Farther Along:Life Science and IT Businesses Navigate the Twisting Path toward Seamless Convergence

by Allen Weiner
May 2003

The impact of technology in life science has become a hot topic. Perhaps with the death of other major net-centric verticals a great deal of hope is placed on the success of selling hardware, software and services to “biotechs” of all size and shape.

Perhaps those with a vision see the extraordinary value that technology can bring to life science with its ability to save money, create value, increase productivity and bring workers together. Whatever the motivation, the climate of hype and hope vs. reality bears examination.

So far, 2003 has been a year of dramatic ups and downs. Marketing, advertising and capital spending for the year were gingerly put together in late 2002 with great caution. A fragile economy and pending geopolitical tension put typical spending and planning patterns in a tenuous position for 2003. For technology vendors, the hope was that need and value were greater than headline-grabbing issues.

To get a true perspective on the state and impact of technology at life science companies in mid-2003, Biotech Tech Research conducted an online survey posing questions that ranged from actual budgets and spending to attitudes about the marketplace. The results, to date, bear examination and analysis, providing a glimpse into the state of the state of the convergence marketplace.

“From (drug) discovery through evaluation and into clinical trials and post marketing, spending is more focused,” observes Insightful Corp.’s director of pharmaceutical solutions, Dr. Michael O’Connell. “Dollars are being spent, but the spending is far more targeted.”

“You sure don’t see enormous numbers of vendors and attendees at trade shows,” he adds.

“There is definitely activity, but there is a shift in modus operandi from project-based purchasing to more enterprise-wide spending,” notes Liz From, global life sciences business strategist for Sun Microsystems. “Silos of behavior are changing where corporate discipline is being used to provide appropriate corporate solutions.”

“There are significant amounts of investment in high-end consulting,” says Dr. James Coffin, worldwide vice president of IBM Life Science Solutions. “Pharmas, for one, are figuring out how to better optimize their pipeline. There are also a lot of sales around developing overall platforms.”

“We are facing a future of the merging of IT and modernized medicine,” he adds.

Which begs the question; how far along are we in that path?

Survey Says…

By and large, in most technology verticals, decisions focusing on the purchase and implementation are stewarded by the Information Services Department (which goes under many guises, such as the IT department). The theory is fairy simple: those who are closest to the day-to-day IT activity and needs of the enterprise are best suited to make plans on technology needs. In life science, that is not always the case as the Biotech Tech Research survey shows.

Who makes the technology purchasing decisions within your organization?

According to the survey, only 10 percent of total respondents say that the IT department made technology purchasing decisions. The largest group says that it is a combined effort, while close to one-third say it is senior management, underscoring the need to have a business focus behind every decision.

Vendors say that because decisions are often made by those outside the IT department, or by a combination of departments, there are often marketing challenges. “You tailor your message by talking about ROI (return on investment),” says Steve Levine, Accelrys’ senior director of business development. “We stress the ability to use technology to share knowledge across all areas of a business.”

“There is a lot of blocking and tackling going on,” adds Sun’s From. She agrees that overarching business decisions that impact an entire biotech organization as opposed to one silo—such as discovery—now force more thoughtful decisions to be made. Such decisions require the input of more than just technology implementers.

IBM’s Coffin notes that one of the determinants for technology decision making is the size of the organization. Large pharmas, he says, still rely on a strong IT department, because of the complexity of purchases. It is incumbent, however, that these IT shops are good at reaching out to lines of business to stay very close in touch with companywide needs.

When asked about the overall importance of technology to their organization, the news is good for those building technology solutions. Close to 95 percent of those who responded to the survey say that technology is either critical or very important to their organization. The question remains, however, whether this importance is based on real applications with proven results or whether it is based on the promise of what is to come.

Sun’s From believes that technology can be contagious within an organization. Once “proof points” of success are made—even in unrelated areas—an enterprise-wide thirst to apply technology to a variety of solutions often takes hold.

How important is technology to your organization?

With new technologies in development on a daily basis, vendors with new products in hand seem to be surfacing at a rapid clip no matter the economic climate. With so many vendors in many crowded marketplaces, we asked if vendors were doing a good job in understanding the needs of their potential customers.

The results show that more than 80 percent of vendors are right on the mark, with 13 percent of that total rated “very much” in tune with end-user needs.

“One of the skills we have had to be good at is drilling down into what the customer needs,” says Accelrys’ Levine. “Customers tend to want a little bit of everything. Our sales people have become expert in determining as much what a customer needs as what a customer wants.”

How would you generally describe technology vendors in the life sciences marketplace?

Insightful Corp.’s O’Connell believes that vendors who are relatively new to the sector are often guilty of being out of touch with the needs of end users. “They seem to be more interested in working on things that are cool rather than things that solve customer pain.”

“To be successful, you need to get in the cage with the animals,” he adds. “You need to get your sales people to continually engage.”

As we drill down into the survey data in subsequent reports, we will see that end users’ attitudes about vendors vary based on the size of the end-user organization and budgets.

On the subject of budgets, it is interesting to observe that, according to Biotech Tech Research’s survey data, only slightly more than 60 percent of respondents are operating on a fixed budget for 2003. Vendors don’t necessarily seem troubled by this, believing that there is a marked delineation between big pharmas who have budgets in place and smaller companies who buy on an as-needed basis.

Has your organization established a budget for IT spending for 2003?

“What we are seeing is that they do have budgets,” says From. “It’s certainly not a free for all. Companies are spending money, but they are spending more intelligently.”

Accelrys’ Levine agrees and believes that it will not be a case in which companies hold back and spend even more freely in the fourth quarter—something common in other verticals. He also believes that the overall climate for spending is not one that shows promise for new, cutting-edge technology providers.

“I would characterize buying behavior to be more conservative than in the past,” he observes. “Companies are buying proven products that have an immediate impact as opposed to innovation. For many start-up tech providers, that could be a death sentence.”

Of those surveyed, 56 percent responded that their IT budgets for this year are larger than last year. Of those who indicated a larger budget, 72 percent say that increase is 25 percent or less.

ose results could be a result of many factors, ranging from issues with the economy to a shakeout in marketplace vendors. Many end users wait for a market to stabilize to make purchases from vendors who appear to have a solid foundation and future. Other buyers wait for single platforms to emerge to eliminate the need for continual realignment of infrastructure.

Another factor, leading vendors say, is the corporate quest for end users to seek to deploy technology in line with enterprise-wide business needs as opposed to individual silo-based needs.

Is your 2003 budget for IT spending larger than what you spent in 2002?

Sun’s From says the evolution from 2002 to 2003 and beyond will create a new role for the traditional corporate chief information officer (CIO). She says CIOs will now need to become “better corporate citizens” and make decisions that “take innovation and spread it throughout the organization.”

That point is an interesting segue to the question of whether 2003 budgets are satisfactory to meet the needs of organizations. More than 70 percent indicate they are spending enough. The ongoing challenge for vendors will be twofold: continue to build excitement and interest about the role of technology and to continue to develop practical solutions to business problems using IT as a foundation.

Do you feel your 2003 budget for IT spending will satisfy the real needs of your organization?

It should come as no surprise that technology purchases varied significantly based on company size and the nature of a life science firm’s core business. While subsequent reports will go into great detail, here are a few interesting observations:

1. Overall, respondents indicate that systems and integration software take up the largest part of their 2003 budgets. Perhaps even more than individual silo needs, such as faster processing and greater data analysis, the core issues of integration require resolution. This might be an indication as to the point of evolution facing most life science firms.
2. Larger firms (greater than 250 employees) far and away are spending money in systems integration while firms with 25 employees or less are spending money fairly evenly across the board. One reason behind this disparity is that as large pharmas begin to merge; integrating disparate systems becomes a major priority.
3. Firms that are participating in core life science research and discovery, such as genetics, far and away are spending money on enhancing their ability to process more information more quickly.

What specific area will take up the largest portion of your 2003 budget for IT?

What does 2004 look like? Those who responded to the Biotech Tech Research survey seem to be on the fence. The good news is that only 5 percent seem convinced it will be less than 2003, with 19 percent taking the safe route, saying they have no idea.

Looking forward to 2004, what is your best estimate of your 2004 life sciences IT budget?

Accelrys’ Levine says increases in spending over the next 12-18 months will be dependent on the amount of in-silico research done by life science end users. He says it’s a matter of timing as opposed to market acceptance. “The issue is how quickly researchers can evolve their procedures,” he adds.

Lastly, when asked the motivation behind making IT purchases, almost three-quarters of those responding say that enhancing productivity was the top reason. Only 14 percent of those surveyed make IT purchases to keep up with competitors.

When making decisions on IT purchases, which of the following organizational goals are true?

“Technology is an important step in an organization’s change management process,” says From, summing up the state of the state of this convergence marketplace. “The best way for everyone to win is to continually show value. There is always far more hype than reality.”