A couple of weeks ago, GE Healthcare announced the launch of its Scientific Asset Services offering, a maintenance and asset-tracking program that the firm believes will save pharmaceutical customers time and money in managing their research instruments. The program follows similar offerings from other divisions of General Electric, and is part of GE Healthcare's $4-billion global services business. This past week, Nick Padula, general manager of services for the life sciences business of GE Healthcare, discussed the offering with BioCommerce Week.
Can you give us some background on the Scientific Asset Services program?
What we've found is our customers have some significant challenges today in pharma and large biotech in negotiating a multitude of service contracts, and that can be in excess of 100 different vendors, depending on the size of the lab or department. Even managing those assets that they need to put under contact and understanding what that service provider has done. Just the variation from vendor to vendor had caused a lot of concern for pharma and biotech customers and a lot of interest in a product like this that allows them … to gain control by sourcing this through one large company.
But it also does two other important things: It fixes their costs and makes their costs predictable as opposed to the variation from vendor to vendor and also device to device. The other really big benefit is in terms of regulation and compliance, being able to capture every device will prove quite helpful for these customers.
Specifically, how does the program work?
We come in and work with the customer at a very granular level, where we'd ask to look at the inventory of what they believe they have within their facilities and work the offering from a device to device basis. So, you have to get that specific to build the program. We have the processes in place and the experience in place to do it rather quickly. We've rolled out programs in our GE aircraft business that has a very similar offering, our locomotive business, but also within our other portion of GE Healthcare. We call it our technologies business that deals with all of the hospitals globally.
So, we take that inventory and we build a service program under one offering for that customer site and staff our delivery team to deliver the direct service. The customers that seem to be interested are larger customers. We would place a contingent for that size of engineers on site, who are supported with unique technologies we've rolled out. We've launched Bio Insite, and it allows us to, remotely from any part of the world, with the customer's control, help augment those engineers that are on site.
So, there are GE Healthcare employees that get placed at a customer's facility?
Exactly. It would vary depending on the size of the engagement. For example, we're talking with a customer one that we had recently signed where we're starting in one very large campus with multiple facilities, [and] there's interest in rolling it out globally. But on sites that would be smaller that wouldn't have as much of a presence, what we anticipate from those that would be interested there would be staff engineers on site.
How, specifically, will customers realize cost-savings from this program?
When we have up to 100 different vendors of service that can be delivering upon the lab, that in and of itself has costs associated for the department and for the customer. The administrative burdens alone associated with that can be staggering. We roll that into dealing with one supplier, one service provider that allows the customers to stay within their core competency. What it also does is it allows them to control their spend. It gives them a one fixed-cost approach to budget against and to plan against.
There's another component to this: the tools we provide. A digital asset tracking inventory tool allows them to get control of all their assets, [and] really helps with the total cost of ownership, allowing them to make much better decisions. For example, in the form of cap ex, could the decision be, 'if we better deployed these systems in department A, could it avoid the purchasing of a whole other number of systems?' So, that is another way for the customer to gain a benefit of savings out of the program.
Beyond servicing of instrumentation, will using this digital tracking tool also include consumables and chemistry?
It's primarily for the assets only at this time. However, each of these engagements will have a component of RFID that is very scalable. It won't cover the entire facility but it's an introduction to that as an offering. What it will do is, they can utilize these tags in the infrastructure that will be provided within the offering to help them perhaps with some of their larger consumables, such as large volumes of reagents. But what the program will do and we've already had discussions with a large pharma that signed on is it will allow us to introduce additional offerings such as lean six sigma and also change acceleration process, which allows us to give them these tools to help them manage within their organization.
Is there any collaboration required between GE and other device vendors that have instruments placed in the lab of a customer in this program?
That collaboration would be done directly through us, as an agent to the customer. That's a really big feature and benefit of the program. As we mentioned earlier, the magnitude of interactions that our customers have to deal with. So, the arrangement of this engagement is you come to General Electric with any service need. Each unit is barcode-tagged and also with a unique system identifier with a phone number, so the only thing that end user has to do, or that department manager, is to pick up the phone, direct connect into us, and hang up the phone. We take it from there. It's our responsibility to repair it directly … or we will be utilizing other regional providers. What we've found out globally since we've launched this is there are others who can augment our services that may have a specific expertise in a region to include as necessary the OEM.
The way we've structured this is even though there was a relationship with another OEM in the past, from time of call placement to time of unit being fixed, some of those times has been considerable. The model I had shared earlier really takes a chunk of that time component out.
Is there any purchasing component to the program, or is it strictly a service offering that kicks in after the purchase is made?
It's pretty much the latter. But since we are going to be that partner, and we are going to see the day-to-day interaction with the end users of the equipment, the perspective we're going to have is going to be quite unique. In the past, the fluctuation and your gauge on getting information back to somebody who would be purchasing a unit like this would be significant and questionable. But when you have a single provider along with an asset management system that allows us to really understand the true uptime, or true productivity, and true cost of ownership that that unit was able to produce, and you add those together, it is going to be of value for purchasing.
I've talked to senior level purchasing folks, and this resonates. They're under extreme pressure right now, and now we're saying we have the technology and the service offering together to be able to provide you within purchasing to make these better decisions.
When a customer comes to GE to buy capital equipment, will the service program be part of that sales push?
No, it won't be a part of this component. If, for example, the unit is purchased and it's under a warranty, it would simply be added on to this overall engagement. We would manage that unit under the contract. We would put a barcode on it, and we would put the unique system ID sticker along with the contact information. The customer wouldn't be paying anything else under this contract. As it came off warranty we would roll it under again at a specific fixed cost.
When did you launch this program or start marketing it?
We started with the concept in 2005. We started working with one specific customer this is the deal that was closed in February. But this concept within GE Healthcare was started a little over 10 years ago … [We] have quite a bit of experience doing this with our hospital customers that have MRIs, cat scans, X-ray systems, but also within our clinical services division that's part of this hospital-customer group, which fixes really anything else within a hospital. General Electric has been doing this for some time, so that's where really this engagement started. Within the life sciences portion we really began with our first engagement on February 14, and have been rolling this out globally with some significant interest. I've met with a number of large pharma [companies] since that day.
So, there has been just the one customer thus far that has signed up?
Yes … it's just with the one customer currently in life sciences.
Can you give us an idea of the size of GE Healthcare's services business in terms of employees and/or revenue?
It is huge. It's not only big for GE Healthcare, services is extremely large for GE as an entity itself. It's almost validated by the investments that have been made by this organization. The Bio Insite piece alone was built on a $20-million infrastructure. By having such a focus on services, and success through growth in services, the investment has certainly been there.