IT outsourcing spending to grow in life sciences

By Wai Lang Chu

- Last updated on GMT

Related tags: Pharmacology, Life

According to a new report, it will become a necessity to outsource
key activities related to securing and managing of data in the life
sciences industry. This, coupled with the regulatory compliance, is
driving the IT spending amongst the life science companies.

Buoyed by these trends, IT spending in the life sciences industry, which totalled $17.10 billion (€14.2 billion) in 2004, is likely to reach $49.30 billion in 2011, registering a compound annual growth rate (CAGR) of 16.3 per cent.

The growth is significant for a number of reasons. With IT having always been one of the key tools, companies, which had to deal with IT regulatory requirements during the last phase of drug discovery, are now facing strict regulatory norms across all business areas.

The recent drug withdrawals have also brought about an increased focus on pharmacovigilance and related regulatory compliance. There have also been huge investments to achieve 21 CFR Part 11 and other related compliance.

Surging volumes of data in the life sciences industry (comprising segments such as servers and desktops, storage, application software and services), touching peta bytes (quadrillion bytes), has been a primary reason in the upgrade of outdated legislation.

With regulatory authorities pushing towards electronic data formats, there is high market potential for IT vendors in digitising, storing and managing this data throughout its life cycle.

Companies have realised the importance of combining data from various locations and storing it in a central warehouse, which would enable easier access to their globally dispersed R&D capabilities.

"The life sciences industry is now in a period of transition, as it seeks to use IT in resolving the process inefficiencies that cause a lot of dollars to be wasted across the spectrum -from R&D to post-marketing,"​ said Frost & Sullivan's industry analyst Raghavendra Chitta.

"These companies are now witnessing a sharp uptake of IT tools, which is not limited to the drug discovery process in the life sciences industry."

While big pharma companies holds potential for IT vendors owing to their more mature, predictable and large IT budgets, they are also more complex customers. The recent drug recalls and pricing pressures have triggered rationalisation of operational costs.

The larger pharmaceutical companies have already replaced legacy systems or are replacing them, leaving little chance for increased IT spending.

The report noted that the entire selling structure in life sciences is moving towards value-based selling and how tools in this particular industry generate value.

The report said that IT companies would have to develop these return on investment (ROI) models and provide proof for these values.

"At the same time, developing tools, which are capable, interoperable and can run using existing infrastructure, offering customising and consulting services and working closely with the customers to ensure easy integration of newer tools with legacy systems will also be critical to success,"​ commented Chitta.

Indeed, combining and consolidating data such as the comparison of genomes in the same conceptual space can greatly magnify the value of a particular sequenced genome.

Enterprise-wide IT systems aid in generating value by gaining knowledge from the various subsidiaries of life science companies. They also keep track of the various research projects and resource allocations and allow easier knowledge management.

"There is a tremendous rush towards compliance-related IT spending, something similar to what was witnessed during the Y2K days which has been garnering greater proportions of IT budgets,"​ commented Chitta.

Frost and Sullivan's latest report: "Strategic Analysis of World IT Spending in Life Sciences Industry B658-55," is available here.

Related topics: Markets & Regulations

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