Topic: IT Application Outsourcing (AO) in the Life Sciences Industry Healthcare Outsourcing Annual Report: September 2012 – Preview Deck
Copyright © 2012, Everest Global, Inc. EGR-2012-12-PD-0756
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Copyright © 2012, Everest Global, Inc. EGR-2012-12-PD-0756
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Background and scope of the research
Background of the research The healthcare industry has witnessed a rapid increase in IT and business process outsourcing adoption in recent years. Regulatory reform, consumerization of healthcare, market consolidation, and emergence of new technologies has accelerated outsourcing in the healthcare market. A number and variety of service providers have developed capabilities to cater to this growing market. With healthcare companies stepping up adoption of outsourced delivery, there is an uptick in demand for research and market intelligence on demand and supply trends in healthcare outsourcing across the three major market segments – payer, provider, and life sciences. The need is more pronounced for the vertical-specific application outsourcing (AO) function, where business challenges are driving greater adoption. Everest Group’s healthcare outsourcing research program addresses this market requirement by analyzing outsourcing trends and service provider capabilities specific to IT AO in the healthcare vertical. In this annual report, we analyze current trends and the future outlook for large, multi-year AO relationships for the life sciences market. We focus on: Trends in AO in the healthcare industry Market trends and activity for large AO relationships in the life sciences segment Service provider landscape for life sciences AO Emerging themes driving AO in the life sciences segment Outlook for life sciences AO in 2012-2013 Scope of this report Industry: Life sciences (pharmaceuticals, medical devices, biotechnology, and other life sciences1) Services: Large (TCV >US$25 million), multi-year (>3 years), and annuity-based application outsourcing Geography: Global Sourcing model: Third-party AO transactions; excludes shared services or captives 1
Includes healthcare data & information service, and medical products distribution Copyright © 2012, Everest Global, Inc. EGR-2012-12-PD-0756
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This report provides an insight into current trends and the future outlook for large, multi-year AO relationships in the global life sciences sector NOT EXHAUSTIVE
Healthcare
Focus of report
Payer
Provider
Life sciences
Private health plans Public health plans
Pharmaceuticals Medical devices Biotechnology Others1
Large health systems Standalone hospitals/clinics Pharmacists Physician practices Diagnostic labs
Services industry
IT Infrastructure Outsourcing (IO)
Traditional IO Remote Infrastructure Management (RIM) Infrastructure Management Services (IMS) Cloud
IT Application Outsourcing (AO)
Applications development Applications maintenance Independent testing Package implementation ERP services Business intelligence / data warehousing
Business Process Outsourcing (BPO)
BFSI-specific BPO HRO FAO PO Contact center Knowledge services
Consulting
IT strategy/operations consulting Business consulting Infrastructure consulting Infrastructure roll-outs
This report analyzes IT AO in the life sciences vertical with a focus on large (TCV >US$25 million), annuity-based, and multi-year (>3 years) relationships 1
Includes healthcare data & information service, and medical products distribution Copyright © 2012, Everest Global, Inc. EGR-2012-12-PD-0756
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Table of contents
(page 1 of 2)
Topic
Page no.
Section I: Introduction and overview
6
Section II: Summary of key messages
12
Section III: Healthcare IT outsourcing market overview Market size and growth Overall healthcare ITO transaction trends Transaction trends by segment – Geographic segments – Business segments: Healthcare payer, life sciences, and provider – Function segments: AO, IO, and bundled BPO
15 16 18 20 20 21 22
Section IV: Life sciences AO market overview Life sciences AO transaction trends Adoption trends for large-sized life sciences AO deals – Geography, life sciences segment – AO subfunctions – Buyer size Delivery location trends Renewals
23 25 26 26 27 28 29 30
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Table of contents
(page 2 of 2)
Topic
Page no.
Section V: Life sciences AO service provider landscape
31
Section VI: Emerging themes driving life sciences AO
37
Section VII: Outlook for 2012-2013
52
Appendix Publicly disclosed major life sciences AO transactions Glossary of terms Healthcare outsourcing research agenda References
54 55 56 58 59
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Overview and abbreviated summary of key messages (page 1 of 2)
The report provides an overview of the AO market for the life sciences industry. Analysis includes key trends in market size & growth, demand drivers, adoption & scope trends, emerging themes, key areas of investment, and outlook for the coming year. The report also provides an introduction to the service provider landscape for the life sciences industry. Some of the findings in this report, among others, are: Healthcare ITO market overview
Life sciences AO market overview
The US$25 billion healthcare ITO market leads the global ITO market in terms of growth North America is the most active geography in healthcare ITO; healthcare provider segment accounts for over half of the transaction activity. Application outsourcing is included in the scope in over 60% of all healthcare ITO transactions The life sciences AO transaction activity accelerated notably over the last four years, registering a CAGR of over 50% from 2008 to 2011 Large transactions (>US$25 million in TCV) accounted for ~50% of the life sciences AO transaction activity during the last four years North America (primarily the United States) and the pharmaceutical segment dominate in terms of AO adoption in life sciences India is the preferred delivery location for AO in the life sciences segment; China, Malaysia, and Latin America are emerging as newer low-cost locations Over US$3 billion worth of life sciences AO contracts are due for renewal between 2013 and 2018 Copyright © 2012, Everest Global, Inc. EGR-2012-12-PD-0756
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Overview and abbreviated summary of key messages (page 2 of 2)
Service provider landscape
Supplier delivery capability
Everest Group analyzed the life sciences AO capability of 14 select service providers across three categories: global majors, offshore majors, and regional/tier-2 players Global majors demonstrate the highest scale and scope of life sciences AO services Everest Group’s upcoming report maps these 14 providers on the PEAK Matrix
Five key themes are driving technology demand in the life sciences market: Portfolio diversification: Patent-cliff and related M&A-based geographic and product diversification is creating demand for technology integration, consolidation, and legacy upgrade Convergence for personalized medicine: Convergence of information across the healthcare ecosystem is driving the need for big data management and advanced analytics Cost & efficiency management: Rising cost of innovation and operation is creating demand for IT in R&D collaboration, supply chain efficiency, and sales force effectiveness Compliance: IT demand is being driven by regulations such as the Sunshine Act, Real-World Evidence, Pharmacovigilance, and Serialization, among others Consumerization: Consumerization of pharmaceutical products and medical devices is leading companies to focus on customer centricity, driving investments in social media and mobility Copyright © 2012, Everest Global, Inc. EGR-2012-12-PD-0756
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This study offers four distinct chapters providing a deep dive into key aspects of life sciences AO market; below are four charts to illustrate the depth of the report Healthcare ITO transaction volume
Life sciences AO adoption levels
Distribution of healthcare ITO transactions by sub-vertical Number of transactions
Life sciences AO activity across various regions Based on number of transactions
100% = High
North America
Provider
Life sciences
EMEA
Medium
APAC
Low
Latin America
Signing region
Payer Scope of contract 2009
2010
2011
Life sciences AO contract renewals TCV of contracts coming up for renewal 2013-2018; US$ million
2013
Source:
2014
2015
Life sciences AO service provider landscape Number of transactions
2016
2017
2018
Average life sciences AO revenues 2011; US$ million
Global majors
Offshore majors
Regional/ tier-2 players
Everest Group (2012) Copyright © 2012, Everest Global, Inc. EGR-2012-12-PD-0756
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Healthcare outsourcing research agenda
Published
Topic
Current
Release date
Report Card for the Indian IT Majors – Pecking Order Analysis of the "WITCH" Group
June-2012
IT AO in the Healthcare Payer Industry – Annual Report 2012
July-2012
IT AO in the Healthcare Payer Industry – Service Provider Landscape 2012
July-2012
IT AO in the Life Sciences Industry – Annual Report 2012
September-2012
IT AO in the Life Sciences Industry – Service Provider Landscape 2012
Q4-2012
IT AO in the Healthcare Provider Industry – Annual Report 2012
Q4-2012
IT AO in the Healthcare Provider Industry – Service Provider Landscape 2012
Q4-2012
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Additional healthcare research references
The following documents are recommended for additional insight on the topic covered in this Report. The recommended documents either provide additional details on the topic or complementary content that may be of interest. 1. IT Application Outsourcing (AO) in the Healthcare Payer Industry – Annual Report (EGR-2012-12-R-0711); 2012. This report provides an overview of the AO market for the healthcare payer market. Analysis includes key trends in market size & growth, demand drivers, adoption & scope trends, service provider landscape, emerging themes, key areas of investment, and implications for key stakeholders. The report also provides a mapping of service providers on Everest Group’s PEAK Matrix 2. IT Application Outsourcing (AO) in the Healthcare Payer Industry – Service Provider Landscape (EGR-2012-12-R-0721); 2012. This report provides an in-depth analysis of the service provider landscape for AO in the healthcare payer segment. It includes the PEAK Matrix for Payer AO, analysis of service providers in terms of their delivery capability and market success, and detailed profiles of the service providers featured on the Payer AO PEAK Matrix 3. Outsourcing and Offshoring Trends in Pharmaceuticals (EGR-2011-2-R-0600); 2011. This research provides an in-depth analysis of outsourcing and offshoring in the pharma industry, with focus on outsourcing transactions in the industry, buyer adoption of outsourcing and service provider landscape. The report also comments on the key future trends to watch, for buyers and service providers and other industry stakeholders For more information on this and other research published by the Everest Group, please contact us:
[email protected] [email protected] [email protected]
Jimit Arora, Vice President: Mridul Gupta, Senior Analyst: Service Provider Intelligence Team: Everest Group Two Galleria Tower 13455 Noel Road, Suite 2100 Dallas, TX 75240 Copyright © 2012, Everest Global, Inc. EGR-2012-12-PD-0756
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