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Houston and London (June 26, 2008) – EquaTerra’s latest industry Perspective research paper depicts the pharmaceutical industry as reaching a critical inflection point – either change operating models or face long-term decline. In response, EquaTerra, a leading business advisory firm, reports pharma firms have been actively adopting alternative service delivery models – shared services, information technology and business process outsourcing – across general and administrative support functions. Now, they are poised to expand outsourcing into more strategic business activities.

Perspective: Emerging BPO and KPO Trends in the Pharmaceutical Industry* provides insight into pharma’s use of outsourcing to streamline complex global back-office operations and to reduce the costs of developing, monitoring and marketing drugs. Based on a survey of the top outsourcing service providers in the global pharma market and its own direct market experience, EquaTerra mapped current demand and projected buyer demand levels for the next 24 months. Top-line finds: Current demand for outsourcing includes processes for clinical trials, pharmacovigilance and sales analytics. Demand over the next 24 months is expected to focus on marketing analytics, contract sales, overall support for drug development, legal and knowledge services.

As the outsourcing market for pharma matures, both traditional multinational outsourcing providers and Indian service providers, who initially entered the market via information technology and information technology outsourcing (ITO) services, are targeting the knowledge-intensive pharma industry with expanded business process and knowledge process (BPO and KPO) outsourcing services. Not surprisingly, these providers cite the top three business drivers for their services as:

• Cost reduction – while cost reduction is typically the leading driver for most types of outsourcing, pharma buyers cite it 90 percent of the time, a significantly higher percentage than other industries, according to EquaTerra data.
• Industry refocus on strategic activities – 70 percent of pharma clients view outsourcing as a way to improve efficiency in core areas of their business, including clinical data management, pharmacovigilance, sales and marketing analytics and related knowledge services.
• Process improvement – 60 percent of pharma buyers look to outsourcing for process improvement.

Traditional pharma operating models are flagging under high costs, emerging competition, the weight of supporting global distribution channels and increased government and political demands, according to Vicki Tauscher-Phelan, pharmaceutical Industry practice lead for EquaTerra. “Pharma firms are rethinking everything from their delivery of back-office and administrative services to strategic activities like drug development, sales and marketing and regulatory compliance. Outsourcing is going to play a bigger role within individual companies and within the industry as a whole over the next several years.”

EquaTerra’s Perspective also suggests service providers realize they will face tough challenges achieving pharma’s ambitious outsourcing goals. Self-reported pain points include:

• Managing intellectual property and data confidentiality.
• Designing and managing global delivery processes.
• Regulatory challenges from the U.S. Food and Drug Administration and other organizations that require significant due diligence and may expand the scope of the work and increase risk to both outsourcing buyers and providers.
• Recruiting and retaining the levels of specialized talent needed to deliver complex pharma BPO and KPO services.
• Fear pharma firms will shy away from executing change initiatives they’ve commissioned.

“The pharma outsourcing market is rapidly maturing,” says Stan Lepeak, EquaTerra’s managing director of research. “Buyers currently assessing the BPO and KPO areas will find expanded offerings and greater overall industry expertise. The trick, as always, will be how to successfully match up the players and manage the processes to maximize results.”

EquaTerra recently polled top outsourcing service providers in the global pharma market. Based on those findings and its own direct market experience, the company mapped the level of buyer demand across several sets of emerging BPO and KPO functions and processes specific to the pharma space. The demand-level ranking is based on a scale of 1 to 10, with 1 equating to low buyer demand, 5.5 to moderate demand and 10 to high levels of demand. Service providers were asked to comment on current demand and projected levels of demand 24 months out. For more details or to obtain a copy of this pharmaceutical industry Perspective, please contact Stan Lepeak.

EquaTerra sourcing advisors help clients achieve sustainable value in their IT and business processes. Our advisors average more than 20 years of industry experience and have supported over 2000 transformation and outsourcing projects across more than 60 countries. Supporting clients throughout the Americas, Europe, Middle East, Africa and Asia Pacific, we have deep functional knowledge in Finance and Accounting, HR, IT, Procurement and other critical business processes. EquaTerra helps clients achieve significant cost savings and process improvement with internal transformation, shared services and outsourcing solutions.  For more information, please contact Lee Ann Moore at +1 713.669.9292; leeann.moore@equaterra.com; www.equaterra.com.