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Pharma industry 'growth leaders' in BP and IT outsourcing

By Kirsty Barnes , 24-Jan-2007

More companies in the pharmaceutical industry than any other industry are set to increase their reliance on information technology (IT) and business process (BP) outsourcing this year, new research indicates.

Cost savings are the primary driver for this growth spurt in regards to ITO, while both cost and process improvement were motivating factors for undertaking BPO, according to Equaterra, the consulting company that produced the research.

Of the 25 large pharmaceutical companies surveyed, 44 per cent of firms that had outsourced one or more IT or BP areas planned to expand their outsourcing into new process areas, 39 per cent planned to expand outsourcing into new geographies or business units, while 22 per cent planned to expand in the existing process areas outsourced, and nobody planned to cut back their outsourcing, said the report.

"Currently the pharmaceutical industry sits third or fourth in its overall level of outsourcing in these areas, along with the financial services, retail and automotive industries," Stan Lepeak, managing director of research at Equaterra told outsourcing-Pharma.com.

"However, these results indicate that the pharmaceutical industry is planning to expand in the areas of IT and BP outsourcing this year more than any of the other industries we surveyed."

Providing more of a breakdown, the report confirmed that IT is the most commonly outsourced process in the pharma industry, with 72 per cent of companies surveyed already outsourcing IT, while 17 per cent are in the process of doing so and 22 per cent have no intention.

While outsourcing of BP functions such as call centres, finance and human resources, remains immature in this industry, Equaterra's survey results indicate that this is beginning to change.

The most popular of these areas to outsource is call centre/customer relationship management (CRM) with 39 per cent of companies already doing so, 11 per cent planning to and half not planning to.

Human resources and procurement currently have the same level of outsourcing, with 28 per cent, while six and 11 per cent respectively plan to begin this shortly and 67 and 56 per cent respectively have no plans to do so.

Finance and accounting is the least popular BP to outsource, with a current rate of only 11 per cent, although this function will see the biggest growth over the next year with 17 per cent of respondents indicating they are in the process of starting. The majority, however, (72 per cent) - will still keep the function in-house.

"We see these outsourcing trends continuing to remain strong, at least over the next four years, because the drivers for this will remain," said Lepeak.

"Such drivers include the current cost cutting environment of the pharmaceutical industry and the opportunity that outsourcing brings to reduce costs, plus the fact that offshore environments are evolving in their capabilities and offerings, coupled with the current political environment in the US, which is creating and anti-pharmaceutical company environment."

According to Lepeak, the bulk of this outsourcing will still be carried out in Western countries, although the amount of offshoring is gradually increasing.

Meanwhile, the report, titled "Outsourcing trends in the pharmaceutical industry," also indicated that a rise in outsourcing in the process areas of clinical trials, new drug research and development (R&D) and drug manufacturing is on the way.

This was echoed in another recent report compiled by the firm, the 4Q06 Outsourcing Pulse Survey, said Lepeak.

"Adoption is still very low in these areas but our research indicates that interest levels are high and outsourcing in these areas is something that is at least being discussed by every firm."

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