Lifesciences IT Spending to Experience Mature Growth Rates Despite Economic Slowdown, Declares Frost & Sullivan

22-Oct-2009 - United Kingdom

The global recession will have limited effect on the lifesciences industry. However, internal factors and external issues such as weak product pipelines, generic competition and declining market shares are pressurising lifesciences companies to cut down their IT budgets. New analysis from Frost & Sullivan, Competitive Profiling of Market Participants in Lifesciences-IT, finds that the market was worth $26.5 billion in 2008 and is estimated to reach $41.6 billion in 2015.

“SaaS technology will be adopted by pharmaceutical companies as it is cost effective and offers enhanced flexibility options,” notes Frost & Sullivan Industry Analyst E. Sujith. “The lifesciences industry is focusing on outsourcing its operations to reduce costs, creating a new market for vendors of IT solutions.”

Pharmaceutical companies are moving to outsource operations to countries including India, China and Singapore as a cost-cutting measure. Despite the pharmaceutical industry increasingly rationalising and rightsizing its outsourcing, this still presents a substantial market. Pharmaceutical companies are reducing their IT budgets. They are also rationalising new purchases due to uncertainties in the industry.

“Pharmaceutical and biotechnology companies are confronting issues such as a flood of generics, intensified competition, shrinking drug pipelines and lowered cash flows,” cautions Sujith. “This is discouraging them from investing in IT-related expenses.”

Accordingly, service providers should revise their pricing models. These could shift from effort-based pricing methods to potentially more successful outcome-based partnership contracts.

“The performance-based pricing model has been widely accepted in the marketplace during the recession and vendors would benefit by following this model,” advises Sujith. “The IT cost efficiency compared to productivity of the business in exploring the cost is now a corporate wide strategy for maximising business productivity from the costs.”

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