Many contract manufacturing and contract research organisations (CMO, CRO) experienced a challenging 2009 as pharma tackled industry specific and wider economic challenges but 2010 offers some hope.
In its list of the top 10 outsourcing trends for 2010 the International Association of Outsourcing Professionals (IAOP), which covers a number of industries, states that delayed deals will resume giving a boost to the sector.
This upturn is predicted to lead to growth in new graduate hiring in emerging markets, accompanied by wage increases of eight to 10 per cent in India and other Asia-Pacific locations. The US and Western Europe will see much smaller rises.
Despite the upbeat tone of these predictions the IAOP warns that global economic uncertainty and currency fluctuations will remain.
This is predicted to lead to increasing levels of mergers and acquisitions (M&A), which will in turn “drive higher value services and continue to put pressure on other players to be more strategic in their offerings”, according to Jagdish Dalal, IAOP’s managing director of thought leadership.
Furthermore, the IAOP believes economic uncertainty will make shorter-term contracts more popular, with companies unwilling to commit to long-term deals.
Outsourcing providers will also have to manage the impact pricing pressure had on renegotiated contracts over the past two years. The IAOP believes the deep pricing cuts made by some “have damaged relationships and the business value that outsourcing brings”.
These deals must now be renegotiated “more collaboratively to regain innovation and flexibility, and enhance total value”.
The IAOP predicts that Central and South America will take market share away from Asia-Pacific and that this increased competition between countries will lead drive differentiation.
In particular countries will use professional certification, training and education programmes. These efforts will be supported by differentiation and bundling of services and “greater intimacy with customers”, according to Matt Shocklee, IAOP US Ambassador.
New tools, new responsibilities
The IAOP expects that outsourcing practices in 2010 will continue to be impacted by increased need for environmental awareness and social responsibility.
In part this will require the adoption of new tools and technologies. This will be true of all areas of the business, with advanced management practices, tools and technologies, such as cloud computing and outsourcing relationship management (ORM), being adopted.
A countries political stance is another factor affecting companies’ environmental and social policies.
These political shifts also impact on other areas of operations and the IAOP believes companies must be increasingly aware of new regulations and establish better relationships with key opinion leaders.