A Portrait of the Enterprise Software User in the Pharmaceutical Industry

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1 A Portrait of the Enterprise Software User in the Pharmaceutical Industry Rahim Kaba - 1/4/2012 4:44:00 PM My article depicting a portrait of the Indian enterprise software user prompted me to develop a new series of articles that describe enterprise software users in other geographies and industries. Having worked previously in the pharmaceutical industry, I decided that my next article would focus on the enterprise software buying intentions and behaviors in that sector. Through an analysis of Technology Evaluation Centers (TEC s) market data, I will provide a glimpse into the types of enterprise systems that pharmaceutical companies are considering, and the top functional priorities they seek to help streamline their day-to-day operations. If you work in the pharmaceutical industry and are looking to evaluate enterprise software solutions, the research and market data presented in this article may be of particular interest to you. The Pharmaceutical Industry Landscape The pharmaceutical industry is one of the most highly regulated in the world. Drugs and other medical therapies must adhere to stringent governmental regulations stipulating the requirements for a new drug approval in a particular country. To be competitive, pharmaceutical companies need to be efficient and quick to bring drugs to market, while ensuring a high level of drug efficacy and safety. Successful pharmaceutical companies have been able to achieve this all the while facing many challenges, including a shift from developed markets to emerging markets, lengthy and costly drug approval processes, increased availability of generic options, and adoption of breakthrough technologies such as genetic engineering, combinatorial chemistry, and high-throughput screening. Increasing medical concerns over product safety and compliance with medical marketing practices throughout the product lifecycle have placed pharmaceutical companies under the eye of scrutiny. Due to the complex nature of regulatory compliance processes, pharmaceutical companies look to software to not only help them improve their business and manufacturing processes, but also integrate ways to manage compliance and risk. Enterprise software vendors such as 3i Infotech, Deacom, and SAP have tailored their solutions to provide industry-specific functionality to help pharmaceutical companies comply with the growing number of regulations and ensure they are better able to manage and monitor production and product quality, as well as the associated workflow and documentation. TEC Market Data: A Profile of the Pharmaceutical Industry Selecting the right enterprise software solution is a large feat. Making the right investments in technology can provide companies with a significant competitive advantage. Many pharmaceutical companies invest in enterprise-wide systems in order to increase efficiencies in all segments of the company from management of inventory to manufacturing processes to electronic records and to ensure they abide by drug safety and efficacy requirements. In order to paint a portrait of the enterprise software user in the pharmaceutical industry, I examined nearly 3,500 software evaluation projects from pharma decision makers and the associated market data in TEC s online software evaluation system, TEC Advisor, from the last two years. TEC Advisor contains detailed information about enterprise software solutions collected directly from vendors and reviewed by TEC analysts and is designed to help end users quickly and accurately compare solutions (try TEC Advisor, if you haven t already). The graphs below provide an overview of demographics of the respondents, the software types and functionality they sought, and their interest in software-as-a-service (SaaS) and on-demand deployment options. Respondent Demographics Figure 1 depicts the geographical breakdown of pharmaceutical industry respondents that evaluated enterprise software in TEC Advisor. Not surprisingly, Asia and North America top the list with the largest number of respondents at 27% and 19%, respectively. The United States represents the single largest pharmaceutical market (and historically the world s most highly developed health care market), while China and India are poised to be among the largest according to IMS Health. Africa was a close third at 17%. My curiosity on this last statistic led me to find that the majority of software evaluations in 1/5

2 Africa originated from Egypt. According to Espicom Business Intelligence, the pharmaceutical market in Egypt is expected to rank second highest in the Middle East and Africa (MEA) region by It s no wonder that many leading multinational pharmaceutical companies have already localized operations in Egypt. Figure 1. Geographic Breakdown of Pharmaceutical Industry Users that Evaluated Enterprise Software in TEC Advisor (as a percentage of all users) Next, I wanted to garner an understanding of the size of the pharmaceutical companies evaluating enterprise software. Figure 2 shows that 70% of software evaluators originated from small to medium b usinesses (SMBs) with up to 500 employees. These companies consist of smaller pharmaceutical and biotech firms, start-ups, medical research laboratories, and pharmaceutical service providers, some of which are likely supported by government grants and venture capital firms. Figure 2. Breakdown of Pharmaceutical Industry Users that Evaluated Enterprise Software in TEC Advisor by Company Size (as a percentage of all users). 2/5

3 Top Software Types Enterprise resource planning (ERP) for SMBs topped the list of software types sought by software evaluators in the pharmaceutical industry, as can be seen in Figure 3. This result is consistent with the demographic breakdown in Figure 2. TEC defines this type of software as one that is applicable to small to medium sized organizations researching an ERP system supporting a wide range of core functionality, such as general ledger, accounts payable and receivable, payroll, job and project costing, manufacturing, and inventory, to name a few. Such functionality offers pharmaceutical companies the key tools needed to comply with tight government regulations and to help improve their business and manufacturing processes. ERP vendors have specifically tailored their solutions to allow SMBs to take advantage of core ERP functionality with fast and low-cost implementation and deployment, as well as low cost of ownership and maintenance, allowing SMBs to be competitive with larger companies. Discrete and process manufacturing ERP software were next on the list. These software types are particularly applicable to companies that require an ERP system to handle their production, planning, product costing, and materials management capabilities. These are robust solutions with integrated functionality in human resources, financials, and sales management. Figure 3. Top Software Types that Pharmaceutical Industry Users Evaluated in TEC Advisor (as a percentage of all evaluations) Top Software Functionality With the help of my TEC colleagues, I analyzed the software requirements of pharmaceutical companies and sorted them by percentage of responses to determine the most frequently sought-after functional areas. I make the general assumption that a more frequently selected functional area constitutes a functionality with a higher aggregate priority. As Figure 4 shows, the Financials and Accounting module was the most requested functionality, which is consistent with the top priorities of SMBs using ERP systems. Financial and accounting functionality allows organizations to operate under the umbrella of transparency and to be able to manage and track accurate information about their current and projected financial activities, which is critical for SMBs looking to ensure growth and prosperity over the long term. Purchasing and inventory management is particularly useful in helping pharmaceutical companies manage and report their inventory information and streamline procurement processes related to raw materials. 3/5

4 Figure 4. Top Prioritized Functional Modules Requested by Pharmaceutical Industry Users Evaluating Enterprise Software in TEC Advisor (as a percentage of responses depicted in Figure 3) On-demand Software Requirements Cloud computing is a trend whose impact is just beginning to be felt in the areas of research, development, clinical trial management, and health care information exchange. The explosion of data on next-generation drugs and biologics is making cloud-based computing an increasingly important aspect of research and development (R&D) in the pharmaceutical industry. As can be seen in Figure 5, the general acceptance of hosted software delivery models has remained relatively stable since Compared with other industries for example, manufacturing, with a generally higher SaaS acceptance rate (>15%) the pharmaceutical industry has not yet fully embraced this deployment model, possibly due to security and intellectual property concerns in the cloud. Figure 5. Percentage of TEC Advisor Users in the Pharmaceutical Industry that Requested SaaS or Hosted Applications During their Software Evaluation (as a percentage of all evaluations) Conclusion The data presented in this article provides only a glimpse into the buying intentions and behaviors of pharmaceutical companies looking to acquire enterprise software. It spans the entire pharmaceutical industry including a mix of pharmaceutical manufacturers and distributors, biotechnology firms, medical research laboratories, and pharmaceutical 4/5

5 service providers of different sizes and geographies. The majority of the nearly 3,500 evaluation projects used in my analysis of the pharmaceutical industry belong to the SMB market. Based on TEC s data, this audience sought ERP systems with core functionality related to financials, accounting, purchasing management, and inventory management to support its business and manufacturing processes, and provide the level of transparency and traceability mandated by regulatory bodies. Regulatory compliance however is complex and ever-changing, and poses significant challenges to pharmaceutical companies both large and small. Companies looking to survive and grow in this extremely competitive marketplace should look to evaluate solutions that integrate compliance and risk management with their unique business requirements over the entire product lifecycle. By selecting the right enterprise software solution, pharmaceutical companies will be better positioned to face the fierce competition through efficient operations, high-quality products, and strong company financials. 5/5