordination

Automatic crowd monitoring algorithms allow individual counting and density watching21

The 2012 London Olympic games tested crowd monitoring features for better security forces coordination thanks to applications installed on visitors smartphones and reporting crowd direction, speed and size22

Cost reduction of connected and full HD surveillance cameras

Mass deployment and increased density leads to better security forces coordination

In 2005, “Chicago (had) 2,250 cameras in its “Homeland Security Grid””, reported (EPIC,2005)23, and was continuing investing.

Satellite monitoring Far distance remote monitoring Satmos makes M2M communication over large areas through satellite communication services24.

Energy Real-time data collection Real time energy consumption understanding

USA25 and European commission26 are strongly supporting development of smartgrids

17 Visit http://www.sportypal.com/Home/Overview 18 Visit http://nikeplus.nike.com/plus/products/ 19 The Electronic Privacy Information Center (EPIC), a US public interest research center, provides a lot of information at http://epic.org/privacy/facerecognition/ 20 Discover AutoVu automated plate reading solution at http://www.genetec.com/Products/Pages/autovu-overview-en.aspx 21 Get understanding of the SCADA solution and the crowd modelization published by the Imam Muhammad Ibn Saud Islamic University at http://www.imamu.edu.sa/Scientific_selections/files/DocLib/003-013(01)%20Monitoring.pdf 22 Read the report at http://www.dfki.de/web/presse/pressemitteilungen_intern/2012/crowd%20monitoring 23 Read the EPIC report available at: http://epic.org/privacy/surveillance/spotlight/0505.html 24 Visit www.satmos.com 25 Get more about US initiatives on the institutional website of the Office of Electricity delivery and Energy reliability at http://energy.gov/oe/technology-development/smart-grid 26 Read more about European projects at http://www.smartgrids.eu/


http://www.smartgrids.eu/

http://energy.gov/oe/technology-development/smart-grid

http://www.satmos.com/

http://epic.org/privacy/surveillance/spotlight/0505.html

http://www.dfki.de/web/presse/pressemitteilungen_intern/2012/crowd%20monitoring

http://www.imamu.edu.sa/Scientific_selections/files/DocLib/003-013(01)%20Monitoring.pdf

http://www.genetec.com/Products/Pages/autovu-overview-en.aspx

http://epic.org/privacy/facerecognition/

http://nikeplus.nike.com/plus/products/

http://www.sportypal.com/Home/Overview


Business area Applications Benefits sample Examples of solutionWeather forecasting Natural events prevention Life savings

Social damages reductionInsurance cost savings

DART project aims real-time tsunami prevention27

Military Un-manned drones Cost reductionPilot safetyMission success rate

Northrop Grumman X-47B experimental prototype under development is the next generation of drone. It does not require any human control once missions are started and should be able to automatically land and take-off on an aircraft carrier28

Food & Beverages Self-ordering, self-servicing Labor cost reductionWaiting time reductionGamification

2S2B new self-service bars allow customers to order and consume alcoholic beverages by their own thanks to a pre-paid access card29

Insurance Real-time usage insurance Cost reductionRisk managementDeep individualization of commercial offers

Allstate DRIVEWISE30

Logistics Package tracking Customer satisfactionLocalisation of single unit of good transported

“Federal Express customers tracked 800,000 packages in January, 1997 via the world wide web, and the company is aiming for 100% electronic transactions.” (Brynjolfsson & Yang, The IntangibleBenefits and Costs of Computer Investments:Evidence from the Financial Markets, 1997, revised1998)

27 Learn details about DART at http://nctr.pmel.noaa.gov/Dart/ and learn about tsunami prevention actions at http://nctr.pmel.noaa.gov/index.html 28 Read the news report on the Los Angeles Time at http://articles.latimes.com/2012/jan/26/business/la-fi-auto-drone-20120126 or on smartplanet.com at http://www.smartplanet.com/blog/thinking-tech/military-drone-with-no-human-control/10094 29 Discover 2S2B service offer at http://www.2s2b.com/en/ 30 Visit http://www.allstate.com/drive-wise.aspx


http://www.allstate.com/drive-wise.aspx

http://www.2s2b.com/en/

http://www.smartplanet.com/blog/thinking-tech/military-drone-with-no-human-control/10094

http://articles.latimes.com/2012/jan/26/business/la-fi-auto-drone-20120126%20or%20on%20smartplanet.com

http://nctr.pmel.noaa.gov/index.html

http://nctr.pmel.noaa.gov/Dart/


Figure 14: An anachronistic representation of the IT/OT convergence in the field of automotive and navigation



II.2. IT business value

1. IT business value: Definition and Meaning

Intuitively we understand that value equals the price to pay for consumption of limited resources. It is also defined as the gain directly obtained from the cost of opportunity caused by the consumption of resources through the choices we make (Samuelson& Nordhaus, 1998). However, the notion of IT business value remains complex to define. Multiple parameters blur IT’s perceived benefits and therefore cause value to be subjective for many organizations (McKeen & Smith, 2012). Many measurement methodologies have been inventoried (Cronck & Fitzgerald, 1999) but none of them has achieved a clear consensus.

One proposed definition is the following: “‘IT business value’ is the sustainable value added to the business by IT, either collectively or by individual systems, considered from organizational perspective, relative to the resource expenditure required”(Cronck & Fitzgerald, 1999). Figure 15 shows how IT currently add value to the value chain.

Figure 15: “Information Technology permeates the value chain” (Figure sourced from (Porter & Millar, 1985))

Added value encompasses both physical transformations and information processed. The resulting total value is a function of both the information intensity of the value chain and the information content of the product (Porter & Millar, 1985).

“Every value activity has both a physical and an information-processing component. The physical component includes all the physical tasks required to perform the activity. The information-processing component



encompasses the steps required to capture, manipulate, and channel the data necessary to perform the activity.” (Porter & Millar, 1985)

Figure 16: Companies with the highest level of information intensity in both the value chain and the product content are best placed to develop a competitive advantage by leveraging IT.

Arrows symbolize the general trends observable among all business areas (adapted from Harvard Business Review Jul-Aug 1985, p.153, (Porter & Millar, 1985)).

Although it is obvious that IT provides value, assessing the true return of IT investments it is challenging because IT investments cannot be easily isolated. However, one estimates the potential return to be up to 10 times greater than that of investments in computer hardware (Brynjolfsson & Hitt, The Productivity Paradox ofInformation Technology: Review and Assessment, 1998).

“High levels of output associated with computer investments reflect not only the contributions of computers, but also the contributions of costly, but unmeasured intangible assets that are often coincide with investments in computers. […] In other words, the output increases associated with computer capital are not necessarily “excess” returns, but rather reflect returns on a collection of partially unmeasured assets.” (Brynjolfsson &Yang, The Intangible Benefits and Costs of Computer Investments:Evidence from the Financial Markets, 1997, revised 1998)


Life Science Indus.

Theory of Production

Theory of Consumer

Theory of Competitive Strategy

Focus on conferred total benefit+

Assess value by estimating demand curve and total consumer surplus

Focus on transforming method+

Sum of contribution of each resource to the gross marginal product

Sum of contributions to competitive advantage+

Measured with ROI, ROA, revenue, quality, sales and IT capital


Figure 17: IT value is a many layered concept (adapted from (McKeen & Smith, 2012))

IT can lead to the automation of business processes and consequently, directly or indirectly, contribute to reducing operational costs. The increase of the speed of information flows across the organization allows faster decision making, while the improvement of the quality of information leads to make better decisions. The literature summarizes that every organization is pursuing three goals when investing in information and control technologies: Continuity, Control and Comprehensibility (Zuboff, 1985).


What value will be delivered?

Where will value be delivered?

Who will deliver value?

When will value be delivered?

How will value be delivered?

Figure 18: A representation of the prism of value perception created according to the three theorical perspectives described in “Productivity, Business Profitability and Consumer Surplus: Three Different

Measures of Information Technology Value” (Hitt & Brynjolfsson, Productivity, Business Profitability andConsumer Surplus: Three Different Measures of Information Technology Value, 1996)


2. IT business value creation process

IT affects organizational performance via intermediate business processes. Other organizational resources, such as workplace practices, interact with IT, whether as mediators or moderators, in the achievement of organizational performance. External environment also plays a role in IT business value generation. It is important to divide the IT construct into four meaningful subcomponents which are the four necessary conditions to achieve a sustainable competitive advantage

Value Rareness Inimitability Non-substitutability

IT value can therefore be produced by applying the IT benefits delivery process which was established ten years ago (Peppard & Ward, 2003) and which can be broken into 3 simple steps: Identification; Conversion; Realization (McKeen & Smith,2012).

Figure 19: The three components of the IT value proposition (McKeen & Smith, 2012)

How well these three stages are completed will have a direct effect on the payback time and consequently the net present value (NPV) generated by investments in IT.

A key component to be able to create value through the use of IT is not just how it is deployed but the expertise of its users in working with information (Marchand,Kettinger, & Rollins, 2000). In that sense, “Realization” would be the most critical stage of the change management process.

For example, providing laboratory scientists with analytical tools only does not deliver value. Value can only arise if they have developed the skills to use these tools and the means to analyze the information generated to achieve the desired business objectives. Unfortunately, this is a much neglected aspect of IT management. It is often taken for granted that given the tools people will quickly learn how to use them well. Studies around customer relationship management (CRM) have shown that it can take considerable time for marketers to be able to use the new information collected (Davenport, Harris, DeLong, & Jacobson, 2001).

On that basis, “computer capital can be thought of as a “marker” for a broader set of investments” (Brynjolfsson & Yang, The Intangible Benefits and Costs of ComputerInvestments: Evidence from the Financial Markets, 1997, revised 1998) and the


Identification Creation Realization IT value


associated additional capital expenditure reflects the transformation of the organization through investments in its immaterial capital: human capital, information capital and organization capital. All of them have been identified in recent researches about Balance Score Cards (Kaplan & Norton, Measuring the Strategic Readiness ofIntangible Assets, 2004).

It is difficult for management to estimate the overall cost of projects. Reasons for this difficulty centering on the socio-technical (human and organizational) dimensions associated with IT deployment, have been suggested in the normative literature. The difficulties encountered by managers to determine the true costs of deploying IT are often attributed to a lack of knowledge and understanding of IT-related costs and benefits measurements (Alshawi, Irani, & Baldwin, 2003)

Strategic readiness is consequently critical for leveraging the IT value of investments (Kaplan & Norton, Measuring the Strategic Readiness of Intangible Assets, 2004):

“If a firm needs to make investments in intangible assets in order to unlock the full value of computer capital, then the market value of a firm with substantial computer assets already in place should be greater than that of a similar firm which has not yet integrated computers into its organization.”(Brynjolfsson & Yang, The Intangible Benefits and Costs of ComputerInvestments: Evidence from the Financial Markets, 1997, revised 1998)

Indeed, while it is challenging to estimate the sustainable value generated by IT investments, the potential magnitude of subsequent business investments to get appropriation of the technology can be up to 10 times the spending done on computer hardware (Brynjolfsson & Hitt, The Productivity Paradox of InformationTechnology: Review and Assessment, 1998).

“Each dollar of property, plant and equipment (PP&E) is valued at about a dollar, and a dollar of other assets is valued at about $0.70. Strikingly, each dollar of computer capital is associated with over $15 of market value. This implies that the stock market imputes an average of $14 of «intangible assets» to a firm for every $1 of computer capital.” “Market valuations for each dollar of installed computer capital are at least four times greater than the market values for each dollar of conventional assets. […] IT implementation may cost up to ten times more than the installation of other physical assets » (Brynjolfsson & Yang, The IntangibleBenefits and Costs of Computer Investments: Evidence from the FinancialMarkets, 1997, revised 1998)



3. Key factors influencing business value creation

Literature is rich with key factors influencing business value creation. The most common are cited below and a model sourced from (Melville, Kraemer, & Gurbaxani,2004) is given in Figure 20:

Level of competitiveness in the industry Country characteristics Industry characteristics Complementary external resources Integration of IT resources and complementary organizational

resources

Figure 20: IT business value model (Figure sourced from MIS Quarterly, Vol. 28, No. 2, p293, June 2004 (Melville, Kraemer, & Gurbaxani,

2004))



4. Proposed framework for benefits identification

Knowing what the benefits are expected to be, then committing to their realization is the first critical step in successful IT investments (McKeen & Smith, 2012).

Our research shows that the question of value creation is a central point of academic research about IT. The literature is rich with reports, surveys and case studies on planning and control systems cost-benefit analysis but the closer we move to the shopfloor, the poorer it becomes. Our strategy is to explore the literature and to capture key observations and recommendations to build an experimental benefits analysis framework.

We soon observe that the benefits expected from IT investments can be vertically divided between Operational, Tactical (also called Managerial) and Strategic benefits, depending on when the returns are expected (Anthony, 1965). Investment decisions should take into account this time horizon (Anthony, 1965).

Decision level Term ActivitiesStrategic Decisions

1 year+ Product Design/RedesignSupplier Selection

Facility Layout & LocationProduct/Plant Assignment

Capital ExpendituresCustomer service targets

Tactical (Managerial) Decisions

1 month – 1 year Lot sizes, production planningInventory buffer placement

Safety stock levelsLabor levels

Line balancingOperational Decisions

1 week or less Operational Scheduling of batchesDecisions Overtime (when and how much)

Crew assignmentMaintenance scheduling

Production ratesTable 4: Samples of activities corresponding to the decision levels defined by (Anthony, 1965)

It is demonstrated that benefits are most tangible and easiest to demonstrate at the operational level. They are much more difficult to demonstrate at the strategic level and (Murphy & Simon, 2002) adapted the framework proposed by (Irani & Love,2001) by classifying benefits in accordance with both their tangible and quantitative nature.



Figure 21: “Nature of strategic, tactical and operational benefits” (Adapted from (Murphy & Simon, 2002))

These three levels can be mapped, bottom-up, with the “Automate” and “Informate” faces described by (Zuboff, 1985). This can be enriched with a “Transformate” level, reflecting the huge organizational transforming power generated by the liberation of information made available with the deployment of intelligent technologies described by (Zuboff, 1985). IT also appears in the framework proposed by (Eckartz, Daneva,Wieringa, & van Hillegersberg, 2009) for enterprise resource planning (ERP) benefits classification represented in Figure 22.

Figure 22: A three dimensional framework proposed for ERP benefits classification(Eckartz, Daneva, Wieringa, & van Hillegersberg, 2009)


Strategicbenefits

Operationalbenefits

Long termAlmost intangible

Non-Quantitative in nature

Short termAlmost tangible

Quantitative in nature


We observe in Figure 22 that the innovation management process and the HR dimension are pieces of the immaterial capital in the learning perspective defined by Kaplan and Norton. This immaterial capital, which is a part of the organization’s knowledge, has been raised here to the same level as other perspectives (e.g. Process, Customer and Finance). This model is rich and potentially addresses the high complexity of the IT benefits assessment and we understand here the Managerial level to be on par with operation planning and operational decision making.

An improved planning of operations results in an increased efficiency in operations which is often considered an intangible benefit. We acknowledge that poor planning practices and/or wrong short-term decisions directly result in productivity loss. It is through this loss quantification that the benefit can be easily determined and calculated. On that basis, we believe that the Managerial level can be split into two sublevels, depending on the term of the decision impact. Decisions causing a short-term impact directly affect the operational performance, whereas longer term decisions are deemed to have an indirect impact on it.

We propose to classify the benefits depending on their tangibility or quantitative nature and then to flatten the 3-level hierarchy into a 2-level framework, see Figure23, which we believe will be more user-friendly to professionals.

This constitutes our first dimension for assessing benefits and at the same time it makes us more sensitive to the difficulty of evaluating the intangible value part.

Managers are increasingly required to show returns for strategic initiatives. However, they are often unable to provide accurate estimates of expected intangible benefits (Farbey, Land, & Targett, 1992). The lack of accurate estimates mean that the derived benefits fail to be accounted for when assessing IT’s impact on the organization (Cline & Guynes, 2001), (Thatcher & Oliver, 2001). Their accounting is


Figure 23: our first dimension opposes long-term and short-term benefits


worthwhile for project assessment (Murphy & Simon, 2002) and on that basis a second dimension should be added to help their identification.

Estimating intangible benefits seems to be an enormous challenge and external surveys have been identified as an alternative method. For example when investigating the customer relationship management process, the external survey will look into the causes of customer dissatisfaction, before assessing what effect the investment will have on the related services (Murphy & Simon, 2002). The resulting improvements can then be valued with tangible data about the increased customer retention and the increased revenues per customer. External surveys are an interesting method for capturing and valuing intangible benefits in our framework.

The next step is to propose a consistent components review in the foundation strategy. The Balance Score Cards developed by Kaplan and Norton provides a powerful tool for linking company strategy to four different perspectives: Finance, Customer, Processes and Learning (Kaplan & Norton, The Balanced Scorecard -Measures That Drive Performance, 1992). Our field research focuses on the Financial and the Internal Process perspectives.

Figure 24: The strategy map provides a powerful framework linking intangible assets to shareholders value creation

(Adapted from Harvard Business Review, 2004, (Kaplan & Norton, Measuring the Strategic Readiness ofIntangible Assets, 2004))

The potential impacts on almost all components of the customer value proposition will be highlighted within the outcomes of the benefits identified within these two areas of potential. If we find that such impacts are only indirectly related to brand value, it could be more challenging to identify the appropriate root cause. We consequently choose to keep brand value as a specific benefit category.



The pharmaceutical and biotechnology industries, which are the focus of our field research, are tightly regulated business areas and the management of regulatory affairs is a critical internal process for guaranteeing new drug filing and a successful marketing and sales strategy. This leads us to adapt the model proposed by Kaplan and Norton and we finally build the second dimension of our framework as follow: Finance, internal processes (which will include operations management, customer management, innovation management and regulatory affairs management), social responsibility, completed with brand value. Table 5, page 36, depicts the proposed framework.

Balanced Score cards have been the focus of a number of important publications and we are particularly interested in the methodology used to measure strategic readiness of intangible assets (Kaplan & Norton, Measuring the Strategic Readinessof Intangible Assets, 2004). This methodology, and the ancillary grids for immaterial capital needs assessment, can be used later in the benefits identification process to better define the efforts that organizations will have to make to achieve all the possible benefits from their investments and to mitigate the risks of achieving them fully.

BENEFIT CLASSIFICATION

BENEFIT CATEGORIES OPERATIONAL STRATEGIC

Finance Cost structureAsset utilizationCustomer valueRevenue opportunities

Internal processes

Operations managementCustomer managementInnovation managementRegulatory affairs management

Social responsibility

Environmental footprintCommunities developmentSafety

Brand Brand valueTable 5: Our proposed framework for IT/OT convergence benefits assessment

This proposed framework, in Table 5, serves as an experimental tool for consolidating the interview outputs of our field research and for analysis.



CHAPTER III: FIELD RESEARCH

The pharmaceutical and biotechnology industry is a risk-adverse business area, often considered conservative and reluctant to change. One reason for this behavior is that the products in this industry have a direct impact on life and death. Approvals for new drugs are therefore the result of a careful evaluation of the benefits/risk ratio for patients. Changes to existing products or processes are drastically controlled by regulatory authorities to ensure that their safety is not jeopardized. This specific business characteristic translates into significant filing costs each time a company wants to make a change and this probably explains why this industry is very careful when it comes to adopting technological innovations. Although IT/OT convergence can result in significant benefits and cost savings, pharmaceutical and biotechnology organizations are at the early stages of new application development, whereas other industries are already leveraging Operational Technologies’ integration potential.

III.1. Field research: methodology and interviewee panel

1. Methodology

To conduct our field research, we collected data from a perimeter as large as possible in order to get a good overview of practices in place at different stages of the pharmaceutical/biotechnological industry value chain.

Our interview goals were as follows:

Comprehend the industry representatives understanding of the IT/OT convergence trend and ascertain if their understanding fits within the boundaries established at the beginning of this thesis;Identify the key expected benefits of the IT/OT convergence in this industry and gather data about how these benefits can be evaluatedDetermine how investments relating to the IT/OT convergence are justified internally

The data was collected through in-depth interviews, conducted either in person or over the phone. Participants were enrolled through direct contact, recommendations of existing professional contacts, invitations to connect sent through professional social networks (e.g. LinkedIn, Viadeo), collection of email addresses found over the Internet through search engines (e.g. Google). Allocated interview time was between one and two hours.

An interview guide facilitating the interview process was developed and sent to interviewees prior to the interview.



Participants were informed that interviews would be audio-recorded prior to the interview. Interview recordings are confidential but key observations are anonymized in the analysis summary (see ADDENDUM 4, page 84).

2. Target

For the purpose of our research, we first considered two different representative segments within the industry: the pharmaceutical drug segment and the biotechnology drug segment.

Because these segments rely on different processes (pharmaceutical drugs manufacturing involves a chemical process, while the biotechnology drugs involves genetic engineering and cell/tissue culture processes), the cultures within these sub-segments differ too. We suspected that this cultural difference could lead to different management approaches, choices and expectations regarding the use of technology hence our segmentation.

We then considered a second segmentation according to the role of participants. Depending on their position and their field of expertise, we suspected that their views about the technological trend differ. We considered four different participant types: first, among the industry, professional experts and management representatives of either IT or Operations and second, as support of the industry: the solution provider representatives and the service provider representatives.

Further, although our research focuses on the study of the pharmaceutical and biotechnology industry, we decided that it would be easier to identify specificities and key characteristic of this industry by comparing this industry’s responses with some external references. We consequently interviewed some representatives of other industries. This also provided us with a unique opportunity to make some general observations and recommendations.

A summary is given in Table 6.

Table 6: Our field research target segmentation


Industry

Biopharmaceutical

Pharmaceutical

Other industries

Respondant RoleSolution or Service

provider

IT consultant, expert

IT management

Operations management


Finally, we decided that a minimum of one representative for each respondent role in the pharmaceutical industry and a minimum of one representative for each respondent role in the biotechnological industry were required. An interviewee could fill more than one respondent role if their experience warranted it. Representatives of other industries were considered extras.

This led us to set ourselves a goal of nine in-depth interviews to produce significant outputs. Our target screener is available in ADDENDUM 1, page 81.

3. Participants’ panel

Nine people, each with at least 15 years experience and holding senior positions within their organization, agreed to answer to our questions. Interviewees’ positions in relation to their company’s executive board are given in Figure 25. The anonymized list of participants is given in ADDENDUM 2, page 82.

Figure 25: Position of the field research participants in their organization

Both the pharmaceutical and biotechnology industries were well represented and, in addition, we interviewed Technology and Service providers to this business area. Through their cumulated professional experience, nine life-science companies are represented and five of them are in the top ten of either the biotechnology or the pharmaceutical companies.

We also conducted two additional interviews that gave us an opportunistic insight into the energy production industry and the manufacturing processes of professional furniture.


2 participants are members of the board

2 participants are directly reporting to a board member

3 participants are between the second and the third level

2 participants are reporting to a manager atthe fourth level or more


The experience of our participant panel means that we covered a total of fourteen represented roles; thereby comfortably exceeding our target of 8 represented roles. Roles mapping is given in ADDENDUM 3, page 83.

Our respondents are principally working in large size companies, with three quarters of them counting more than ten thousand employees. Seven of them have revenues in excess of $10 billion. Their headquarters are located in the USA and in Europe.

Twenty-two requests were sent. Nine interviews were conducted (i.e. 40% success rate).

II.3. Field research analysis: Observations and findings

Our research data is very broad in terms of experiences but also very detailed. The summary of our observations is given in ADDENDUM 4, page 84.

In this section, we first report the benefits expected by companies in relation to investments made to integrate IT and OT. Second, we report the perceived challenges and risks. We then analyze the responses deeper to check whether a common strategy is reported when it comes to managing the IT/OT convergence. We finish our analysis by exploring how organizations realize the value of their investments and how they justify these investments.

Subsections are centered on our key findings. For each of them, we provide different examples given by our interviewees. We then list the benefits of IT/OT convergence perceived by the respondents. Finally, we list the solutions and technologies used by organizations to achieve their strategic goals and we complement this list through a secondary research.

1. Interviewees’ perception of the IT/OT boundary

We started our interviews by asking the respondents where they would set the boundary between IT and OT. Answers were heterogeneous and seemed to depend on the depth of integration of IT with operational assets and technologies.

About half of respondents had a clear idea of the boundary, whereas the other half did not. Two participants could not define OT at all. One respondent referred to the age of processed data for defining the boundary and finally set it at the supervisory level (e.g. SCADA/DCS).

“It is the border of real-time. […] Although supervisory systems symbolize this boundary as they compute real-time data, reporting features are to be considered traditional IT.” [M9]

Five other participants, who reported a strategic willingness to integrate IT with operational assets, directly referred to the ISA95 architecture model to set the


4

3

2

Occurrences4

3

2

1

0

ISA-95 Level


boundary. Lastly, one business operations representative considered that the boundary is blurred because operations are fully dependant on the availability of information.

“I don't know if there is a clearly established boundary. The boundary is defined to the extent that our needs and our processes are defined by our clients. Then, we deliver the technology. So in project phases, it's relatively simple. In the use phase, it's more complex. Our goal is for our users to be better able to understand and use that technology. […] Actually, as soon as a system is under consideration, whether it is a unit of laboratory or production equipment, the technical responsibility, including for stability and compliance, comes under IT. So take, for example, the IT architectural model (ISA S95) of a system (for a manufacturing environment), as soon as the data is digitalized, at level 1, it fits within IT.” [M1]

Figure 26 below shows where each interviewee perceived the boundary to be.

Figure 26: IT/OT boundary mapped over a functional hierarchy adapted from ISA95

We make two deductions based on our field study observations:

1) The more integrated their information system and operational technologies are, the lower the boundary set by organizations is.

2) Business operations representatives are inclined to link the boundary with the operational decision time. This results in the boundaries of level 2.


Business resource

s planning and

supply

chain

Operations m anagem ent

Process control

Process autom ation

Physical transform ation


2. Benefits expectations resulting from IT/OT convergence

The identification of key benefits was done in three steps. Firstly, we mapped all the benefits expressed by our respondents within the framework proposed in Table 5, page 36. Secondly, we analyzed these results and tried to group them into more abstract categories of benefits that would make sense for the reader. Thirdly, we ranked the categories by the frequency of occurrence of any related examples captured during the interviews.

Six key classes of benefits came to light. Table 7 shows the benefits ranked by our life science representatives who were specifically requested to do so several weeks after their interview, from the most expected to the least expected.

Top expectation Regulatory complianceIncreased product and process knowledge

Better risk managementOperational costs reduction

Increase in research and development productivityLowest expectation Increase in revenues

Table 7: List of key benefits classes, ranked by the interviewees from the most expected to the least expected.

Surprisingly, this ranking is not the same if we use the reasons given by our interviewees to justify the investments made by pharmaceutical and biotechnology companies. The revised ranking is given in Table 8.

Most frequent Operational costs reductionIncreased product and process knowledge

Increase in revenuesIncrease in research and development productivity

Regulatory complianceLeast frequent Better risk management

Table 8: List of the most frequent benefits classes used to justify investment, ranked from the most frequent to the least frequent in our interview records.

The differences between Table 7 and Table 8 illustrate the consideration of different benefit horizons described earlier: Operational or Strategic, depending on the question context. When industry management aims at important strategic benefits, then huge capital investments have to be committed.

“So what we did was to prove unequivocally that the solution brought a return on investment and that there was a much greater earnings potential, and then be certain and confident that we could deliver reliable solutions that would become an indispensable production tool rather than a financial impediment.” [M1]

To justify the significant investments required for achieving the integration of IT and OT on an organization scale, managers need to put forward short term benefits that


Operational benefits“The lever”

Strategic benefits“The actual target”


provide a fast payback. Operational benefits, more certain and tangible, are a lever to secure investment and make the adoption of the change easier. In that respect, operational costs reduction is the most obvious choice.

We position in Figure 27 the Operational and Strategic benefits over the value realization process we mentioned in section II.2, page 29.

“In that kind of project [i.e. MES implementation], when you deploy it, the first phase of the project is to deploy the infrastructure and facilities. Next, there is a very long implementation phase and increasing use of the tools potential. It isn't a big-bang, where you push a button, with a before and an after.” [M1]

In addition to the above, we observed that the benefits potential of IT/OT convergence is perceived as very significant by all our respondents.

3. Operational costs reduction

Operational costs reduction is the number one benefit put forward to justify investment relating to IT/OT integration. The savings are expected to be generated at each stage of the industry value chain: drug discovery, drug development, manufacturing, distribution, sales and marketing.

In this benefits category, we included – to name a few – all the benefits relating to the automation of tasks, faster task execution, faster asset setup, faster changeover, process lead time reduction, better planning, increased efficiency and effectiveness.

Benefits described by participants mostly relate to direct improvements of Information & Control systems and which coincide with the 3 C’s of (Zuboff, 1985): Continuity, Control and Comprehensibility. Table 9 gives definitions of these three improvement goals.

Continuity Functional integration, enhanced automaticity, rapid response


Identification Creation Realization IT value

Figure 27: Operational benefits and Strategic benefits are reaped at different stages of the IT business value realization process (Figure adapted from (McKeen & Smith, 2012))


Control Precision, Accuracy, Predictability, Consistency, Certainty

Comprehensibility Visibility, Analysis, SynthesisTable 9: Operational objectives characteristics (table is adapted from (Zuboff, 1985))

Process steps reduction with task automation is the most reported cause of savings. Reduction of human tasks, execution performance improvements and reduction of paperwork generate tangible and direct benefits for operational teams.

Three quarter of our respondents view the implementation of operation management systems (e.g. Laboratory Information Management Systems, Manufacturing Execution Systems) as a complement to ERP systems. The rate reaches 100% for representatives of drug makers and technology and service supplier representatives, who report implementation of such systems to be more and more frequent. However, in its 2010 fifth annual process control and automation survey, PharmaManufacturing.com predicted that the 25% adoption rate would remain stable with an additional 25% of respondents planning to deploy such solutions within the next few years (Agnes Shanley, PharmaManufacturing.com, 2010).

These systems are positioned as central information hubs for operations management. They improve operations planning, automate workflows and permit to track materials consumptions and product units closely and accurately. In addition, they allow operators to follow electronic procedures and capture production records directly from their work centers.

It appears to us that the main tangible reason for replacing traditional paper flows with electronic systems is the increased operational effectiveness and efficiency, achieved through operational business processes aggregation and their high standardization. The same would not be possible with traditional paper based processes due to information flow pace limits and the significant amount of data integrity errors statistically generated. Flexibility for aggregating business workflows was reported to be the first requirement for LIMS selection (Frost & Sullivan, 2008). Interconnection of these systems with ERP and shop floor allows automation of data transfers and of data capture.

In the laboratory area, LabWare LIMS™31 and Accelrys LIMS32 are two solutions reported by two of our respondents. VelQuest’s SmartLab™33 and LabWare ELN™34 are reported to be used as electronic notebook systems. This second product class is reported to be very usefull for global monitoring of laboratory operational processes as it allows, with Cloud services, to create unique global data-warehouse instance. The combination of both types of solutions seems to be a common practice for driving operational efficiency gains in the laboratory.

31 Visit http://www.labware.com/en/p/04 for more information about Labware products.32 Read datasheet: http://accelrys.com/products/process-management-and-compliance/accelrys-lims/ 33 VelQuest has merged with Accelrys. Consult http://accelrys.com/products/process-management-and-compliance/index.html for more information.34 Visit http://www.labware.com/en/p/04 for more information about Labware products.


http://www.labware.com/en/p/04

http://accelrys.com/products/process-management-and-compliance/index.html

http://accelrys.com/products/process-management-and-compliance/index.html

http://accelrys.com/products/process-management-and-compliance/accelrys-lims/

http://www.labware.com/en/p/04


In the manufacturing area, reported products are Rockwell PMX, Rockwell production center, Werum PAS-X in the life science industry and a legacy in-house system in traditional manufacturing. Integration of devices, equipments and SCADA/DCS35 systems with Manufacturing Execution Systems leads to increased process aggregation and automation.

“As we go electronic we find that the data are getting as important as the physical product, as we can not release any product without proper documentation of the manufacturing process—today typically managed by MES. It is only natural to collect production data at the source.” (Robert Fretz, Head of Process Automation and MES delivery program at F. Hoffman-La Roche in an interview for Pharmamanufacturing.com(Thomas, 2010))

Although it appears that standard solutions for connecting with assets are rare and that manufacturers often rely on in-house developments of interfaces based on OPC36 communication standard or SQL databases, two participants report the use of SAP MII as an application integration platform for connecting shop floor with ERP, which also allows horizontal integration. However, if this solution helps to integrate applications, it does not seem mature enough yet to be considered COTS software.

“This tool [MII] is sold as a mature Off-The-Shelf product but still requires a lot of customizations.” [M1]

“SAP relies on service companies for developing final applications” [M2].

Inxites37 is a service provider offering such developments and standard libraries for speeding up application developments and asset integration with SAP.

Faster equipments and devices setup, faster changeover made possible through automated data transfers, as well as a reduction in human errors rates, generate direct Overall Efficiency and Effectiveness (OEE) gains and a subsequent reduction in production lead time38.

The display of real time reporting of OEE metrics in the production area, calculated with data gathered on equipments, appears to have enabled significant performance improvements. A recent survey concluded that manufacturing companies (all sectors) that have implemented real-time OEE metrics on their shop floor “outperform others by 6% in OEE” (LNS Research, 2013). One of our respondents reported a good satisfaction level with the use of Parsec Tracksys™, a real-time manufacturing operations performance monitoring.

35 SCADA means Supervisory Control and Data Acquisition. DCS means Distributed Control System.36 OPC is the acronym for OLE in Process Control. It is an open communication standard specified by Microsoft above COM/DCOM remote procedure calls.37 Learn more about Inxites at http://www.inxites.be/ 38 Production lead time is the time required between the very start and the very end of the production process (see http://en.wikipedia.org/wiki/Lead_time)


http://en.wikipedia.org/wiki/Lead_time

http://www.inxites.be/


The development of vision control, with spectroscopy, x-ray inspection, tomography or Static Division (SD) sensors, helps to achieve systematic quality control of product units and produce more accurate and reliable results without negatively impacting OEE.

The development of smart instruments such as microplate readers, microscopes and precision instruments enables the acquisition of experimental or control data directly at their source and their storage in a rich contextual database with other 21CFRp11 regulated electronic records and signatures.

Network integration enables these new appliances to automatically obtain and transfer data to a central application and to authenticate operational staffs on-the-fly through smart tags. Network integration also enables remote management and remote maintenance of these assets, which improves the support resources efficiency by limiting service on the field and generates additional cost reductions. Lastly, wireless technologies should lead to widespread sensor deployments and additional infrastructure costs reduction.

“We looked at RFID to see how it could help our operations and develop efficiency. When we estimated the return of investment we did not find a sufficient payback however. We started then to think about the value it could add to our products. This is when we were going to be sollicitated by a few key accounts for developing traceability of the shipping of our products. […] At this time, our CEO wanted to force IT to be closer to the business. We therefore created an IT team […] for prototyping innovative solutions. […] With this team, IT proposes solutions that generate new opportunities of cost reduction and bring value to our products. With use of RFID, we have developed solutions that automatically scan all product units at the shipping dock. […]” [M5]

Automation and interconnection of systems and applications are expected to directly result in operational cost reduction. The use of common standards for architecture design and the emergence of leading products have permitted the launch of innovative devices and equipments which improve customer experience and simplify operational tasks by leveraging available network services.

4. Increased product and process knowledge

Increased Product and process knowledge is the second most important benefit cited by our respondents.

Increased Product and process knowledge involves but is not limited to: improvement of the design space and optimization of the operating space, development of better Product and process specifications, specification of Process Analytical Technology (PAT), increased understanding of variability causes, faster technology transfer,



better alarming, better preventive actions and corrective actions (CAPA) planning, increased traceability, easier scientific investigation and faster root cause analysis.

Figure 28: Knowledge space, design space and operating space hierarchy

Knowledge also increases as a result of an improved management of information and an easier access to it. Improved management of information and easier access to information have consequently been included in this benefit class.

In the areas of process development and manufacturing, the development of innovative sensors, the implementation of data historians and the building of central data-warehouses allow organizations to collect much more data and to leverage new analytical technologies like statistical modeling and multi-variables analysis.

“Currently, our models correlate 32 variables altogether making it possible to find patterns. Depending on the patterns and the way the variables evolve, the system will warn us that a reaction is necessary before a particular time, without which we would have a problem” [M1]

The deployment of LIMS and MES, and their connection to ERP, appear to be a first major milestone in the building of an information system backbone which then facilitates the centralization of the Product and process data.

“In fact, the greatest value of these tools is not automation. It lies in the potential for data use that this created. When you start integrating these data into the various architectural levels, sites or any other representation you have of the organization and you add modeling and predicting tools, it leads to possibilities that were not really possible before.” [M1]


Knowledge space

Design spaceOperating space


This built-in Enterprise Intelligence Platform is complemented with data historian, data modeling and data analytics suites. OSIsoft PI system39 is cited by almost all our life sciences representatives. Three interviewees report that suites such as Aegis Discoverant40 permit organizations to increase the success rate of their technology transfers and to more easily identify causes of process variability by comparing distant sites. One respondent describes the deployment of such tools on a large scale and reports that these new tools lead to success rates of 100% in their biotechnology batch manufacturing processes.

“I think it is relatively specific to biotechnology activities, because this is a process that is less well understood than chemical processes, so the idea is to ensure that we have maximum lot success. When you are in the production chain, you don't realize that you have a problem and are losing the organisms you are developing, or that you won't be able to harvest the expected quantities. So the idea was to set up data systems allowing you to represent what is happening as well as you can, and then, using correlations, understand and predict what is going to happen before it happens.[…] [The deployment of analytics] has allowed our largest production sites to function with a 100% success rate for the 3 past years” [M1]

In the process development area specifically, Electronic Data Capture (EDC) and Clinical Data Management Systems (CDMS) are now used in a majority of operations but the data models are not standardized enough yet to demonstrate interoperability (Lu & Su, 2010). However, one of our participants points out that the FDA will soon release new guidance for clinical data specifications and expects this event to result in the simplification of data reconciliation and the release of standardized products, which will make the processing of results easier.

“Clinical trials are undergoing a great transformation. Most of life sciences companies have joined together to initiate a standardization process. The Clinical Data Interchange Standards Consortium41 (CDISC) released two standards: Study Data Tabulation Model (SDTM) and ADaM which are very important for data storage and data exchange. […] We are adopting these standards and we will request our partners to comply with these standards in the future. […] These will generate huge operational benefits for clinical trials because it will allow bringing together the data collected on different site across the world. […] We guess that the FDA will soon adopt these standards within its guidance.” [M2]

Integration of these data with data generated during the active drug manufacturing process could help establish quickly whether or not the patients’ responses are

39 Tracksys™ is developed by Parsec Automation Corp., learn more at http://www.parsec-corp.com/ 40 You may read more at http://www.osisoft.com/ 41 Aegis Discoverant product page is available at http://aegiscorp.com/products/discoverant


http://aegiscorp.com/products/discoverant

http://www.osisoft.com/

http://www.parsec-corp.com/


relevant and to determine if they are caused by process variability or adverse drug effects. Exclusion of irrelevant results would optimize the design space definition.

“Advances in instrumentation through miniaturized biosensors and the evolution in smartphones and their apps are resulting in increasingly sophisticated health measurement devices. Pharmaceutical companies can deploy smart devices to gather large quantities of real-world data not previously available to scientists.” (McKinsey&Company, 2013)

All these new information modeling and processing capabilities are made possible by the implementation of new instruments at the process level. Our participants report that the use of connected instruments and devices allows the collection of much more process data than ever before. Our secondary research reveals that PAT adoption could have gone past the early adopters’ threshold.

“This puts PAT adoption on par with process modeling (52% using or planning) and knowledge management (50.6%), and ahead of other initiatives such as multivariable data analysis, factorial testing of critical process parameters, and stage gate and in-line product reviews.” ( (EricLanger, Bioplan Associates, Inc., 2012) in an interview for PharmaManufacturing.com)

IT/OT convergence in the field of pharmaceutical and biotechnology manufacturing has a direct positive impact on the Product and process knowledge development, which naturally leads to indirect operational benefits. In particular, the batch success rate is reported to have significantly increased over the past 5 years.

“[The implementation of new process instruments and of new analytical tools] has allowed our largest production sites to function with a 100% success rate for the past three years, since the system was installed. No more lots are being destroyed due to uncontrolled processes. Since product lots are expressed in millions of dollars, the return on investment is obtained rather fast.” [M1]

This information is complemented with data reported in Table 10 that show that the mean time between batch failures in Biotechnology manufacturing facilities have increased by 50% over the past 5 years (Eric Langer, Bioplan Associates, Inc.,2012).

Year Average Number of Weeks between Batch Failure per Facility

2012 60.32011 54.52010 50.92009 51.12008 40.6

Table 10: Batch failure rates per facility, 2008-2012 (Adapted from PharmaManufacturing.com,



(Eric Langer, Bioplan Associates, Inc., 2012))

Product and process knowledge benefits are maximized when organizations develop the capability to spread it across the different stages of the value chain.

Models developed during the Product and process development stages (e.g. molecule screening and clinical trials) can be improved and their value can be increased when increasing the number of final applications thereof.

A virtuous cycle is realized when the data collected during the Product and Process development stages are applied to control the production operations. In turn, this allows to continuously enrich the knowledge capital and to optimize the selection of the future molecules in regard to their manufacturing complexity and thus to refine the evaluation of any new product’s economic potential.

This information, stored in databases, allows organizations to refine the profile of the target patients in accordance with the best health benefit / risk ratio ultimately improving the marketing of products.

Integration of information collected through marketing, sales and pharmacovigilance allows organizations to complete these databases with market returns in terms of acceptance, risks and efficiency. These enriched models make it possible for industrialists to define the optimal use of their products and to identify new possible therapeutic indication.

Finally, the improvements described earlier in this section can accelerate the speed of drug development and commercialization.

5. Increase in revenues

Increase in revenues is only the sixth most expected benefit from IT/OT convergence among the represented industry leaders, but is the third most frequently given justification for investment.

We consider that the increase in revenues may result from increased product value, personalization, additional sales directly enabled by capacity increase, complementary products and complementary services.

Automation of the manufacturing processes, which leads to OEE rate increase, is reported in several ways during our field study. Reduction in paperwork, reduction in operational variability and reduction in setup and changeover times, lead to significant improvements in the manufacturing lead time. The increased capacity can then be converted into additional production volumes supporting the revenue growth.

The development of Product and process knowledge together with the steadily improving scientific knowledge, allows the healthcare industry to offer personalized medications. Personalization increases the product value by providing each individual with the optimal treatment. IT/OT convergence makes this personalization



possible by: first, allowing patients to order the drug dosage that corresponds to unique individual needs; second, allowing an accurate production order planning; third, ensuring the compliant operation execution and the traceability of products all along the supply chain to ensure that the products are delivered to the right person.

“Today we are researching the field of personalized medicines. We want to target drugs to patients in regard of their genetics. Depending on their genetics, people do react to medications differently. […] This is very important for the value proposition because drug makers can accurately demonstrate the efficiency of their drugs and so their worth.” [M2]

In addition, the evolution of IT and OT has permitted the development of new diagnostics which leverage medical imagery, data modeling, statistical analysis and individualization of the production.

“We produce ionized solutions that are used in tomography diagnosis. To comply with our patients’ needs (e.g. weight of the person, shipping distance and date of the medical exam), we need to plan specific production orders which take into account the physical specifications (e.g. radioactive period) of the radioactive elements (e.g. iodine-131) we process. The orders are then automatically scheduled and transferred to equipments. We manufacture units with very small volumes of 1.2ml.” [M3]

Finally, new products and services can be considered. Smart devices and smart applications which facilitate medication and patient monitoring are new complementary offers, which could soon be considered medical devices.

6. Increase in research and development productivity

Increase in research and development productivity is ranked fifth among the benefits most expected from IT/OT convergence by our industry representatives and is the fourth most frequently given justification for investment.

In order to understand how investments leading to IT/OT convergence can result in an increase in productivity, it might be useful to remind ourselves of the traditional flow of drug discovery given in Figure 29.


Time

Evolution of the number of drug candidates (dotted line) Cost of each stage of research and development, in millions of $


Figure 29: The traditional flow of drug discovery (Adapted from Fujitsu Science Technology Journal, Vol. 44, No. 4, October 2008, p485)

The automation of tasks and controls is expected to only marginally increase efficiency and effectiveness. It is indeed the increase in product and process knowledge described in the previous section that is expected to result in the most significant transformation.

The development of complex mathematical models, verified through Design of Experiments (DOE) methodologies, should allow the industry to develop confidence in active drug mechanisms at the early stage of candidate drugs selection and consequently to drastically reduce the number of molecules released into the pre-clinical and clinical evaluation stages.

“Health and medicine [are] now an information technology. In terms of business models, it’s already stratifying into different types of firms “de-risking” projects at different levels. You have lots of little companies that sit down, actually, at computer terminals and design new interventions, and they may take the drug through, possibly, just simulated trials and pass it off to somebody else. Then somebody does animal trials and, finally, there’s another set of firms that do Phase 1 FDA4 trials, and so on.

I think these new drugs that really get into the advanced part of biotechnology are going to be so much significantly better that they’re going to be less risky to try. And they’ll go through more quickly. If something really works dramatically, the FDA can work more quickly. The data [become] obvious more quickly. It becomes unethical not to give people the drug.


CIDM CIDS

CIDM CIDS


The FDA actually is starting and has a whole road map on using simulators rather than trials. It’ll soon be the case that using a simulator of human biology is a better simulation of humans than animals are.” (Kurzweil, 2011)

The development of molecules can also be shortened through the integration of R&D tools and practices with regulation (PriceWaterHouseCoopers, 2007).

Figure 30: Integration of R&D and regulation will result in significant cycle time reduction (Figure adapted from (PriceWaterHouseCoopers, 2007))

Finally, R&D operations should be facilitated by the use of smart computing which will allow gathering larger amount of data immediately with their context and to correlate them instantly.

“A combination of new, smarter devices and fluid data exchange will enable improvements in clinical-trial design and outcomes as well as greater efficiency. Clinical trials will become increasingly adaptable to react to drug-safety signals seen only in small but identifiable subpopulations of patients.” (McKinsey&Company, 2013)

7. Regulatory compliance

Regulatory compliance is the most expected benefit by our interviewees. Surprisingly, perhaps because it is a fundamental expectation for them, it is only the fifth most frequently given justification for investment during our interview.

Regulatory compliance encompasses the sustained improvements realized to improve data integrity, the application of operating procedures and the fast completion of quality improvement plans (e.g. implementation of Corrective Actions and Preventive Actions resulting from Product and process monitoring, investigations of complaints, deviations, audits and inspections). All of these were aimed at meeting


Discovery &

Screening

Lead develop-

ment

Pre-Clinical Evaluation

Phase I Phase II Phase III Submission Phase IIIb/IV

Patho-physiology response

identificat-ion

Molecule develop-

ment

Submission In-Life testing

The new drug development process today

The new drug development process in the future

CIDM = Confidence In Drug Mechanism

CIDS = Confidence In Drug Safety


tighter compliance and regulation requirements while managing costs and improving the relationship with the regulatory authorities.

“The features [resulting from IT/OT convergence] were something we considered nice to have five to ten years ago. Now they are something that gives you a certain advantage if you have them and I believe they will become mandatory in the future because they will become a regulatory expectation [once adoption we will have reach a certain level of adoption]” [M7]

Regulators are already pushing for an increased quality control of the production processes. Our interviewees reported principally that this improved control can be achieved through the implementation of operations management systems and the parallel standardization of operational processes required for their digitization. These systems ensure that operational procedures can be managed and distributed in real time. In addition, in association with smart identifiers and training & qualification databases, the access to operational control features or electronic records could be restricted to the duly qualified personnel only.

“Regulatory influence pushes our industry to develop effectiveness. Effectiveness means [for us] continuity, integrity, and errors avoidance.” [M4]

“By integrating security control with individual training plans we could avoid that people who would not have completed their qualification process could not access to critical operational functions.” [M3]

Separately, regulators are increasingly urging industrials to leverage technological innovations and to implement technology enabled process improvements. An example thereof is systematic product testing which is slowly becoming the standard in sterile pharmaceutical production (World Health Organization, 2011), medical devices assembly (FDA, 2009) and packaging (FDA, 2012).

“Containers closed by fusion (…) should be subject to 100% integrity testing” (Annex 6 for GMP of sterile pharmaceutical products (13.1) (WorldHealth Organization, 2011))

“Questions such as those listed below should be considered before selecting a sampling plan. (…) What is the state-of-the-art technology for 100% valid testing of this device?” (FDA, 2009)

“One of these procedures requires the use of “appropriate electronic or electromechanical equipment to conduct a 100-percent examination for correct labeling during or after completion of finishing operations” (Sec. 211.122(g)(2) (FDA, 2012))



Whereas the cost of manual testing is very high, the development of operational technologies has allowed 100% online testing of drug products without any product destruction and without risking their integrity.

“Since 100% control has become obligatory, manufacturers are continuously challenged to increase output and improve efficiency, as well as inspection accuracy; the main focus will be on fully automated solutions.” (Dr. Freissmuth, 2013)

The results of controls made during the production process are automatically recorded within context thanks to the integration of IT/OT. Product serialization, also referred as product tracking and tracing, which is expected to allow full traceability of any commercial unit, is the next step. Regulators and industry leaders are imagining solutions and guidance to reach this level of control. In the US, the GS1 standard will support the deployment of technologies enabling product serialization. Its pilot stage is expected to start in 2015 (GS1 US, 2011). Without a doubt, this improvement in product traceability would not have been possible without a deep vertical integration of technologies.

“Technically, line-management programs from Systech, Optel Vision and others can communicate with enterprise-level ERP systems, specifically those of SAP AG, the enterprise-software vendor that is dominant in life sciences globally. But at the same time, many, if not most, serialization implementations involve additional software vendors. Axway, with its Track & Trace solution, has been deployed in a number of implementations, and the company is currently engaged in a global deployment with Sanofi-Aventis. IBM and Oracle have track-and-trace modules that attach to their enterprise-level software suites. SAP itself has modules, called AII and the Object Event Repository (OER), that also connect to packaging-line systems.” (Basta, 2012)

8. Better risk management

While better risk management is the third most expected benefit within our interviewees, it is also the justification least frequently given for investments. One possible explanation is that it may be difficult for industry leaders to commit to reducing risk because it is intangible per nature.

In addition, it is apparent from our interviews that the risks our respondents are concerned about are varied and cover all operational processes. The risks reported fall into numerous categories such as patient safety, product integrity, compliance, business continuity, change, loss of operational process control, financial loss, operational flexibility loss, and not keeping-up with technology.

While the risk relating to patient safety is the most critical risk category, the risk relating to non-compliance is the risk that was mentioned the most during our



interviews. It covers almost all functions and processes of the much regulated pharmaceutical and biotechnology industries. Non-compliance issues can result in the decision to halt the production and can have major financial consequences in addition to their public publication.

Three main concerns were captured within non-compliance: regulatory change inappropriately handled, inappropriate design and lack of adherence to operating procedures.

Lastly, the risk relating to business continuity appears to be another serious concern for representatives. To mitigate this risk, their organizations are keen to develop solutions that will ensure that the processes are both flexible and reliable.

“Two things drive the entire production function of a biotechnology company: production cost, and, above all, risk. Compliance risk, business continuity risk, etc. And to minimize that kind of risk, we are literally obsessed by single points of failure; we are obsessed by our understanding of all the causes of error, both human and technical. When we introduce new technologies, this is the first aspect.” [M1]

“We usually take some time to wait, and then end up deciding to proceed once we accept more risk. So this is a function that relies on the relationship between risk and cost and that evolves on a timescale. And this is not specific to [us]. It is pretty general.” [M1]



CHAPTER IV: IMPLICATIONS: CHALLENGES AND OPPORTUNITIES

IV.1. Anticipated challenges and risks of IT/OT convergence

We have seen how professionals consider the IT/OT convergence to be a source of important benefits for their organization. However, these same professionals are conscious of the important challenges that need to be overcome in order to leverage the full potential of IT/OT convergence. We set out below the challenges that appear to be the most crucial to them: Interoperability, Security, Cultural change and User Experience.

Figure 31: Overview of the challenges of IT/OT convergence faced by our interviewees.

1. Interoperability

The experiences shared by our panel show that the industry first approaches the technical convergence through integration. The absence of standardized interfaces pushes organizations to make in-house development that directly respond to processes in place and that quickly demonstrate the automation potential.

“Architecting the IT/OT convergence reveals the need for new standards which will facilitate connectivity, integration and interoperability.


Asset availability Product safety Responsibility

Ergonomy Cognition

Change management Talent & skills management

Technologies Standards and certification Communities

Inter-operability

Cultural change

Security&

Regulatory

User experience


Unfortunately [it takes time and] in the real world you do not ever have the time to wait for the ideal solution.” [M4]

However, this does not make these systems highly interoperable. Failure to distinguish between integration, interoperability and compatibility makes planning their achievement more difficult (Panetto & Molina, 2008).

But what is interoperability?

“Interoperability. The ability of two or more systems or components to exchange information and to use the information that has been exchanged.” (IEEE, 1990)

Interoperability is less complex than integration as it usually deals with technical issues only, whereas integration also involves dealing with people, making integration issues more difficult to solve. However, “while interoperable systems can function independently, an integrated system loses significant functionality if the flow of services is interrupted” (Panetto & Molina, 2008).

Compatibility is the lowest level of constraint as it refers only to the ability to function in the same environment as the other system. IEEE extends this definition by adding the ability to exchange information but not necessarily to use it as is the case with interoperability.

“Compatibility. (1)The ability of two or more systems or components to perform their required functions while sharing the same hardware or software environment. (2) The ability of two or more systems or components to exchange information.” (IEEE, 1990)

Low interoperability constrains the ability of the organization to adapt its processes to respond to business changes. Integration instead affects operational flexibility to the extent that it increases the resource and the time required for implementing changes.

“Solutions existing at the operations management level and at the shopfloor process control level are not really interoperable today. You need to deploy complementary tools and technologies to make the link.” [M8]

Here is an example of the interoperability challenges when dealing with legacy equipment controls from our secondary research:

“Diversity of equipment controls was not a problem because equipment was often maintained and serviced by the vendor, especially in smaller sites without a big engineering or maintenance department. (…) Here a number of challenges exist: First, the relevant data must exist in the machine control system. Second, the machine data must also contain recipe, batch, and phase information in order to be later easily grouped



when analyzed at batch review time. Often such context data does not exist in older equipment. Third, even if the data exist it can be difficult to access online before the end of a batch, which is needed to automatically capture bad trends or potential deviations as early as possible. Fourth, physical connections to older machine controls are slow or non-standard—if they exist at all. Fifth, older machine controls are mostly not aware of any standard data access protocols—such as OPC—used today. The combination of the five challenges in a grown environment can make your life difficult and asks for a flexible architecture and can require additional post-processing before presenting the data to MES.” (Robert Fretz, Head of Process Automation and MES delivery program at F. Hoffman-La Roche in an interview for Pharmamanufacturing.com (Paul Thomas,PharmaManufacturing.com, 2010))

Intel is reported to have identified six major factors that affect an industry’s ability to achieve interoperability (Wikipedia, 2013):

There must be a demand for interoperable products There must be standards, or rules, defining what interoperability means

in the field Business conditions must encourage manufacturers to make their

products interoperable Guidelines must exist that make the often-complicated standards easier

for companies to interpret Compliance must be verified by independent testing Interoperability must be actively promoted.

Based on our interviews there is a clear demand for interoperable products in the manufacturing area. The purpose of investments is to deploy systems allowing the vertical integration of functions without constraining the operational flexibility.

“What is definitely important is to be able to integrate the new technologies and technical advances. And in this particular field (the biotech industry), that means being able to use those technical advances to simplify the tool. We have a complexity problem. Information systems introduce an intrinsic level of complexity that becomes an insurmountable brake.” [M1]

“Often process automation is modeling a few configurations only because modeling every possibility would be too expensive. For example, if you designed your custom process to manufacture 1000 liters of a product, you would not usually specify your system for the hypothetic case where you would have to produce 500 liters only. This is what then limits the operations flexibility.” [M3]

Second, international standards defining what interoperability means for each function of the information system are being developed, if not already available. Two



such international standards already available are ISA-8842 and ISA-9543, internationally known as IEC/ISO 62264, which defines the architecture of Information & Control systems and their interactions. It is complemented by B2MML44, which sets XML schemas for implementing ISA-95 data models. Our respondents were aware of ISA-95 and reported using it as a reference model for architecting the manufacturing information system.

“ISA-95 is my bible. [..] Actually we never do any presentation to our customers without referring to it. It is widely adopted across the industry so far I know.” [M6]

However, the standardization process seems to be slower at the controls and automation level. The ISO technical committee TC184 is developing standards for industrial automation. The TC184/SC5 subcommittee, in particular, is focusing on the development of interoperability and integration with enterprise systems. This sub-committee has already issued two parts of ISO 1843545 for the integration of diagnostics, capability assessment and maintenance applications with industrial automation systems.

Third, as the industry is working hard to develop and implement the information backbone (e.g. MES, SCADA, DCS) that allows the interconnection of operational technologies and leads to improve operational processes, industry leaders seems to be focusing more on enriching the features than on consolidating the cost structure. Consequently, business conditions might be ideal for encouraging solution providers to make their product fully interoperable and the existing needs for complementing products with external features (e.g. data historian, analytics, advanced reporting) shall incite them to open their systems.

“The information that is gathered [by MES] is very operational and will get much more value if it is being shared with other functions (IT) that are no more operational at all [e.g. Datamining].” [M2]

Fourth, guidelines exist and developments of existing standards are actively supported by international working groups which publicly publish resources to help with their implementation. WBF46 and MESA47, the two most active communities historically, have recently merged48 to bring their means together, improve their work efficiency and increase their influence. There is therefore an active community supporting the development of manufacturing standards and their implementation.42 Visit the CDISC website at http://www.cdisc.org 43 ISA automation standards at a glance at http://www.isa.org/Template.cfm?Section=Standards2 44 Visit ISA.org at http://www.isa.org/InTechTemplate.cfm?Section=Channel_Talk1&template=/ContentManagement/ContentDisplay.cfm&ContentID=59918 45 B2MML schema and downloads are available at http://www.isa.org/Content/NavigationMenu/General_Information/Partners_and_Affiliates/WBF/Working_Groups2/XML_Working_Group/B2MML/B2MML.htm 46 Get more details at http://www.iso.org/iso/home/search.htm?qt=18435&published=on 47 Learn more about World Batch Forum (WBF) organization at www.wbf.org.48 Learn more about the Manufacturing Enterprise Solutions Association (MESA) at www.mesa.org


http://www.mesa.org/

http://www.wbf.org/

http://www.iso.org/iso/home/search.htm?qt=18435&published=on

http://www.isa.org/Content/NavigationMenu/General_Information/Partners_and_Affiliates/WBF/Working_Groups2/XML_Working_Group/B2MML/B2MML.htm

http://www.isa.org/Content/NavigationMenu/General_Information/Partners_and_Affiliates/WBF/Working_Groups2/XML_Working_Group/B2MML/B2MML.htm

http://www.isa.org/InTechTemplate.cfm?Section=Channel_Talk1&template=/ContentManagement/ContentDisplay.cfm&ContentID=59918

http://www.isa.org/InTechTemplate.cfm?Section=Channel_Talk1&template=/ContentManagement/ContentDisplay.cfm&ContentID=59918

http://www.isa.org/Template.cfm?Section=Standards2

http://www.cdisc.org/


Fifth, although most of the standards set out above are controlled by ISO and are published with certification specifications, we have not been able to find external bodies who publicly propose official product certification services for any one of these standards.

Sixth, interviewees report that despite the emergence of middleware solutions aimed at linking systems together, the customization level remains significant. End-user organizations (e.g. manufacturing) are therefore forced to complete lot of software developments by themselves if they want different solutions to interface with each other. Interoperability does not yet seem to be actively promoted beyond the proprietary offers of technology and solution suppliers or of their ecosystem.

“We have been using the Lighthammer product, bought out by SAP and sold under the MII name, and the ISA S88 switchboard to define all of the integrations. In fact, it is a virtual data-warehouse that searches all the data in our systems and then represents them in Business Objects type universes (also bought out by SAP) or in more complex universes, allowing us to define multi-variable and predictive models. It is all based on the virtual data-warehouse, giving us a rather amazing analytical capacity, so we do not need to build a huge database where it would be hard to tell what we have and would be hard to maintain later on. […] MII, which is sold as an integration tool, still requires lots of specific development. This tool is sold as a mature Off-The-Shelf product but still requires a lot of customizations.” [M1]

In regard of the six key factors identified by Intel, the conditions for delivering a high level of systems interoperation are not yet met. However, these standardization initiatives demonstrate a good industry dynamic. They “lay a solid foundation and begin to articulate the system and component features necessary to achieve robust interoperability in the future” (Martin, 2005).

2. Security

The second concern captured during our interviews relates to the security of operational assets. Logical security weaknesses might lead to asset unavailability, malfunction, operational data losses and, in a worst case scenario, safety issues. With computers the biggest risk is the loss of data. With operational technologies, the biggest risk is the loss of life.

“Technological innovation has demolished our received ideas [about operational devices security]. With IT/OT convergence, the IT challenges [e.g. security, integrity, life cycle management] are now coming to the device.” [M4]

The IT/OT convergence increases security risks in different ways. First, operational assets might be damaged or simply made inoperative as a result of software issues



and security attacks. Second, medical products might be corrupted by inappropriate access. Third, company responsibility could be engaged for having procedures in place that are inadequate to ensure compliance with regulatory requirements.

Another concern shared by our interviewees relates to business continuity and operational assets availability. Interviewed professionals expressed a common feeling that connecting operational technologies to information technologies exposes them to the usual software security threats, which requires mitigation and control. This idea directly link with the concern expressed by our energy industry representative and who relates the continuous effort to sustain to keep-up with security standards. For this industry, the industrial network is actually critical to production planning and energy distribution.

“Security is a concern. We do have initiated and completed many projects to raise the bar of our industrial network security. We continuously work to secure gateways in place between the office network and the industrial network.” [M9]

Earlier this year, the Financial Times newspaper published an article about the cyber-attack threat that hangs over the future of connected cars (Bryant, 2013). This article demonstrates the acute public sensitivity to questions surrounding the reliability and the security of operational technologies.

“Currently I don’t think we have an issue – because we have only internet connections to the infotainment system that displays information – it’s not really going deep in the architecture of the car . . . But in the next years we will have to discuss the issues that could come up.”(Dirk Hoheisel, board member responsible for automotive electronics and car multimedia at Bosch cited in an article from the Financial Times, published at ft.com, by(Bryant, 2013))

The same reserve is expressed by our field representatives. All of them, including professionals from other industries, describe a common risk mitigation strategy built on the principle that the operational information network should be isolated from the general business network as much as possible.

“The idea is that a site must be able to produce as soon as it has people, raw materials and utilities. […] the laboratory information management systems (LIMS) and production management systems, an MES, […] are completely isolated, asynchronous, on level 4 [ISA-95]. This means that we can stop our ERP system without impacting production. We will not be able to ship or send products abroad, we will not be able to do batch releases but production services will not be impacted for some time.” [M1]

This strategy is, however, challengeable. By gaining control over the on-board computer of a commercial airplane with applications running on an android operating



system (Cheminat, 2013), Hugo Teso, a security consultant at n.runs, showed that the physical segregation is no more the ultimate safeguard against threats. Furthermore, in other manufacturing areas, organizations with short manufacturing lead time design their Information System backbone to ensure availability of the communication link with ERP, which can nevertheless be implemented as a single instance for all manufacturing facilities.

“When a system [e.g. ERP, MES] is unavailable our plant operations will stop after two hours. Today you need all the Information System [backbone] to operate. To imagine that you can work without these systems is a reality that does not exist anymore. […] There is a simple physical reason, […] at the end of the production line there is a small storage area that buffers the products before their loading into the trucks. Actually you need the ERP to allow the labeling and the loading of the products into the trucks. Consequently, when this area is full, you have to stop the line.” [M5]

Organizations face the difficult challenge of finding the right balance between the security risk and the benefit potential. Having access (or not having access) to network services (e.g. central user management, central asset management and other directory services) is one example of the choices that need to be made.

While organizations intend to leverage the potential of both vertical and horizontal integrations, the strategy of network isolation clearly reaches its limits as it constrains value realization. Although, our life science representatives were not considering the possibility of maintaining an isolated model in the long term, our energy industry representative foresees architecture where the operational information and the control system remain distinct from the business network.

“Historically we [i.e. the IT function] believed we could ever work with either non-standard or proprietary solutions if we would just isolate them from the enterprise network. Today, it means that users are not benefiting from the basic network services: e.g. user authentication, data exchange and remote maintenance. It is obvious now that this answer is a short-term answer and we understand that it is not sustainable anymore. IT [function] has to accept that the trend is to connect [everything] on the network and we must find solutions to guarantee the business continuity.” [M4]

While the risk of unauthorized access to operational systems through information network seems to be under control for now, medical products embedding software components are currently left much more exposed to any intentional or unintentional interference. Industry professionals and authorities are expressing serious concerns about medical devices security in particular (GAO, 2012). Analysts believe that the likelihood of having a serious malfunction caused by software security issues is high, which makes them predict that “by 2016, patients will be harmed or placed at risk by a medical device security breach” (Gartner, 2012).



Going forward, device makers should integrate product life-cycle management practices into their software development processes (Gartner, 2012). This should naturally result in the set up of an active technical watch, the development of risk analysis practices and the issuance of corrective patches.

“Manufacturers must now think about security and continuous product updating and this causes them significant needs in new skills sourcing”(Forrester Research, 2012).

However, the FDA regulations and guidance on medical devices have not yet been strengthened to address these specific threats. The latest guidance issued by the U.S. agency still does not require manufacturers to report cyber-security threats. Instead, what is required is the reporting of software updates that could compromise the safety or the effectiveness of the medical device (FDA, 2005). Manufacturers are therefore not yet clearly committed to actively monitoring security issues and reporting their risk assessment to a central authority. It is probably why the FDA has recently been advised to enhance “its review and surveillance of medical devices as technology evolves, and [to] incorporate the multiple aspects of information security” (GAO, 2012).

For now, industrials are assisted in their task of controlling the risk of inappropriate access to operational systems by newer international standards such as ISA101 (HMI), ISA18.2 (Alarm Management) and ISA99 (Control System Cyber-security).

“Industry experts will show how the application of some of the newer standards (…) can help manufacturing companies to look to the future in a positive way and address some of the hottest industry issues created by the loss of skills due to the retiring «Baby Boomer» generation and the growth in cyber attacks on process manufacturing.” (Wilkins, 2012)

Separately, the development of new medical devices with wireless communication capabilities has raised the interest of industrials in collecting data about product use and the effects of medication on a large scale. This raises the question of data privacy. Although this question is not clearly addressed by regulators today, data privacy laws and rules are expected to be issued by governments soon. Sixteen life-science leading companies have joined their efforts and created the International Pharmaceutical Privacy Consortium (IPPC)49 in order to actively address data privacy and security issues around the world.

“A specific legislative aspect concerns the term ‘‘person’’. The EU Directives as well as many national laws only consider individuals (‘‘natural persons’’) as objects of privacy laws. In particular, in the context of the [Internet of Things], this understanding is too narrow. Legal persons (e.g. corporations) do also have privacy interests; as for example in the Swiss

49 WBF and MESA merged as of May 31st, 2012. Read the announcement at www.wbf.org/associations/12553/files/MESA_WBF_Merger_Press_Release.docx


http://www.wbf.org/associations/12553/files/MESA_WBF_Merger_Press_Release.docx


legislation, the scope of application of data protection law needs to be extended to legal persons.” (Weber, 2010)

Life science professionals are eagerly awaiting regulators to address these specific concerns in a clear manner. For now, practices rely on validation and risk management methodologies to mitigate security risks and avoid inherent patient safety issues. A more formal alignment of responsibilities across their industries would enable the security threat to be better controlled and compliance better ensured.

3. Facing the cultural change

Along with change comes another key challenge for organizations: cultural change. Cultural change is absolutely key when it comes to the successful adoption of new technology. It is therefore not surprising that it was often alluded to in the course of our interviews. We chose to explore this area by looking at the practices implemented to manage the change and to manage talents and skills.

Change management

As far as pharmaceutical and biotechnology operations are concerned, the most important cultural change resulting from the IT/OT convergence relates to the management of Quality Assurance. We have seen how automation and computerization can increase the compliance level, mitigate risks and result in significant reduction of operational costs. However, because they are the foundation the foundation of the pharmaceutical and biotechnology processes, these technological improvements require that the quality procedures be transformed in depth because.

“The biggest cultural changes happen in Quality Assurance. The main change is from “seeing everything” to “review by exception”.” (Robert Fretz, Head of Process Automation and MES delivery program at F. Hoffman-La Roche in an interview for Pharmamanufacturing.com(Thomas, 2010))

Through our interviews, we understood that the control strategy evolves through a maturity scale where the level of digitization and automation is increasing. The secondary research helped us then to figure out six relevant stages and we give them in Figure 32.


Mostly manual control operations Mostly automated control operations


Figure 32: The stages of the strategic transformation of operational quality assurance (Figure is adapted from paradigm descriptions sourced from (WPF, 2010) and (MESA, 2009))

As one moves along this model, the reliance on the Information & Control system and its validation, increases. This therefore requires a strong user adoption.

A lack of user acceptance has long been an impediment to the adoption of Information Technology (Davis, 1991). From a practical standpoint it is therefore important to understand how technology acceptance is achieved. We set out the technology acceptance model (TAM) of (Davis, 1991) in Figure 33.

Figure 33: Technology acceptance model (TAM) (Figure adapted from (Davis, 1991))

TAM is a practical tool for the testing of early user acceptance. It explains how a user’s overall attitude towards using a given system determines how the user actually uses it. TAM also provides two determining factors for the user’s attitude toward the system: its perceived usefulness and its perceived ease of use. Finally, it reminds us that usefulness should not be overshadowed by ease of use because “no amount of ease of use can compensate for a system that doesn’t do a useful task” (Davis,1991).

We reported earlier how life-science organizations usually first build up the Information & Control system’s backbone which allows further integration and supports the convergence. This first step is then leveraged to facilitate the adoption of innovation by supporting operational staffs in the understanding of the usefulness of new technologies.


Paper based procedures

Paper on glass

Partial automation

Complete automation

Review by exception

Release by exception


“The first step is to collect more data from the end-user. The second step is to improve the value of the data by adding contextual information and giving end-users powerful analytics. […] The IT function supports the business by processing the data collected to find answers to business questions.” [M2]

“Once you have demonstrated the benefits and the usefulness of new technologies with a first project, there is no debate anymore. IT does not need to push for business adoption because business representatives do.” [M4]

The observations made hereafter relate on the methods used by companies to realize the value of their investments and later, at section 4, we explain how the cognitive response and the affective response to the change can be enhanced through the improvement of the user experience.

The change strategy reported above aims transforming the organization’s culture by deploying first technologies then processes. If it covers well the “Conversion” and “Realization” stages of IT business value realization process described in section 2, it could induce risks on return on investments and furthermore the benefits could be slow to be realized. “Effective benefits realization requires an ongoing [business sponsors’] commitment to, and focus upon, the benefits, rather than the technology, throughout a system's development, implementation and operation.” (Ashurst,Doherty, & Peppard, 2008)

“[To successfully adopt new technology] you need to have a strong strategic sponsorship, then to plan the implementation in detail and lastly to empower people for realizing the change.” [M3]

Our pharmaceutical and biotechnologies representatives expect to see a return on investment 24 to 36 months after the investment are made. By contrast, the expectation was 12 to 24 months for the representatives from other industries. Although business cases seems to be more and more present in the project portfolio management practices of our life-science representatives, other industry representatives are reporting more formal business cases practices. Those last tend also to focus on tangible benefits only, what leads them to define a smaller functional scope of work.

“Our investment selection criteria are, first, the return on investment which we expect to be below 6 months, and second, the strategic alignment, which can justify to have a longer return on investment.[…] We focus our decision making process on the [tangible benefits].” [M5]

In addition, we observed that organizations which rely on a formal process for the approval of business cases also boldly implement two interesting principles : firstly, the management of operations (or of the management of the function benefiting the



most from the return on investment) is accountable for the benefits identification and the business case; secondly, business case is reviewed on an ongoing basis during the project and one last time controlled at the project’s closure.

““Dedicated teams” are responsible for identifying benefits and building the business case. They launch the project then intervene again after its delivery to check the realization of the goals and of the benefits. […] These are staffed with senior professionals who have demonstrated their business knowledge and their understanding of the organization.” [M2]

“Writing the requirements is not easy. Business representatives must be responsible for defining the requirements if you want their commitment to the proper need definition. […] It is one thing to say that you need a weight scale but it means nothing. It is another thing indeed to say how it should be used, what its accuracy should be and which systems it should be connected to. It is a mandatory practice to ensure the end-users’ commitment to the change.” [M3]

It confirms the idea that project portfolio management must not only track projects with consideration of time, cost and quality but also ensure that value is being realized (McKeen & Smith, 2012) and that a high level of customer satisfaction is being achieved from an investment. Here again, revisiting decisions made previously is essential. An organization’s unwillingness to revisit them can be a key barrier to achieving value (McKeen & Smith, 2012).

Technology should be linked to strategic initiatives or programs. To realize value, IT efforts should be concentrated on the most strategic projects. The spread of IT investments across too many projects may prevent the potential of value of the investment from being realized (McKeen & Smith, 2012).

Balanced score cards to measure the performance of strategic program can be developped. Recently, several researchers (e.g. Martinsons et al., 1999; Martinsons, 1992; Rosemann and Wiese, 1999; Bruggeman, 1999; Reo, 1999) have suggested that Balanced Scorecard can facilitate the evaluation of the performance of Information System (IS) and help evaluate IS investments in a holistic manner. Their successful use for managing performance has been demonstrated even with most complex systems, such as ERPs (Sedera, Gable, & Rosemann, 2001)

Finally, pilot studies, requiring limited investments, can be performed to demonstrate the value of an idea and provide company executives with more options in managing the technology portfolio (McKeen & Smith, 2012).

“Pharmaceutical companies should learn from smaller, more entrepreneurial enterprises that see value in the incremental improvements that might emerge from small-scale pilots. The experience



so obtained might yield long-term benefits and accelerate the path to the future state.” (McKinsey&Company, 2013)

This approach extends the potential benefits of the value portfolio management approach by giving senior management the opportunity to revisit decisions and investment priorities much more easily by giving it “go/no go” options at project gates and project portfolio review events.

Talent and skills managementTechnological integration requires many skills to be involved in parallel to allow its benefits to be realized. Business continuity through this integration is critical, even more so than its complexity.

“The success relies on three key factors: business needs [understanding], technologies [selection] and organization [capabilities]. […] When these three pillars are strong then success is guaranteed. […] My conclusion is that these three strengths should be developed in parallel. We should not believe that technology can solve every problem on its own. […] Solutions could look simple in surface but could be complex inside and that’s a trap because it can be very expensive at the end. We need people who master the technology and we need a clear understanding of the business needs.” [M4]

Interviewees reported that the integration of people and organizational functions is an essential condition for success.

“For achieving the integration of technologies you have to achieve the integration of people. This could be achieved through formal integration […] or by a very close collaboration.[…] As a member of the project team, you then have to make the best to understand your counterparts.” [M8]

“We shall have the same language and the same practices. IT must adopt operational and engineering methods (e.g. FMEA, Root cause analysis) to facilitate people’s integration and so the functional alignment. These methods will be re-used in IT project processes. IT resources will bring the data and they will be coached on the method’s application by operational staff.” [M4]

Organizations often employ a project-like organization to bring people together to work towards a common objective. On one hand, the background education of the project leader was not reported as important. However, on the other hand, having someone who understands both the big picture and the operational processes to be integrated facilitates the decision making and consequently the project’s execution.

“The best experience I had was with a production manager, perhaps because he was more concerned about the functionality and the cost of



the solution. […] Within MES deployment project I noticed that the PM was making decisions very fast when issued from the production staff.”[M6]

“[As an answer to the question: “Who should lead this transformation?”] It depends. It is more a joint effort between IT and engineering with support of Production. A formal joint-type organization is not necessary as long as the vision and the goals are shared. By experience, the best leaders did come most of the operational area. Almost former plant automation managers who had experience with technologies and with day-to-day operational constraints of a plant.” [M7]

Finally, the integration of people and functions was reported to be a key factor for the success of IT and OT integration projects and the development of new skill sets and the definition of a new strategy for talent management was considered to be a solution by our field research participants.

“IT people do not have the knowledge about how operations are run on the shop floor. So Process engineers did move to the IT area and became consultants and experts of operations in the implementation of MES systems. […] In matrix organizations, which appear in the 90s, IT people did hierarchically report to IT department but functionally to operations or process engineering. This leaded people to a better mutual understanding.” [M6]

“We usually intent to reassign people in different roles at the end of the project in order to capitalize their knowledge within the organization [and] because they usually give much more attention to their choices [afterward]. Otherwise, the knowledge about how the things are tensed together is usually dissipated over the time after the project is over.” [M6]

However, our secondary research shows that the development and the retention of new skills sets need to be brought into the foreground for the long-term objectives of organizations to be met (Gartner, 2009), (Forrester Research, 2012). Differences in the educational background and the fragmentation of the technical expertise create a social distance between the IT and OT support functions that need to be reduced for the management of IT/OT convergence.

Consequently, to successfully align IT and OT, organizations will need “to bring together disparate capabilities from inside and outside the company” (ForresterResearch, 2012). Figure 34 symbolizes how new skill sets could be developed for a successful IT/OT convergence strategy.



Figure 34: The IT/OT convergence requires new skill sets (Figure adapted from figure titled “Emergence of Smart Products and Apps Requires Combining CIO and

CTO skill sets” (Forrester Research, 2012) and from (Gartner, 2009))

4. User experience

User experience (referred to as UX or UE in the literature) is another important challenge identified during our field study. The model of Davis given in Figure 33 highlighted the cognitive and affective responses of end-users to the technology they use or are to use.

"[User experience] a person's perceptions and responses that result from the use or anticipated use of a product, system or service" (ISO, 2010)

Two interesting user-centric factors of the development of the User Experience, both reported by our interviewees, are: Ergonomics and Cognition.

Due to limitations in system integration and interoperability, work station users have to deal with more and more Human Machine Interfaces (HMI), also called User Interfaces (UI), often materialized by heterogeneous displays, and the IT infrastructure footprint becomes larger. Improvement in ergonomics and cognition are reported to be the goals set by our interviewees’ organizations to simplify operational tasks and to improve overall efficiency and effectiveness.

“Monitoring everything is too much. If you report all data then you have people who do nothing but data analysis. We prefer to monitor critical


IT/OT Convergence

Officer

CIO skillsApplication developmentMiddlewareIT InfrastructuresPortal developmentLogical security

New skillsUser experiencePortfolio managementProgram managementEcosystem/Service centered architecture designAgile development process

CTO skillsHardware engineeringEmbedded softwareOperational process understandingProduct/Process engineeringSafety


parameters only. […] We set a threshold above which the process performance is considered good and we require our managers to react when the performance fall below the threshold only. This enables our managers to actually manage instead of keeping their full attention on numbers and tables.” [M3]

Ergonomics is “the study of people’s efficiency in their working environment” (OxfordDictionaries, 2013). Ergonomic research covers almost four areas: physical ergonomics, cognitive ergonomics, social ergonomics and environmental ergonomics. We center our focus on physical and cognitive ergonomics.

Initiatives like SMED and the 5’S of the Lean Six Sigma toolkit aim at improving operational efficiency and effectiveness by leveraging physical ergonomics. Industrials are making further improvements by studying individual and social behaviors occurring in the workplace. Leveraging these human factors helps organizations to raise efficiency and effectiveness.

“We implement Poke-Yoke concepts into our electronic systems to avoid operational mistakes. Operational devices automatically control that the setup of components complies with specifications.” [M3]

“We implement more and more quality checks within our operations. We drift the Poke-Yoke principle to automated quality checks. For example, we implement visual control stations at the end of our production lines and we require operators to choose the actual color of the [product] within different choices displayed on a touch screen. The system then check that the selected color corresponds to the expected one. […] In the same way, manufacturing systems guide operator with light signals automatically switched on during material selection.” [M5]

While ergonomic improvements help prevent the making of mistakes and increase the speed of tasks, cognition facilitation aims instead at helping operational staff make better and faster decisions.

“It allows informing operators of the process efficiency defined with real business criteria (e.g. cost of units produced in real time). This is cognition: the operator as an intuitive understanding of the impact of the events he is observing on the floor. This helps him to take better decisions.” [M8]

Cognition is “the mental action or process of acquiring knowledge and understanding through thought, experience, and the senses.” (Oxford Dictionaries, 2013).

Cognition is essential to deliver a valuable user experience and leverage the real-time information made available to operational staff directly on their work-center. An appropriate User Interface design facilitates good cognition and reduces training requirements.



“Delivering an exceptional user experience (UX) or facing an increasing raise in complaint volumes caused by ergonomic issues or unexpected training needs.” (Forrester Research, 2012).

Solutions providers are working on ways to display information and to analyze it in a broader context. This helps end-users to perceive trends, as opposed to not only react to single events.

“IT solutions allow the operations to have real-time visibility on the process. […] The integration of the systems with SAP MII allows to create different views which consolidate information at different levels. ” [M8]

In summary, the development of a valuable User Interface requires three factors: first, the knowledge of practices and constraints (e.g. workplace ergonomics); second, the understanding of operational processes in order to tie in operational data with their business meaning; third, the acknowledgement of people, cultures and backgrounds to understand human factors which prevent the right treatment of information. Our participants report, however, that the current state of industrial technology hinders the improvement of the user experience

“Technology is available. We have tera-octets of data. Having access to the technology is no more a competitive advantage because if you have access to the technology your competitor will certainly have access to it soon. […] Having a data historian or a MES does not develop your competitive advantage. It is actually how you use the technology that will allow you to realize the benefits or not. The stake is therefore to understand how you can make the best use of the technology. [Competitive advantage] is about getting the services that will enable the development of the use capabilities and knowledge.” [M4]

HTML5 and Wireless technologies are two technologies which could improve the end-user experience.

Given the fast rate of adoption of smart devices, the need to have mobile applications developed with a common language but running on different operating systems is strong. HTML 5 specification is about to be officially released by the W3C group in 2014Q450. HTML5 offers a very rich user experience thanks to its use of, in particular, the latest technologies and of vector graphics canvas. HTML5 applications51 can use local resources and be run without the need to pre-install any plug-in like Flash. HTML5 can work without being connected. Could this protocol allow direct access to machine interfaces by connecting a smart device to a simple web-server embedded into operational control units? This makes sense but implies that machines will be opened to connection requests.50 Learn more about IPPC at http://www.pharmaprivacy.org/links.html. Links to national or regional privacy laws resources are available in the “Usefull Links” section of this site.51 The World Wide Web Consortium (W3C) published the candidate definition of the HTML5 on December, 17th 2012. Read the announcement at http://www.w3.org/2012/12/html5-cr.


http://www.w3.org/2012/12/html5-cr

http://www.pharmaprivacy.org/links.html


Wireless technologies can make the deployment and connection of smart devices much more cost-effective provided that appropriate procedures are in place. The increase in wireless technologies coverage and bandwidth should enable the exponential multiplication of uses.

Although wireless technologies are increasingly accepted by organizations, barriers to adoption remain as far as the core operations are concerned. The anticipated arrival of the ISA-100.11a standard (IEC 62734)52 and Wireless HART (IEC 62591)53 for industrial wireless should help industrials leverage existing and future technologies and overcome the last level of resistance.

Enterprise networks are, however, often locked down and fully controlled by a small group of individuals. New security models, including new policies and new technologies for managing access requests of an exponential number of users or objects, have to be developed. The current model, very centralized and delegated to a very narrow pool of experts, needs to be replaced with a libertarian model in which users are in charge of using the available infrastructure after having verified the compliance of their resources and having been properly trained and educated.

“The role of the CIO is to refresh and to update the Information System architecture principles. They define how new components should be integrated into the system. It is actually a challenge for us because of the pace of innovation.” [M4]

If the operational staff is not supported in the integration of these new technologies, the development of Machine to Machine (M2M)54 features will certainly permit end-users to work around the enterprise network security constraints and make use of the new capabilities of their operational devices but without benefiting, at the beginning, of the central network services. An example is Wi-Fi direct, a peer-to-peer standard specification, which enables ad’hoc communication between Wi-Fi devices and comes with a process for certifying compatible products. By using Wi-Fi direct end-user could access operational devices or equipments through smart products, without requiring any IT support.

Finally, we believe that the convergence of IT/OT will lead to the development of industrial software services built on existing and proven web technologies (e.g. Service Oriented Architectures). Increased interoperability and aggregation of application components into single intuitive and consistent User Interfaces should allow the delivery of a rich User Experience.

52 Check www.aviary.com “the world’s best photo editing SDK” (aviary.com, 2013). Aviary is a photo edition tool fully developed with HTML5. A lot of other HMTL5 showcases are available on the web.53 Visit ISA website at http://www.isa.org/Template.cfm?Section=Standards8&Template=/Ecommerce/ProductDisplay.cfm&ProductID=11931 54 Learn more on the HART communication foundation website at http://www.hartcomm.org/


http://www.hartcomm.org/

http://www.isa.org/Template.cfm?Section=Standards8&Template=/Ecommerce/ProductDisplay.cfm&ProductID=11931

http://www.isa.org/Template.cfm?Section=Standards8&Template=/Ecommerce/ProductDisplay.cfm&ProductID=11931

http://www.aviary.com/


IV.2. Potential impacts on the pharmaceutical/biotechnology industry value chain

We have seen how IT/OT convergence results in numerous changes in business processes. Solutions have been mapped over the current pharmaceutical/biotechnology industry value chain to give the reader a synthetic overview of the areas impacted by IT/OT convergence. Please refer to ADDENDUM6, page 92.

IV.3. Connections of IT/OT convergence with other IT trends

The phenomenon of IT/OT convergence is directly linked to many of the trends that are gaining importance in the present day. For example, the IT/OT convergence is really at the root of the Internet of Things, Big data, Smart computing, Bring Your Own Device, Shadow IT and Cloud computing. Solutions being developed to address these specific challenges should support the pace of technologies convergence.

1. Internet of Things

“The Internet of Things refers to uniquely identifiable objects (things) and their virtual representations in an Internet-like structure. […] Equipping all objects in the world with minuscule identifying devices could be transformative of daily life.” (Wikipedia, 2013)

In 2020, Internet could be supporting « more than 50 billion connected devices » (ERICSSON, 2011). This exponential growth in the number of connections will create several technical challenges around the processing of the resultant growth in data, the security and the reliability of the connection these communicant objects, and the means necessary to easily manage these widely distributed assets.

The solutions developed to solve these challenges could find applications in the drug industries to manage assets remotely and efficiently, to individually track and locate any product units and to significantly increase the number of sensors to gather much more data about products and processes.

2. Big data

The Big data phenomenon comes from the observation that the processing of a very large amount of data pushed Information Technologies to their limits. This idea has continuously evolved to integrate the complexity of the data model, then the level of confidence in the data.



“Big data is a collection of data sets so large and complex that it becomes difficult to process using on-hand database management tools or traditional data processing applications.” (Wikipedia, 2013)

For IBM, “Big data spans four dimensions: Volume, Velocity, Variety, and Veracity”(IBM, 2013). These terms apply well to the operational data. Sensor networks and operational devices generate large amount of data (Volume) that need to be processed almost in real-time (Velocity). These data can be either structured or unstructured and need context to be analyzed (Variety). Operational measures are subject to variations so the aggregation of different sources requires algorithms to determine the confidence level on inputs and consequently on outputs (Veracity).

“We combine OT with Big Data. […] It creates a continuous improvement loop by reaping more value and knowledge from operational data thanks to advanced analytics. […] It leads us to an actual strategy of Information Management. […] OT serves a better understanding of the operational business processes.” [M2]

Big data should sustain innovation in the following technological area: sensors and device networks, process analytics, IT infrastructures and user interfaces.

3. Cloud computing

“Cloud computing is the use of computing resources (hardware and software) that are delivered as a service over a network (typically the Internet)” (Wikipedia, 2013)

Services have different natures: Infrastructure As A Service (IAAS), Platform As A Service (PAAS), Software As A Service (SAAS) and now emerging Business Process As A Service (BPAAS).

The primary benefit of Cloud computing is the reduction in capital needs (CAPEX) through the transformation of IT use to expenses (OPEX). Cloud computing also allows organizations to leverage highly specialized capabilities and to focus their development on their core competencies.

Although Cloud computing raises the problem of security and privacy, consuming IT services like a utility could accelerate the convergence of IT/OT by facilitating the remote management of globally distributed assets, by allowing on-demand access to computing resources and by creating the opportunity to reach a high level of standardization of non-core business processes among industrials.

4. Smart computing

IT/OT convergence and Smart computing are two intertwined phenomena we described earlier. We focus here our attention on smart devices (e.g. Smartphones



and Tablets). Tablet sales should exceed PC sales (e.g. desktops and notebooks) before 2017, “having much wider implications than hardware displacement” (Gartner,2013).

The use of smart devices for accessing operational data and controlling operational assets could significantly reduce IT costs. Considering that an international company owns hundreds of industrial displays and owns an average of more than one computer per employee, the savings that could be generated by replacing a significant share of these assets with smart mobile devices are tremendous.

In addition, the off-the-shelf availability of smart devices and their high level of interoperability with the companies’ Information & Communication infrastructure should also increase the reliability of the Information System and reduce maintenance costs.

5. Shadow IT

Originally, Shadow IT described the use of IT within organizations without organizational approval (e.g. IT function control). The meaning of the word now also includes the development of IT solutions or IT based products and services within functions beyond IT. Shadow IT has therefore acquired a much more positive meaning now also covering the resulting innovation.

Organizations are now trying to reduce the central control of the IT function to leverage the benefits of Shadow IT. Researches around this topic have already produced useful tools and methodologies for mapping practices and mitigating risks for the organization. All of them help to convert the threat into an opportunity (Chejfec, 2013).

It was reported during our interviews that IT resources can be integrated into the business organization to produce solutions that maximize business value and comply with company security and quality specifications. The IT function keeps the ownership of the enterprise infrastructure and the standard specifications that operational devices must comply with.

Shadow IT will help organization to innovate, to maximize their return on investment and to facilitate change.

“The group I’m a member of is shadow IT. We are IT people but report to a business function. We could be member of the IT function. I think it is a good way to redistribute costs outside of the IT function. But not only actually. […] Being in the business gives a better understanding of the culture, of the organization and of the work of business people. The organizational proximity improves the reactivity and the efficiency. Lastly it allows to impute costs to the business organization. […] The group is



involved in the business strategy and the business planning and it consequently brings something that traditional IT could not bring.” [M2]

6. Bring Your Own Device (BYOD)

“Bring Your Own Device (BYOD) […] means the policy of permitting employees to bring personally owned mobile devices (laptops, tablets, and smart phones) to their workplace, and use those devices to access privileged company information and applications.” (Wikipedia, 2013)

Because the main challenge of BYOD is security, we can expect significant improvements that will help companies to simplify their infrastructure and make it more reliable. BYOD solutions should facilitate the use of widely available smart devices across the organization, either in the office or on the shop floor.

“BYOD could also expand the total number of mobile users substantially — by 50% or more.” (Gartner, 2012)

All major companies in the software industry are keen to see organization implement BYOD and actively publish on the topic to assist the trend. Microsoft France has recently published an interesting report presenting a risk analysis, a global method for deploying BYOD and a framework for modeling the protection levels and mapping solutions. The report concludes that even though new features are currently being released, almost all the required building blocks are already in place in the organizations’ infrastructure (Microsoft Corporation, 2013).

If companies may be reluctant to use non-controlled devices to interface with their operational assets, we believe that BYOD will provide the technologies that will improve mobility on the shop floor and facilitate the deployment of devices, which may still be owned by the company but would not require assistance from IT staffs. This is the “Corporate Owned Personally Enabled” approach (Deal, 2013). Employee efficiency and satisfaction could thereby be much improved. However, the adoption of mobile touch displays could be rather limited due to the need to wear gloves in clean areas.



Conclusions

The convergence between IT and OT not only creates strategic process transformation opportunities but also deeply challenges business and operational processes. In the case of a highly regulated industries, such as pharmaceutical and biotechnology industries, the changes required for realizing the expected long term and intangible benefits which may induce multiple risks and cultural challenges may require extended lengths of time for implementation.

Using a qualitative approach, this study identified six categories of benefits namely: regulatory compliance, increased product and process knowledge, better risk management, operational cost reduction, increase in R&D productivity and increase in revenues.

What we have learned through our research is that the commitment to the delivery of short term operational benefits, which does not cause such important transformations and regulatory risks, is often viewed as an efficient lever that facilitates the adoption of innovation and that secures return on investments. However, it requires the application of best practices for IT business value realization, a formal prior identification of these benefits by business operational representatives and a strong support from the top management. Organizations should ensure the cross-functional integration, up-to the senior management level, of business, OT and IT resources to ensure the future success of the process transformation.

We also observed two interesting changes: Firstly, regulations are evolving and regulators are paying increased attention to both the kinds of benefits (i.e. operational and strategic) and also the safety risks for patients resulting from the use of this technology trend; Secondly, industry leaders are fully embracing innovation but their expectations around interoperability, compliance, life-cycle management and user experience are now much higher than in the past.

This dissertation gives a good overview of the potential benefits and also of the challenges faced in facilitating the IT/OT convergence. Further, the study identifies potential opportunities for the pharmaceutical and biotechnology firms contemplating to employ IT/OT convergence for efficient functioning.



ADDENDUMS

The following section contains addendums to the dissertation.



ADDENDUM 1. Field research target screener

Interview objectives Biotechnology Pharmaceutical Other industries

Solutions –Sales, Marketing, Services 1-2 1-2 0-1

IT –Expert, consultant 1-3 1-3 0-2

IT –Management 1-3 1-3 0-2

Operations –Management 1-3 1-3 0-2


4-10 4-10 0-7Sum: 8-27


ADDENDUM 2. Field research interviewees list

Id Interviewee title

Area of responsibility

Company size

Company revenues

Company nationalit

y

Business area Interview duration

Interview type Interviewee location

M1 VP Global,IT

10000+ $10G+ USA Biotechnologies 1 hour Face to face meeting

USA

M2 Senior Consultant

Global, Operations55

10000+ $10G+ USA Pharmaceuticals 1 hour 40 Teleconference USA

M3 VP Global, Operations

1000-4999 €100M- €499M

Belgium Biotechnologies 1hour 30 Teleconference Belgium

M4 Director Regional,IT

10000+ $10G+ USA Pharmaceuticals 1 hour Face-to-face meeting

France

M5 Director Regional,IT

10000+ $1G - $9G USA Manufacturing 1 hour Teleconference France

M6 Senior Consultant

Global, Operations

10000+ $10G+ USA Technology and services

1 hour Teleconference USA

M7 Director Global, Operations

10000+ $10G+ Switzerland Pharmaceuticals 45 minutes Teleconference Switzerland

M8 Director Affiliate, Operations

50-99 €50M-€99M Belgium Technology and services

1 hour 30 Teleconference France

M9 Manager Local, Operations

10000+ €10G+ France Energy 1 hour Teleconference France

Table 11: field research interviewees list

55 Learn more about M2M available APIs at http://sourceforge.net/projects/m2mxml/ and http://www.bitxml.org/


http://www.bitxml.org/

http://sourceforge.net/projects/m2mxml/


ADDENDUM 3. Field research target achievement

Interviewees segments Biotechnology Pharmaceutical Other industries

Solutions –Sales, Marketing, Services [M6], [M8] [M6], [M8] [M8]

IT –Expert, consultant - [M2] -

IT –Management [M1] [M4] [M5]

Operations –Management [M3] [M3], [M7] [M9], [M3]


Sum of represented roles: 14 4 6 4


ADDENDUM 4. Field research analysis summary

Questions Observations summary

I. Interviewees

Interviewee self-introduction (role, when did they start in the company)

People with IT background involved in the business function are forming the shadow IT force and help the organization to leverage IT to realize value[M2]

II. IT & Organization

Can you describe the IT organization in the overall organization? (position, numbers)

Integration of IT people, geographically distributed or dispersed across the organization, helps the organization to reinforce the dotted line meaning and to make a successful IT/OT integration [M1]IT organization should fit its structure to interface with the business appropriately [M4, M5]IT management should be a member of the governance committee to improve IT business value by providing IT representatives with a broader picture of the business constraints and opportunities, and allowing a virtual exchange loop between IT and other functions [M4, M5]Industrial IT resources can be reporting to either the IT function or the operations/engineering [M1, M4, F1]. Choice seems to depend on the integration challenge and the cost strategy [M1,M4]

What is the mission of the CIO? The CIO reporting staff is changing depending on the company’s strategy. If the company is more focused on innovation, the CIO is more likely to report directly to the CEO. If the company is more focused on cost reduction and operational efficiency, the CIO is more likely to report directly to the CFO. [M1, M2]

How is IT helping the organization to succeed in these challenges?

IT function helps the business:- adapt its organization to the business structure [M2, M4] - retain talents through allowing them to cross over other functional areas [M2 case]- face the increasing complexity of information flows [M4]- increase the product value for the customer [with specific information] [M2]- provide the right information at the right moment and assist operational staff with guidance through automated procedures and data analysis [M4]

III. IT/OT convergence

How would you define the boundary between IT and OT?

Boundary between IT/OT is not a clear concept for participants [M5, F1, M6, M7]




- Do you have a clear definition? Boundary is easier to define for people who have implemented an architecture model (e.g. ISA95 for batch processes): Two interviewees cannot define OT [M7, M5]One interviewee defined [OT] in relation to the data “age” (?) [F1]Five participants defined [OT] by directly referring to an architecture model [M1, M2, M4, M6, M8]

The locations given for the IT/OT boundary varied.

Three participants set [check tenses throughout, past or present – must be consistent] it between the functions of «Operations management» (MES, LIMS) and «Enterprise management» (ERP) [M8, M6, M2]Three participants defined the boundary as the frontier of the physical world with the digital universe. Either between levels 1 and 2 or levels 2 and 3 [M1, M4, F1].[ One participant considers that it makes no sense to distinguish IT from OT within manufacturing activities because information is a requisite for operations [M3].

The more automated the operational activities, the more blurred the boundary between IT/OT [M3]

- How are responsibilities in your organization distributed?

Although process automation falls under the responsibility of the IT department when integration starts [M1, M4], process control engineers often report to the engineering function in order to facilitate the diffusion of skills and knowledge across the [industry] [organization?](M4, M7). Participants recognize that the reporting links need to be adapted in function of the business needs and the organization strategy [M2, M4, M7]

- How do you see IT/OT converging in 3 years? in 10 years?

The network will be open, allowing the end user to easily benefit from the services made available and consequently to get more and more value from integration [M4]Benefits of IT/OT convergence will become an expectation for public authorities in regulated industries [M7]The convergence brings the IT activities (configuration management, security management, data management and data integrity assurance…) to the OT. [M4]

What does integrating IT with OT mean for you? Technical integration. Network integration of the real world instruments, devices, equipments, machines with the components of the company’s Information System, thanks to IT. [M1, M2, M3, M4, M5, M7, F1]People integration: ensuring sustainable collaboration through a common understanding [M1, M4, M6]Automating operations [M1, M3,M4, M5]Increasing knowledge by leveraging IT to manage complex data and present them in a valuable format [F1, M1, M7, M8]

How do you foresee the trend of the IT / OT evolution?

Focus on data valorizationStandardization (architecture and data structure)Acceleration through the network effect (adding new node allows to create n new paths in a n-size network)

How should the organization transform to benefit from the IT/OT convergence?

Strategic willingness is important [M3]People integration is important [M7]Project organizations are more efficient (see other sections)

Who should lead this transformation? Operational background is important. It increases efficiency and leads to faster decision making during the project [M6, M7]

How do you see the role of the CIO evolving? CIO reporting must be adapted to the company’s objectives [M2]Collaboration with other functions can be improved by filling some technical knowledge gaps [M7]Although the CIO is detached from operations [M7], the example of [M1], who reports to its CIO, shows that CIO can be very sensitive to integration




What objectives are being set in your company to achieve IT/OT convergence?

n/a

- Standardization? Use of industry standards (ISA88/ISA95)?

ISA95 is a reference model in the biotech and pharmaceutical industry [M1, M2, M4, M6, M7, M8]Standardization of data models should facilitate the integration of systems and processes [M2] Regulation is expected within 1-2 years in the biotech/pharma industry [M2]

- Use of off-the-shelf solutions for integrating IT/OT (EAI, e.g. SAP MII)?

The industry is looking for standard solutions to share data and value them. An objective is to deploy as many off-the-shelf products as possible. SAP MII is an interesting offer but it is not an actual COTS value proposition yet. [M1, M8]

- Valorization of returns on investment? ROI calculation is not a systematic requirement. ROI is expected to be calculated for significant projects. [M1, M2, M4] Business cases defense is a common practice [M2, M4]Being able to demonstrate tangible benefits (at least $1 for $1 ROI) is a requirement. Task automation is the common source of tangible benefits [M1]

What are the most important benefits you expect from IT/OT convergence?

Operational efficiency improvement through knowledge development, standardization (of processes, practices and data models), new work practices allowed by IT and automation (e.g. remote control, optimized maintenance scheduling, automated data transfer, event management) [M1, M2, M3, M6]Quality improvements through error reduction, easier investigation, predictive control and full traceability [M1, M3, M5]

What risks do you perceive in integrating IT with OT?

Flexibility can be negatively impacted by too much integration [M1, M3, M4]Increased support and maintenance costs [M1, M6]Misalignment of solutions design with actual business needs [M2, M3, M4]Security issues [F1]

What are the biggest challenges when trying to achieve IT/OT alignment?

n/a

- Organization? Integration leads to organizational changes that are met with resistance [M1, M4] Project organizations facilitate the change [M6]Alignment of the stakeholders and objectives [M7]

- Skills? People? People integration is the key. The challenge is to develop a common understanding and a common language [M4, M6 , M7]

- Technologies? Technology can reduce the flexibility and scalability [M1, M2]Existing infrastructure is a constraint [M1]

- Changing the role of the CIO? CTO? CEO? No answer

- Security? No answer

- Business Continuity? Business continuity needs to be addressed during at the system design stage [M1, M3]. Risk analysis and fault causes management practices helps to improve the design [M3]

Has your organization started investing in the field of IT/OT?

IT/OT integration projects have been largely started [almost all participants]Companies usually start by deploying the building blocks of the infrastructure (e.g. MES, LIMS) then focus on leveraging these investments to [develop the level of integration][pas clair] with shop floor. This represents a top-down approach. [M1, M2 , M4, M5, M6, M7]

Has your organization already benefitted from IT/OT convergence? Success stories?

The companies that have completed integration projects have benefited more than expected [M1, M3, M4]. The more companies integrate their business processes, the more they benefit [M1]




How were these benefits valued? Intangible benefits are the biggest source of value [M1, M7]Organizations should not try to integrate too much. They should carefully consider the impact on flexibility before deciding on the integration level to be achieved [M3]

What do you expect from your suppliers or OEM to facilitate IT/OT convergence?

Suppliers should offer to alleviate the efforts required to manage technology (e.g. selection, deployment, support and maintenance through the entire lifecycle) [M1]Suppliers should offer «as a service» solutions [M1]

IV. IT investments & value

How does your company value investments made in the field of IT?

Companies are seeking intangible benefits which they must be able to demonstrate through tangible benefits [(often from automation)] relative to project costs [M1, M2, M6] Large systems deployment can lead to headcount reduction with process reengineering [M3]Quality improvements are usually intangible benefits at the beginning of the project [M3, M7]

- How does it proceed? Business case formalization is a common practice [M1, M2, M6, M7]

- What model/method is used? (NPV, ROI, other)

ROI calculation is not yet systematic but widespread. It is the standard methodology for calculating investment opportunity [M1, M2, M3, M5], except when integration is seen as mandatory for operations execution [F1].Short payback is often expected (e.g. 6 months to 2 years) for integration projects made in respect of manufacturing processes [M3, M5]

- What is the process for determining the business value output?

Benefits identification is not easy at all. [M6] Field studies, which can be expensive, seem to be key to properly assess potential benefits. [M6] and [users][?] use suppliers with the appropriate skills and capabilities to carry them out (e.g. as a service at the beginning of a project[?]) [and then commit to the identified source of benefits [M6]

- Who is accountable/responsible for calculating the IT business value?

Operations representatives [M3]IT project managers [M5]Teams dedicated to benefits identification [M2]Suppliers [M6]IT always supports the benefits identification [all participants]If the identities of the persons responsible for identifying potential benefits are diversified, it is crucial that operations management approves the benefits goals and commits to their realization [M3]

- When was it put in place?

- What are the key learnings? Risks and unknown challenges impact the actual outcome. Project teams must carefully communicate at the beginning of the project [M3]

Are intangible benefits valued in this process? Intangible benefits are the primary expectation in integration projects when considered strategic [M1]

How is the share of the benefits brought by IT determined? (Revenues increases or cost savings)

Organization can consider the cost of not doing the change [M1]Pharma/Biotech companies are conservative and do not change their practices so easily hence benefits are primary obtained through technological improvements [M7]

What are the factors that most influence the IT business value in your opinion?

n/a

- Culture YES [M1]




- Geography (or environment) YES [M1]

- People YES [M1, M6]People involved in projects are often assigned to positions within the organization to facilitate change appropriation by the organization [M6]

Is IT business value a criterion when comparing different offers?

[Due to rarity of off-the-shelf solutions, if business value is not yet a key criterion in procurement processes, suppliers with expertise and capabilities in technology management and specific industry processes and practices are preferred. Unfortunately, this is generally only known afterwards [M4]

- Is this data used in the procurement process?

Organization can only assess the suppliers’ capabilities if they have developed a sufficient understanding of and expertise in the area [M4]

How much time is usually needed to get a ROI from IT investments?

Between 24-36 months in the pharma/biotech industry. 6 months in manufacturing.

Who realizes IT business value? Business operations is finally realizing the value [M4]

Do you agree with the model defined in “IT Strategy: Issues and Practices” (J.D. McKeen & H.A.Smith, Pearson, 2009, Second edition, p6)

Participants agree.

Identification is performed through business case studies and ROI calculations, then commitment is required from operations management [M1, M3]. Conversion is the actual IT/OT system deployment and release, under the responsibility of IT [M1, M3, M5]. Realization falls under the responsibility of operations. [M3] [usually out-of-project scope, it falls in for projects where fast payback is expected] [M5]

V. IT & Manufacturing operations

In which part of the organization are IT resources in charge of supporting the manufacturing operations?

Industrial IT is considered as a key competency by organizations viewing IT/OT integration as an important [stake] [M1, M2, M5]

What are the most important challenges your company is facing in the field of Manufacturing Operations?

No answer

How is IT helping the organization to meet these challenges?

The IT function helps the organization interact efficiently with the other functions, especially business operations [M2, M4, F1]The IT function helps the organization to leverage technologies and service offers to realize its financial strategy [M1]

What are the levers used to improve the efficiency of manufacturing operations?

n/a

- Statistical analysis? Mature: YES -> 3 respondents in biotech/pharma

- Predictive control? Emerging: YES -> 1 respondent in biotech/pharma

- Network connection Mature: YES -> 3 respondents in biotech/pharmaCOTS solutions (e.g. SAP MII) are being used and considered to improve data sharing and valorization [M1]

- Standardization? ISA95 is a reference architecture model for almost all our biotech/pharma representatives. The other industry representatives do not know this model developed for batch manufacturing.ISA88 is considered important by one of the interviewees.




- Single use? Single use is very seriously considered to transform biotech/pharma manufacturing processes. Reengineering of current architecture of the information system is considered to be a challenge [M1]

- MES and LIMS? Mature: MES and LIMS are now building blocks commonly implemented in manufacturing facilities (Biotech/Pharma and Professional furniture’s). Deployment is considered expensive and slow in biotech/pharma.

- Data historian? Mature: for process control and process engineering improvements, for OEE increase.

- Other? RFID is implemented for increasing value to customers, but justified first through internal operational efficiency and quality improvements benefits.

Can you describe the overall IT architecture that supports manufacturing operations?

Read answers.

How was this architecture defined? «operations are driving system integration», «systems are not constraining operations, it is the opposite» [M1]

What standards are implemented? ISA88 and ISA95 are widely adopted by biotech/pharma.



ADDENDUM 5. Field research expected benefits summary

The benefits framework coupled with the outputs of our field study and our secondary research is, together with the section title and the footnotes, too large to fit on this page. For convenience, it is therefore set out on the next page.



BENEFIT TERMSBENEFIT CATEGORIES OPERATIONAL STRATEGICFinance Cost structure Reduced research and development costs

Reduced manufacturing costsReduced regulatory costsReduced inventories costsReduced labor, travel and tax costsReduced Information & Communication costs

Increased product profitabilityReduced CAPEX, switched to OPEX with “pay as a Service “ offersSmaller batch sizeContinuous manufacturing

Asset utilization Reduced manufacturing lead timeReduced batch release lead time

Improved manufacturing flexibility and multi-product facilitiesImproved cash flowReduced average cost of development of new drugs

Customer value Increased information and service value Personalized medicines Increased revenues per patients, increased patient profitabilityIncrease value of branded products against generics.

Revenue opportunities Remote patient monitoring leads to better prescription handling Reduced time to marketCompleted offer with diagnostics and medical devices

Processes Operations management Faster production assets setup, faster changeoverReduced paperworkReduced deviations (e.g. data integrity; human errors) and quality lossesAutomated workflows (e.g. CAPA)Reduced operational processes lead time, increased OEEReduced training requirements

Improved strategic planning accuracyOptimized supply chainImproved process knowledgeProcess standardizationLarge scale personalized drug dosages manufacturingReduced operational risk

Customer relationship/service

Faster complaint processingMobile sales materialsComputer aided prescription toolsOnline orderingConsolidated organization, remote global services

Prescription personalizationPersonalized drug risk assessmentIncreased patient retentionControl distribution value chain

Innovation management Increased molecule screening success rateEasier process/product variability causes identificationEasier vertical risk managementFaster technical transfers and scale-up

Increased ratio of successful drug launchesReduced average drug development time and time to marketImproved design space knowledge

Regulatory compliance Data model standardizationAutomated full traceablyAutomated audit managementCentralized pharmacovigilance and regulatory servicesAutomated statistical detection of significant variances

Developed influence on authoritiesCorporate responsibility assurance over outsourced activities

Social responsibility

Environmental footprint Reduced wastes and energy consumption Environmental commitment reportingCommunities development

Provide controlled information through one channelVirtually manage communities of patients and professionals

Developed influence on societies and associations

Safety Increased root cause analysisEasier drug origin traceabilityProduct serialization

Increased drug benefits/risk knowledgeIncreased drug/patient compatibility knowledgeCounterfeiting prevention and distribution channels control

Brand Brand value Increased brand recognitionIncreased confidence into the brand

Increased brand leadership on the market



ADDENDUM 6. Field research overview of the pharmaceutical/biotechnology industry value chain

Figure 35: IT/OT solutions mapped over the current pharmaceutical and biotechnology industry value chain (adapted from: Frost & Sullivan, Roche.com, lnresearch.com, Pharmamanufacturing.com and enriched with field research interview outputs)



ADDENDUM 7. Top benefits expectations for our field study participants

The following table reports the responses of our pharmaceutical and biotechnology representatives to the following question “What is for you the most important benefits expected by the Life Science industry?”

RANK BENEFIT CATEGORYTOTAL POINTS

(Points were given by Life-sciences management representatives; minimum score ranks first)

1 Regulatory compliance 4

2 Increased product and process knowledge 7

3 Better Risk management 8

4 Operational costs reduction 13

5 Increase in research and development productivity 15

6 Increase in revenues 16



Detailed answers are set out on the next page.

M1 M2 M3 M4 M6 M7 M8

Regulatory compliance Na Regulatory

compliance Na Operational costs reduction

Increased product and process knowledge

Na

Better risk management Na Better risk

management Na Regulatory compliance

Regulatory compliance Na


NaIncreased product

and process knowledge

NaIncreased product

and process knowledge

Operational costs reduction Na

Research and development productivity

improvement

Na Operational costs reduction Na Better risk

managementBetter risk

management Na

Increase in revenues Na Increase in

revenues Na


improvement


improvement

Na

Operational costs improvement Na


improvement

Na Increase in revenues

Increase in revenues Na

“Na”: means “No answer” here.



ADDENDUM 8. Most frequent benefit categories used for investment justification during our interviews

Most frequent Operational costs reduction


Increase in revenues

Increase in research and development productivity

Regulatory compliance

Less frequent Better risk management



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ADDENDUM.1. Figures

Figure 1: The increasing complexity of embedded software in operational assets links gives rise to an increased CIO involvement (figure adapted from(Gartner, 2010)). Here “OS” means Operating System...........................................................................9Figure 2: The same hardware and software components, forming the underlying Infrastructure, now support the integration of IT and OT...........................................10Figure 3: A representation of the Information & Control System architecture............10Figure 4: A representation of the different technical layers of the operational Information & Control system.....................................................................................10Figure 5: Examples of Operational Technologies reported per industry category.....11Figure 6: “Smart computing is the new wave of tech innovation and growth”............13Figure 7: “Smart computing support the doubling of US IT spending”.......................13Figure 8: Apple iPhone 5 available from$649, unlocked and without carriage contract (snapshot took on store.apple.com, last accessed February 23rd 2012)....................15Figure 9: Microprocessor cost per transistor cycle has been reduced exponentially since early 70s (Figure sourced from (KurzweilAI.net)).............................................16Figure 10: The ratio price/performance of wireless chipsets follows the same exponential growth (Figure sourced from(KurzweilAI.net))........................................16Figure 11: Exponential miniaturization of DRAM components (Figure sourced from(KurzweilAI.net, 2005)) develops OT potential...................................................16Figure 12: the Internet hosts growth is exponential (Figure sourced from(The Internet Systems Consortium, 2012)).....................................................................................16Figure 13: Three factors combine to raise the intelligence of products......................17Figure 14: An anachronistic representation of the IT/OT convergence in the field of automotive and navigation.........................................................................................23Figure 15: “Information Technology permeates the value chain”...............................24Figure 16: Companies with the highest level of information intensity in both the value chain and the product content are best placed to develop a competitive advantage by leveraging IT..............................................................................................................25Figure 17: IT value is a many layered concept (adapted from(McKeen & Smith, 2012))........................................................................................................................26Figure 18: A representation of the prism of value perception created according to the three theorical perspectives described in “Productivity, Business Profitability and Consumer Surplus: Three Different Measures of Information Technology Value” (Hitt & Brynjolfsson, Productivity, Business Profitability and Consumer Surplus: Three Different Measures of Information Technology Value, 1996).....................................26Figure 19: The three components of the IT value proposition(McKeen & Smith, 2012)...................................................................................................................................27Figure 20: IT business value model (sourced from MIS Quarterly, Vol. 28, No. 2, p293, June 2004(Melville, Kraemer, & Gurbaxani, 2004)).........................................29



Figure 21: “Nature of strategic, tactical and operational benefits” (adapted from (Murphy & Simon, 2002))...........................................................................................31Figure 22: A three dimensional framework proposed for ERP benefits classification 31Figure 23: our first dimension opposes long-term and short-term benefits................32Figure 24: The strategy map provides a powerful framework linking intangible assets to shareholders value creation (adapted from Harvard Business Review, 2004(Kaplan & Norton, Measuring the Strategic Readiness of Intangible Assets, 2004))........................................................................................................................33Figure 25: Position of the field research participants in their organization.................37Figure 26: IT/OT boundary mapped over a functional hierarchy adapted from ISA95...................................................................................................................................39Figure 27: Operational benefits and Strategic benefits are reaped at different stages of the IT business value realization process (Figure adapted from (McKeen & Smith, 2012))........................................................................................................................41Figure 28: Knowledge space, design space and operating space hierarchy.............45Figure 29: The traditional flow of drug discovery.......................................................50Figure 30: Integration of R&D and regulation will result in significant cycle time reduction (Figure adapted from(PriceWaterHouseCoopers, 2007))..........................51Figure 31: Overview of the challenges of IT/OT convergence faced by our interviewees...............................................................................................................55Figure 32: The stages of the strategic transformation of operational quality assurance (Figure is adapted from paradigm descriptions taken from (WPF, 2010) and (MESA, 2009))........................................................................................................................64Figure 33: Technology acceptance model (TAM) (Figure adapted from (Davis, 1991))...................................................................................................................................64Figure 34: The IT/OT convergence requires new skill sets........................................69Figure 36: IT/OT solutions mapped over the current pharmaceutical and biotechnology industry value chain (adapted from: Frost & Sullivan, Roche.com, lnresearch.com, Pharmamanufacturing.com and enriched with field research interview outputs).......................................................................................................90



ADDENDUM.2. Tables

Table 1: Commonly used words used for differentiating IT and OT in a few business areas............................................................................................................................8Table 2: A few examples of common mature and emerging technologies observed within specifications of operational assets...................................................................8Table 3: Summary of the key differentiating factors between IT and OT...................12Table 4: Samples of activities corresponding to the decision levels defined by (Anthony, 1965).........................................................................................................30Table 5: Our proposed framework for IT/OT convergence benefits assessment.......34Table 6: Our field research target segmentation........................................................36Table 7: List of key benefits classes, ranked by the interviewees from the most expected to the least expected..................................................................................40Table 8: List of the most frequent benefits classes used to justify investment, ranked from the most frequent to the least frequent in our interview records........................40Table 9: Operational objectives characteristics (table is adapted from (Zuboff, 1985))...................................................................................................................................42Table 10: Batch failure rates per facility, 2008-2012(Eric Langer, Bioplan Associates, Inc., 2012), adapted from PharmaManufacturing.com...............................................48Table 11: field research interviewees list...................................................................80



Words of thanks

First, I would like to thank my two tutors, Dr. Shirish C. Srivastava, associate professor at HEC Business School, on the academic side, and Mr. René Reinbigler, R&D Manager at Merck Millipore, on the business side.

I thank Dr. Srivastava for his superb academic tutoring, his priceless advice on the research methodology, his valuable insights on IT business value and for making himself available at any time of the day and the night.

I thank Mr. René Reinbigler, for his ongoing support and understanding, and allowing me to juggle my time, between my work at Merck Millipore and my thesis as was required.

I also would like to thank Mr. Jean-Louis Weissenbach, Merck Millipore Biopharm Process Solutions R&D director, for welcoming me in his department.

Then, I would like to thank Ms. Marie-Hélène Delmond, associate professor at HEC, and Mr. Fabien Coelho, assistant professor at Ecole des Mines ParisTech, both academic directors of the EMS MSIT program, for the quality of the EMS MSIT program and the tremendous value it brings to the students, on a professional level but also on a personal level.

Although I am not allowed to disclose their names, I want to warmly thank all the professionals that I had the privilege to interview for so generously giving me some of their precious time. Their inputs were invaluable to capture the trends and practices in the industry. I hope that this report will, in return, give them a rich overview of how pharmaceutical and biotechnology industries address the IT/OT convergence.

I thank the people who made all this possible by supporting my application to the executive education program. They were so incredibly supportive and reactive, sending their recommendation letters in just a few days.

I thank, in particular, Cécile Morhain, Adriane Harrington and Gaëlle Jovanovski, who kindly accepted to review this dissertation and provided me with first-rate comments and suggestions.

I thank Ms. Sarah Bourreau, HEC Paris Executive Education program manager, for the great administrative and logistic support that she provides the program participants. Her constant good humor and contagious smile are just what students need to keep going and reach the finish line.

Finally, I thank the Best Western hotel personnel, especially Mr. Ali Ailas, for his great customer service, which made our stays on the HEC campus so enjoyable.


Abstract

IT/OT convergence is a major phenomenon enabled by the exponential pace of technological innovations that is currently transforming the way we interact with and evolve in our world.

First, in order to understand the boundary between IT and OT, clear definitions of these technological concepts are given before studying the key principles of the IT business value creation: Identification, Creation and Realization.

This professional thesis proposes a framework for the categorization of the benefits resulting from the IT/OT convergence in the pharmaceutical and biotechnology industries. This categorization is applied to outputs obtained from a field study in which nine professionals from the senior management of leading organizations in that business area were interviewed. We make observations about the distinction between Operational benefits and Strategic benefits and set out what the challenges reported by the participants are.

IT/OT convergence is at the root of several better-known IT challenges, such as Internet of Things, Big Data, Cloud computing, Smart computing, Bring Your Own Device and Shadow IT. Finally, we study their inter-linkage and examine how the findings from the study of these better-known IT challenges could support the IT/OT convergence.

About the Author

Frederic Pennerad is Information and Operational Technologies Manager with more than twelve years of experience in new technology implementation obtained in the life science industry. In February 2012, he integrated both the famous HEC executive education school and the prestigious Ecole des Mines in Paris, France, to complete a Master’s degree and acquire strategic knowledge and skills in the field of technology management.

You may follow and contact Frederic Pennerad at fr.linkedin.com/in/fredericpennerad/

HEC Executive Education & Ecole des Mines ParisTech

©2013 Frédéric Pennerad – HEC & Mines Paristech, EMS MSIT, class of 2013

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