Vendor Assessment: 2014 Top 10 Life Science Software Vendors

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1 VENDOR ASSESSMENT Vendor Assessment: 2014 Top 10 Life Science Software Vendors Eric Newmark Alan S. Louie, Ph.D. IDC HEALTH INSIGHTS OPINION The 2014 top 10 life science software vendor list is made up of both enterprise and specialty vendors. Oracle retained its top position as the leading software vendor, with $430 million in life science software license revenue. Oracle maintains a strong 13% share of the life science software market. With strong overall revenue growth of 23% in 2014, Medidata Solutions strengthened its second place listing, with $280 million in life science software license revenue and an 8.5% market share. Despite reasonable growth in 2014, SAP fell one spot for the second straight year, now placing fourth overall. Continued strong growth of Veeva has catapulted the company to become the third-largest software vendor in the life science market, with $226 million in license revenue and a 6.8% market share. Dassault Systèmes moved into fifth place due to both organic growth and life science-specific acquisitions, currently producing $200 million in life science software license revenue and a healthy 6% overall market share in the industry. SAS, PAREXEL Informatics (previously Perceptive Informatics), Thermo Fisher Scientific, IMS Health, and EMC fill out the remaining five spots. Additional highlights include: Medidata continues its strong growth in the eclinical space as demonstrated by a 23% increase in revenue year over year (y/y), 22% growth in its customer base (including continuing 100% retention of its large enterprise clients), and strong expansion into the emerging risk-based monitoring applications supporting clinical trials. Veeva continued to separate itself from the pack in this space, taking a commanding lead over its competitors in the sales and marketing space, with $219 million in software license revenue and $226 million in the overall life science software market, now placing third overall. SAP built on its life science manufacturing and supply chain market lead with $167 million in revenue, generating more than twice the revenue as any other vendor. Certara, IDBS, Model N, PTC, Revitas, and Tibco comprise this year's top 10 watchlist as the most likely vendors to penetrate the top 10 list in the next few years. March 2015, IDC Health Insights #HI254753

2 IN THIS STUDY This report summarizes the results from a recent IDC Health Insights study to identify the top 10 software vendors serving the life science market. The report also breaks out the top 3 vendors serving the four key subsegments that make up the life science enterprise, namely research, development, manufacturing and supply chain, and sales and marketing. Methodology Each year, IDC Health Insights provides an update to its ranking of the top 10 software vendors serving the life science industry. This ranking is based solely on software license revenue and does not consider any revenue generated from related services such as consulting, implementation services, support, and training. However, we do recognize that at some software companies, certain aspects of support and/or maintenance are built into subscription license revenue when sold through a cloud model. IDC Health Insights does its best to back out this non-applicable revenue through modeling, though some room for error remains since most companies are unable to share or corroborate this intricate level of revenue. Research for the study was conducted as follows: Research phase 1: IDC Health Insights performed an extensive internal modeling exercise, utilizing internal forecasts, spending data, and market sizing information, to identify the top 25 software vendors serving the life sciences and created an IDC estimate for each vendor's 2014 license revenue. This license revenue number included all revenue obtained through any acquired companies prior to the end of Research phase 2: IDC Health Insights then contacted all 25 vendors, asking them to comment on the projections and provide guidance on any changes needed. Many vendors were not willing to provide commentary or guidance because of financial policy restrictions. In instances where a vendor did provide guidance, those numbers were then revalidated against internal data and publicly available information as best possible. If a vendor was not willing to provide guidance, IDC's internal estimate was used. The resulting top 10 vendors and their respective license revenue are published in this report. Note: All numbers in this document may not be exact due to rounding. SITUATION OVERVIEW The life science industry's focus on a limited number of core preferred service providers continues to drive the industry's IT and application vendor ecosystem. Leading industry vendors continue to invest to improve their offerings through both M&A and organic growth. The ongoing transition from traditional site licenses toward software as a service (SaaS) has changed the way that many companies view their application infrastructure, allowing organizations to more easily accommodate upgrades and ensure regulatory compliance. We're continuing to see strong competition at the top, with ongoing shifts away from the once dominant role of the industry leader. To help clarify some of the ongoing uncertainty and provide hard data to support vendor selection, IDC Health Insights updates and publishes annually top 10 life science software vendors list to help life science companies identify the current, successful software vendors serving the life science market today. The top 10 companies, based on enterprise life science software revenue, have been identified and are discussed in this report IDC Health Insights #HI

3 In seeking to accommodate the ongoing change toward SaaS and to better capture perpetual revenue that historically would have been captured separately as application upgrades and custom implementations, this year's top 10 report includes new revenue that may not have been fully captured in prior years. Where applicable, additional vendor revenue attributable to this change in accounting has been identified as such. IT SUPPLIERS Categories of Analysis Vendors included in this study were evaluated solely on software license revenue derived from life science customers. Likewise, this study examined only enterprise solutions, which are defined as any software solutions that fall into one or more of the following categories: Business intelligence/analytics Clinical software Customer relationship management (CRM) Content management Revenue management/erp HR Manufacturing Sales and marketing Supply chain management PLM R&D informatics R&D discovery platforms Revenue obtained from any services, support, training, or maintenance work related to software or from software applications that do not fit into these categories, such as desktop applications, has been excluded for the purposes of this study. Study Results Top 10 Life Science Software Vendors As validated by multiyear trending data, the 2014 top 10 life science software vendor list continues to include both enterprise and specialty vendors. Oracle retained its top position as the leading software vendor, with $430 million in life science software license revenue. Oracle maintains a strong 13% share of the life science software market. With strong overall revenue growth of 23% in 2014, Medidata maintained its second place listing, with an 8.5% market share and $280 million in life science software license revenue. Despite reasonable growth in 2014, SAP fell one spot for the second straight year, now placing fourth overall. Continued strong growth of Veeva has catapulted the company to now being the third-largest software vendor in the life science market, with $226 million in license revenue and a 6.8% market share. Dassault Systèmes moved into fifth place due to its acquisition of Accelrys (and other life science companies), with the company now producing $ IDC Health Insights #HI

4 million in life science software license revenue and a healthy 6% overall market share in the industry. SAS, PAREXEL Informatics, Thermo Fisher Scientific, IMS Health, and EMC fill out the remaining five spots. The complete top 10 list, including license revenue and market share information, is displayed in Table 1. TABLE 1 Life Science Software License Revenue and Share by Top 10 Software Vendors, 2014 Rank Vendor License Revenue ($M) Share (%) 1 Oracle Medidata Solutions Veeva Systems SAP Dassault Systèmes SAS PAREXEL Informatics Thermo Fisher Scientific IMS Health EMC The Top 10 Vendor Watchlist While this report only includes the top 10 vendors ranked by life science software license revenue, it is worth highlighting a few vendors that have been growing quickly in the life sciences and have a strong opportunity to soon break into the top 10 list. Table 2 illustrates the vendors that just missed the top 10 list. 2014's vendor watchlist includes Certara, IDBS, Model N, PTC, Revitas, and Tibco. TABLE 2 Vendors Close to Breaking into the Top 10 Software Vendors in the Life Science, 2014 Vendor 2015 IDC Health Insights #HI

5 TABLE 2 Vendors Close to Breaking into the Top 10 Software Vendors in the Life Science, 2014 Vendor 1 Certara 2 IDBS 3 Model N 4 PTC 5 Revitas 6 Tibco Note: Vendors are listed alphabetically. Top 3 Vendors Life Science Research With its own strong medical device research revenue and in combination with acquisitions of Accelrys, QUMAS, and other life science companies, Dassault Systèmes transitioned its second place position as Accelrys to the top spot in this year's top 10 report. Thermo Fisher Scientific and IDBS maintained their relative positions in our breakout of the top 3 software vendors in life science research (see Table 3). The continuing consolation of vendors in the life science industry is continuing, and we would not be surprised to see additional M&A in the life science research space in the years to come IDC Health Insights #HI

6 TABLE 3 Life Science Research Software License Revenue by Top 3 Software Vendors, 2014 Rank Vendor License Revenue ($M) 1 Dassault Systèmes Thermo Fisher Scientific 90 3 IDBS 25 Top 3 Vendors Life Science Development The move to better capture the ongoing industry transition to SaaS and more systematically include perpetual revenue most benefitted the continuing top life science development vendor, Oracle, which incorporated an $87 million increase over the prior year despite only incremental growth. Medidata, with its strong growth, continues to bite at the heels of Oracle. SAS retained its position as the thirdlargest vendor in the life science development space in 2014 (see Table 4). TABLE 4 Life Science Development Software License Revenue by Top 3 Software Vendors, 2014 Rank Vendor License Revenue ($M) 1 Oracle Medidata Solutions SAS 171 Oracle's dedicated investment over the past several years to upgrade the company's offerings may be beginning to pay off, and it remains to be seen whether Oracle's stronger offerings, combined with the continuing transition to SaaS, will be enough to fend off strong ongoing growth at Medidata. IDC expects that SAS will continue to strongly hold onto the third spot, with SAS' strength in analytics and the company's foundational role in clinical data submissions helping keep SAS as a leading life science development vendor IDC Health Insights #HI

7 Top 3 Vendors Life Science Sales and Marketing Over the past several years, the sales and marketing space has been very focused on compliance due to significant regulatory changes forced on the industry because of healthcare reform, gift ban laws, aggregate spend compliance, off-label marketing fines, and other regulatory challenges. While it's been a challenging time, many organizations have now gotten ahead of these required changes and are now positioned to start benefiting more from them and optimizing operations around them. Increased focus on electronic HCP interactions, greater reliance on mobile capabilities, and stronger emphasis on multichannel marketing optimization are just a few of the areas currently top of mind for life science organizations. Veeva continues to separate itself from the pack in this space, taking a commanding license revenue lead over its competitors, with $219 million in life science sales and marketing software license revenue. Veeva's ascension has been largely due to strong growth in the CRM space, though portfolio expansion into content management and various aspects of multichannel marketing is helping sustain the company's momentum as CRM growth begins to slow. IMS Health, which is in the final stages of its Cegedim Relationship Management acquisition, has now moved into second place in this market, with an estimated $87 million. Oracle has now dropped to third place in this market, with an estimated $38 million in life science sales and marketing revenue. Table 5 shows the official top 3 software vendor list for the life science sales and marketing space. TABLE 5 Life Science Sales and Marketing Software License Revenue by Top 3 Software Vendors, 2014 Rank Vendor License Revenue ($M) 1 Veeva Systems IMS Health 87 3 Oracle 38 Top 3 Vendors Life Science Manufacturing and Supply Chain SAP continued building on its lead in the life science manufacturing and supply chain market, with $167 million in revenue derived from this space. SAP generates more than twice the revenue as any other vendor in the life science manufacturing and supply chain market. However, Oracle has made significant strides in the space, breaking its way on to this list for the first time, and landing in second place, now with $65 million in life science manufacturing and supply chain license revenue. PTC is now placed third in this category, with $50 million in revenue. Table 6 shows the top 3 vendors and their respective license revenue IDC Health Insights #HI

8 TABLE 6 Life Science Manufacturing and Supply Chain Software License Revenue by Top 3 Software Vendors, 2014 Rank Vendor License Revenue ($M) 1 SAP Oracle 65 3 PTC 50 FUTURE OUTLOOK IDC's estimates of 2014 life science software license revenue are significantly larger than 2013, taking into account both growth and a change in the measurement criteria to better capture SaaS-specific revenue. With continuing unmet needs in both the healthcare and the life science industries, both industries remain well positioned for significant long-term growth. With the broad industry transition to a SaaS approach to application needs, leading vendors have gained new growth opportunities through the expansion beyond top-tier life science companies to emerging and midtier companies that can more easily access and adopt top-tier platform solutions. With a focus on business solutions rather than applications and their supporting platforms, life science companies increasingly rely on their preferred vendors to better help them directly achieve their business goals. Continuing investment and innovation by vendors will be key to staying on top, and leading vendors will be expected to continue to improve their offerings, interconnect applications (where applicable), and regularly add new capabilities either organically or through M&A. The transition to SaaS is expected to further expand the customer ecosystem, with significant growth as a result, much of which will come from the emerging and midtier customer space. ESSENTIAL GUIDANCE Actions to Consider Application Software Vendors Demonstrable near-term ROI continues to be a key success factor (and requirement for any new investment) in the life science application software space. Constant investment in new capabilities (including acquisition of niche players, where appropriate) will be necessary to maintain and expand growth with a focus on helping their sponsors continue to improve their operational efficiency and effectiveness. IDC expects that top-tier, best-of-breed solutions will continue to dominate as leading life science companies continue to consolidate their vendor ecosystems to a few preferred partner relationships. The transition to SaaS has been a blessing for leading vendors by broadening the 2015 IDC Health Insights #HI

9 customer ecosystem but will likely require new support infrastructure to accommodate the specific needs of an expanded customer base. Life Science Companies Increased complexity in the global life science ecosystem, increasingly complex global regulatory requirements, and ongoing efforts to improve operational efficiency and effectiveness remain key drivers that are driving life science companies to transform their application ecosystems. In transitioning away from internal legacy systems, leading life science companies need to communicate better with their vendors to ensure that needed features and application improvements will be available in a timely fashion. For more complex applications and platforms, there may be the potential to add atrisk components to contractual agreements to ensure that superior performance is rewarded. Despite the current urgency for change historically triggered by blockbuster patent expirations, companies will still need to demand robust validation from its vendors, since any processes that could put organizations at risk will never be tolerated. LEARN MORE Related Research Vendor Assessment: 2013 Top 10 Life Science Software Vendors (IDC Health Insights #HI247889, April 2014) Vendor Assessment: 2012 Top 10 Life Science Software Vendors (IDC Health Insights #HI240273, March 2013) Vendor Assessment: 2011 Top 10 Life Science Software Vendors (IDC Health Insights #HI234226, April 2012) Vendor Assessment: Top 10 Life Science Software Vendors (IDC Health Insights #HI225921, December 2010) Top 10 Life Science Software Vendors (IDC Health Insights #HI218060, May 2009) Synopsis This IDC Health Insights report summarizes the results from a recent study to identify the top 10 software vendors serving the life science market. Conducted annually since 2010, the 2014 IDC Health Insights top 10 life science software vendors list includes expanded insights into life science vendor rankings within the life science industry subsegments, research, development, manufacturing and supply chain, and sales and marketing. Eric Newmark, program director at IDC Health Insights, said, "The commercial life sciences are working through a challenging period of industry change, accosted by regulatory transformation and shifting market dynamics from U.S. healthcare reform. The sales and marketing space has retooled its IT portfolio to improve sales force effectiveness and is now setting its sights on optimizing marketing efficiency, particularly through implementation of true omni-channel capabilities. And the manufacturing and supply chain arena is now following suit with increased movement of software to the cloud and broader outsourcing of various business processes and IT requirements. Software vendors offering cost-effective, easy-to-use, scalable solutions in a verticalized manner remain best positioned to experience the strongest growth going forward." Alan S. Louie, research director at IDC Health Insights, further commented, "The life science R&D application ecosystem is continuing to grow and evolve, with a number of top-tier, best-of-breed 2015 IDC Health Insights #HI

10 solution providers leading the way. These leading vendors are actively working to make their offerings more accessible, more user-friendly, and more interconnected, making it easier for their customers to recognize the value that their solutions deliver. With further consolidation of the preferred vendor space, IDC expects life science companies to demand more from their vendors, including rewarding successful relationships with growth, potential to be rewarded for exceptional performance, and treatment more as a partner than as a vendor." 2015 IDC Health Insights #HI

11 About IDC International Data Corporation (IDC) is the premier global provider of market intelligence, advisory services, and events for the information technology, telecommunications and consumer technology markets. IDC helps IT professionals, business executives, and the investment community make factbased decisions on technology purchases and business strategy. More than 1,100 IDC analysts provide global, regional, and local expertise on technology and industry opportunities and trends in over 110 countries worldwide. For 50 years, IDC has provided strategic insights to help our clients achieve their key business objectives. IDC is a subsidiary of IDG, the world's leading technology media, research, and events company. Global Headquarters 5 Speen Street Framingham, MA USA idc-insights-community.com Copyright Notice Copyright 2015 IDC Health Insights. Reproduction without written permission is completely forbidden. External Publication of IDC Health Insights Information and Data: Any IDC Health Insights information that is to be used in advertising, press releases, or promotional materials requires prior written approval from the appropriate IDC Health Insights Vice President. A draft of the proposed document should accompany any such request. IDC Health Insights reserves the right to deny approval of external usage for any reason.