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Case study: How Bringing IT back in-house helped Aurobindo Pharma

As one of the country's largest vertically-integrated pharmaceutical companies, the list of Aurobindo Pharma's products covers an impressive span. The Hyderabad-based pharma company makes almost 60 percent of its sales (in volume terms) from exports to over a 100 countries.

But while the company did well by sending out its products, it didn't do so well when it outsourced its IT. For over five years until 2008, Aurobindo had outsourced its IT infrastructure to well-known vendors and for five years the cost of IT had escalated - by six-fold.

Even taking into account the growth of the company, the rising costs ran contrary to management's attempts to control costs to meet the slowdown.  "Bringing down the cost of managing IT infrastructure was part of the management's initiative to bring down cost in any area without compromising quality," says Mahesh Kumar Pinnamaneni, CIO, Aurobindo Pharma.

So Pinnamaneni did what most CIOs would typically consider unthinkable: he brought IT back in-house. Although the plan flew in the face of most management practices, Pinnamaneni knew it would meet the needs of the company. Yet there were plenty of risks, including a likely drop in SLAs and a team that was unfamiliar with Aurobindo's IT set-up.

One insight saw Pinnamaneni through. "We observed that 90 percent of the resources deployed on site were from the channel partners of our outsourcing partners, except for the program manager and team leader, says Pinnamaneni.

By bringing all those 24 people (except the program manager and team leader) over to Aurobindo, Pinnamaneni solved his problem. There was no need for a knowledge transfer, potential change management issues were avoided - both of which helped achieving similar levels of service.

"The objective of bringing down the cost of IT support was achieved as well," explains Pinnamaneni.

The turnaround brought down the total cost of IT helpdesk and facilities management by 15 percent in 2008 (despite a higher number of resources), a figure Pinnamaneni estimates will increase to 22 percent this year.