If you're in the healthcare business, your focus should be healthcare, not IT! Learn how the world's largest commercial provider of DNA sequencing used Oracle On Demand to outsource its IT functionality replace its consultants reduce its overhead Read about plans to build a National Health Information Network that will make use of the technical savvy found within technology community and make medical data accessible to medical professionals across the United States. Says Scott Wallace (National Alliance for Health Information Technology): "Let's capitalize on IT and do it in Healthcare."

As Published In August 2005

Agencourt Bioscience simplifies IT with on demand applications.

When Agencourt Bioscience won a contract to sequence the 12,000 genes thought to make up a fungus called Chrysosporium lucknowense, executives at the company knew that they were taking on yet another complex, time-intensive job. The task of supporting the database and communication applications that make gene sequencing possible is enormous. Agencourt, which sequences the genomes of numerous organisms, can better balance those twin demands because four years ago its leaders outsourced targeted IT functions. Today, its business technology staff is directly focused on supporting Agencourt's mission, and Oracle On Demand has the same degree of focus on supporting Agencourt's Oracle applications.

In March 2005, during a business technology roundtable held by The Economist magazine and sponsored by Oracle, 30 C-level executives said they want their IT staff to spend 75 percent of their time innovating and 25 percent of their time maintaining the infrastructure. That's the opposite of the situation today, they said.

To understand why Beverly, Massachusetts-based Agencourt outsourced its IT infrastructure, it's interesting to look at the company's history. In the late 1990s, Kevin McKernan and Paul McEwan were doing work related to the Human Genome Project when they developed and patented processes for purifying the DNA that would be used to complete the sequencing of the human genome. Ultimately, the technology was used to sequence more than one-third of the human genome that ultimately was uncovered in the Human Genome Project.

McKernan and McEwan, along with two of McKernan's brothers, Brian and Brendan, formed Agencourt. Richard McKernan, their father, joined the company as chairman. Brian became CEO and Brendan the COO. Kevin and Paul became co-chief science officers.

"When we originally brought Oracle in-house," says Brendan McKernan, "we had challenges because we did not have the technical expertise to support the database. We didn't understand the application layer or how to actually build the functional layers on top of the database. So several consultants were brought in to help."

At the time, most of Agencourt's revenue came from sequencing services that utilized its patented SPRI (Solid Phase Reversible Immobilization) chemistry. Sales have grown aggressively over the past three years. The company sequenced its billionth base pair (a subsection of a genome; the human genome is made up of 3 billion base pairs) by July 2001. The company currently sequences 48 million base pairs of DNA per day. Big pharmaceutical, biotechnology, academia, and government contracts make up most of that revenue stream. And kit sales are growing at 40 percent a year, a pace that outstrips that of services.

"When Agencourt first started offering DNA-sequencing services," Brendan McKernan recalls, "we used to just provide raw sequencing data. Over time, a lot of customers asked us to incorporate data analysis into our service offerings to make the data we provided more meaningful." He is referring to genomic information that clients could plug into—rather than create for—their product pipelines and research. An informatics core composed of Oracle Database 10g supports Agencourt's proprietary Laboratory Information Management System (LIMS). The combination tracks samples and collects production metrics. Agencourt generates more than 4 terabytes of data per year and processes 75,000 to 80,000 customer samples per day. This generates more than 800,000 database records containing quality, genealogy, production, packaging, and shipping information.

Snapshot Agencourt Bioscience www.agencourt.com Location: Beverly, Massachusetts Revenue: Approximately US$30 million Employees: 100 Oracle products and services: Oracle9i and Oracle Database 10g; Oracle E-Business Suite, including Financials, Order Management, Discrete Manufacturing; Oracle Collaboration Suite; Oracle On Demand

The beauty of using consultants is that more people can be easily brought in as needs dictate, such as when new services are created or more employees are hired and need to be provisioned. But the scale of information growth alone threatened to turn Agencourt into an IT-hiring paradise and drastically increase overhead, according to Matthew Parisi, senior manager of quality and manufacturing. Clients wouldn't pay for a service sagging under that kind of cost overhead.

The McKernans grew disenchanted with the use of consultants for other reasons too. Staff members, including Brendan himself, were bearing too much of the maintenance burden and, too often, the consultants were just turning to Oracle for help with IT issues anyway. "We were looking for a third-party support provider that had the expertise and the knowledge to keep the Oracle database platform running, patched, and updated, and to provide all the industry standards that go with best practices," says McKernan. They also sought a partner whose service would scale along with Agencourt's growth.

Oracle was hired, through a standard one-year service contract, to manage Oracle Collaboration Suite and Oracle E-Business Suite. Agencourt's data is stored at Oracle's data center in Austin, Texas, where Oracle's own information is stored. The way the standard one-year service contract works, Agencourt owns the databases and applications; Oracle manages them. Agencourt can terminate the contract with 30 days' notice.

If there were any concerns within the company about outsourcing IT functionality, they were eliminated a month before Oracle On Demand was scheduled to begin managing Agencourt's applications. A database became corrupted and threatened to stop Agencourt from conducting business. "We had often faced challenges when maintaining the database internally," recalls Parisi. "But this time was different. We did not have the resources to get the database back up. It shut down our business. We weren't able to ship product. We weren't able to invoice customers." Agencourt called Oracle for assistance. An Oracle On Demand team came in to help the firm recover from the disaster, save the data, and move Agencourt over to the outsourcing service a month early. As Parisi sums up, "They really saved us."

Four years later, Agencourt is the world's largest commercial provider of DNA sequencing, with 2004 revenue of about US$30 million and 2005 revenue expected to reach US$40 million. Annual top-line growth is running between 45 and 55 percent. The company has more than 500 customers worldwide, producing more than 70,000 customer-sample sequences each day. All without a single DBA employed by Agencourt.

And while no one is likely to draw a direct connection between On Demand's success in serving Agencourt and that company's attractiveness as an acquisition target, biomedical-testing firm Beckman Coulter offered in April to buy privately held Agencourt for US$140 million.

Agencourt's 100 employees are all supported by Oracle On Demand, since every employee uses Oracle Collaboration Suite. Parisi states that three-quarters of the staff might be concurrently using Oracle Order Management, Oracle Work in Process, or Oracle Financials. He and Brendan McKernan continue to speak highly of the company's relationship with Oracle On Demand, but satisfaction runs deeper than that. Rosa Cintron, Agencourt's Oracle applications specialist and the liaison between the two firms, works regularly and closely with Oracle On Demand personnel. Tim Collier, an On Demand service delivery manager and the person who is likely to pick up his phone regardless of the hour that Cintron calls, says preliminary talks are under way that would bring another Oracle outsourcing unit into play. Agencourt is considering replacing its most critical Oracle database, the LIMS—which it built—with one managed by Oracle Technology Outsourcing.

In the end, although the quality of the software is critical, even more important is the customer experience. According to Cintron, "Oracle On Demand people are very attentive to me. They know how I operate and what my expectations are. I get very, very good support."

Q&A Scott Wallace of the National Alliance for Health Information technology on bringing medical information into the electronic age Profit : Why is this the right time to address a national healthcare information system? Wallace: The current technology is suitable and the time has come to put it to work in a meaningful way. I would really caution anybody against talking about the National Health Information Network as a centralized database. The framework is really not focused on a single database; rather, it is built around the concept of getting patient and other relevant care information to providers at the time of care and at the place of care. Profit: What is the significance of the framework in terms of bringing all the various agencies together? Wallace: This is the first time this framework has been articulated in one place and the first time it has been articulated, from a government perspective, in a manner that gets the federal sector together behind these issues. When the report detailing the framework was released, there was a summit held in Washington, and the first two and a half hours of the summit were carefully prepared presentations by department heads all across government saying, "We support the framework, and we support the coordinator's office." On a political level that's significant because there was not only an incredibly huge but also an incredibly disparate federal force on healthcare IT spread over many different departments. Profit: What are some of the main objections to this type of housing of medical information? Wallace: The debate for a nationwide system, one with a common goal, started roughly five years ago and focused on a national patient identifier, similar to a social security number. The debate engendered such ferocious dissension, particularly from privacy people and other groups, that it froze the whole healthcare IT debate for years. Profit : What drives privacy concerns? Wallace: For those over 50, privacy is really a first-order issue because they just aren't as comfortable with technology. The sub-30 group has grown up with IT and the internet and they just don't expect anybody is going to be all that interested in their information. Because they have firsthand experience of many facets of their personal life—such as banking—taking place online, they understand that it happens without negative repercussion. Profit : How will the various agencies begin selecting IT options? Wallace: We're going to begin by making sure the IT tools for enabling information flow are available, that they're good tools, and that people can use them and get the results they want. Where I believe companies like Oracle come in is that healthcare needs the systems engineering, the process transformation skills, and the advanced technology that companies such as Oracle offer in abundance. So the infrastructure is going to have to come from people on the outside who can deploy their technology and their knowledge and their expertise in a way that is useful within the complex environment of healthcare. Once these tools are available and they're widely disseminated, we're going to have a whole new IT-enabled healthcare delivery system. Profit: Your background is from the private sector. What got you involved in this initiative? Wallace: My father ended up in the ICU five times after taking prescription medications that conflicted with each other. I wasn't a healthcare person who said, "Gee, I know what's wrong with healthcare and I can fix it." I was an outsider who said, "If healthcare is doing this, it isn't doing things that I know it could do better." It cries out for the real, sophisticated expertise that is available within the technology community. The people in the software and hardware engineering side of the world have done astounding things in other sectors. Let's capitalize on IT and do it in healthcare. Editor's Note: Scott Wallace's comments are from a November 19, 2004, interview with Profit.