Drew Wright, Senior Vice President, Ness Technologies

The use of offshore information technology services vendors, or IT offshoring, is widely accepted now in many industries. In contrast, life sciences firms continue to view IT offshoring with considerable skepticism. But that attitude is changing, due to today’s greater competitive pressure, intensified regulatory scrutiny and cost, and the slow economic recovery, not to mention changes in payer reimbursement policies and consolidations of companies in the industry.

Recent years have been challenging for pharmaceutical, biotech, biopharma and medical device firms, maneuvering them into a face-to-face battle with a metaphorical two-headed monster. While one head attacks market share and product revenue, forcing companies to accelerate product life cycles, the other is attacking the bottom line, creating greater need for cost controls than ever before. It’s an untenable situation: does a company spend more to get its products to market quicker or does it focus on cutting costs? Fighting only one of these heads leaves a company indefensible to the other.

Outsourcing and, to a greater degree, offshoring, offer ways to tame the two-headed monster. By partnering with IT service providers with solid experience in the life sciences market and global delivery capabilities, life sciences firms can develop innovative solutions to help drive revenue up and, at the same time, keep costs down.

The Role of the IT Organization

Originally a line support function, today’s IT organization is well positioned to act as an originator or innovator of business process ideas and technical implementations that can shorten the time to market of new pharmaceutical products. Examples include the use of innovative solutions to shorten R&D cycles, speed-up clinical trials, and to accelerate regulatory approval. Yet these initiatives are difficult to achieve given the high percentage of IT budgets allocated to maintaining and operating existing applications. While such systems are important to the company’s day-to-day business, the 50-to-85 percent of budgeted dollars they consume leaves very little for key new activities.

The high technical capabilities and certification levels of offshore vendors can help IT organizations reduce the cost of building, maintaining and operating routine applications. They can also boost the quantity of work done for a given budget. And, with the right vendor, quality actually goes up, not down. Furthermore, for some, moving to an accelerated, 24-hour application development cycle can have great strategic value. Such strategies allow an increased percentage of the IT budget to be spent on innovative solutions that support business goals, making IT a significant contributor to the company’s success.

Few Downsides to Offshoring

Life sciences companies are generally slow to embrace anything perceived as risky. For many, regulatory concerns still temper the enthusiastic acceptance of offshoring. But research indicates there are virtually no regulatory problems in using offshore facilities. If a company’s validated system development and testing procedures meet FDA requirements, then it really doesn’t matter where the work is done as long as the correct procedures are rigorously followed.

Partnering with providers who have significant regulatory experience, high-level certified processes, and the ability to prepare companies for issues like cultural differences, communications, and employee role changes, will minimize risk and ensure a successful offshore engagement.

Already Familiar to Many

Some life sciences firms are already familiar with the risks – and benefits – of offshore outsourcing through operations in non-IT functions like packaging, clinical trials and sales force mobilization.

Likewise, many manufacturers know the benefits of outsourcing by having shifted the customization, implementation, operations or maintenance of their enterprise resource planning (ERP) or enterprise performance management (EPM) systems to external service providers. Expanding these relationships to include offshore support for ongoing system maintenance or development can reap additional cost reductions and help establish consistency across often diverse and distributed supply chain networks.

How Big Is the Market Today?

IT offshoring is still a nascent industry, but more and more companies are turning to it. Although annual spending, estimated at $12 billion, is small in comparison to the half trillion dollars spent worldwide in IT services, it is growing quickly. In fact, offshoring is growing many times faster than IT services overall, or about 25-to-30 percent annually.Why the dramatic growth? Because it makes solid business sense in today’s market. By turning over IT and business processes to trusted outsourcing providers, companies can focus on bottom-line deliverables in core business areas such as drug discovery and development.

What Should Be Outsourced?

In the pharmaceutical product life cycle (see illustration) every activity, from R&D to clinical trials, manufacturing, sales and marketing, and product planning, is supported by IT. Offshoring opportunities exist in every activity and include a broad range of systems: product planning portals, data warehousing and business intelligence systems, supply chain management, and customer relationship management systems. Within the tight budgets of today’s businesses, offshoring may become a corporate mandate for many companies.

SEE “PHARMACEUTICAL LIFE CYCLE” GRAPHIC

IT managers often determine how to allocate resources by balancing risk against perceived value. Application maintenance, operations and support are generally considered low risk, and consequently, are often the first areas considered for outsourcing. More risky are core projects like clinical trials data management, the development of researcher portals, or building extensions for ERP systems. However, the return on investment for such projects is also greater.

The highest value, and the greatest risk, belongs to the truly transformative IT projects. These are the ones that often offer the highest competitive value. And as life sciences companies develop successful relationships with outsourcing and offshoring partners, they will increasingly be able to devote resources to such initiatives, in anticipation of greater rewards down the line.

“SmartSourcing” versus Offshoring

No matter when the plunge into offshoring occurs, it is critical to consider a “SmartSourcing” model such as that offered by Ness Technologies. A unique offering, SmartSourcing combines local resources with strong domain expertise with highly capable and certified offshore resources, giving life sciences firms the ability to adjust the balance of local and offshore support throughout the IT business solution life cycle (see chart).SEE “SMARTSOURCING BUSINESS SOLUTION CYCLE” GRAPHIC

With a SmartSourcing model, companies use a larger proportion of local resources for initial tasks such as diagnosing the problem, conceptualizing the solution, harnessing appropriate technologies and designing the system. Then, during system construction, the larger part of the effort occurs offshore, led by senior individuals who participated in the initial on-site activities. In testing, validation and deployment, the effort once again is predominantly local. Ongoing operational support, maintenance, enhancements, and even help desk functions are handled mostly offshore, again with continued involvement of local resources. Of course, engagement management is handled locally throughout.

Some companies choose to create a SmartSourcing development center, where a dedicated group of local and offshore resources becomes a permanent part of their extended IT organization. Such tight integration of offshore operations into a company’s own IT program can lead to corporate ownership through a build-operate-transfer model, maximizing cost savings.About Ness Technologies

Ness Technologies (www.ness.com) is a global IT services provider, specializing in the development and integration of end-to-end software solutions, IT outsourcing and consulting through a global delivery model. Ness Technologies employs about 4,400 people in 14 countries: the US, the UK, Switzerland, the Netherlands, Germany, Canada, Israel, India, the Czech Republic, the Slovak Republic, Singapore, Malaysia, Japan, Thailand.