Software-as-a-service (SaaS) has matured quickly due to improvements in infrastructure and internet technologies. However, pharma companies have typically been reluctant to embrace the delivery model, for multiple reasons, including the pervasiveness of highly customized IT systems within the industry. These systems are extremely difficult, if not impossible, to retrofit into a SaaS delivery. Furthermore, within the pharma industry, there is a determination to keep enterprise data on the premises.
Yet overall demand for SaaS continues to rise within the life sciences sector and forward-thinking executives are increasingly inquiring about it. Following the recent and aggressive cost-cutting initiatives in the industry, vendors are wondering if the time has come to introduce SaaS, with its potential cost benefits, into the highly complex life science market.
As pressures to improve efficiency and reduce costs across the pharma value chain escalate, executives will begin to scrutinize IT solutions and their delivery models more often, particularly SaaS. Unfortunately the base of pharma-specific solutions currently offered through SaaS is very limited. This is partly due to the significant variety in pharma business processes across different organizations, which make it difficult for vendors to develop 'one-size-fits-all' solutions that are capable of a SaaS delivery. Vendors have also shown little interest in developing these solutions, due to the poor profitability factor provided by a solution for an extremely limited user base.
However, Datamonitor believes that as pharma processes become better understood, and are approached through the development and use of industry best practices, vendors will increasingly be required to provide highly configurable, 'premium vanilla' solutions through SaaS. While SaaS-enabled solutions will not be accepted, or requested, overnight, vendors should not sit back and wait for companies to approach them. Instead, vendors must take this time to evaluate where in the pharma product lifecycle (discovery, pre-clinical research, clinical trials, manufacturing, or sales and marketing) SaaS would be most beneficial, and start developing IT solutions that support those processes.
Widespread implementation of SaaS in the life sciences sector requires the IT solutions and services to be well defined, which requires IT systems to be commodity-like rather than niche. In this way, SaaS-based customer relationship management (CRM) will have a place in the pharma world. On the other hand, SaaS is not suitable for technologies that support the more creative and dynamic world of R&D. Due to the complex and uncertain nature of pharma and biotech research, many IT applications are developed and customized for a very specific group or purpose within an organization. For vendors, offering these solutions as SaaS does not provide a significant enough market opportunity, but they should keep in mind the potential for custom projects targeting these niche areas.
Furthermore, data control and security will always be a great concern in the R&D phases of pharma. It is extremely unlikely that life science companies will ever give up control of any IT system that touches their data, regardless of the guarantees that a vendor provides. Therefore, vendors developing these niche solutions should not focus on SaaS, but rather on continuously improving the features of existing products.
Within R&D, Datamonitor believes that the area most likely to see growth in SaaS solutions is clinical trials. While each organization has its own requirements, the clinical trials process is well understood throughout the industry. Therefore, commercial solutions such as electronic data capture (EDC) and clinical trials management systems have become rather mature and commoditized.
With the globalization of clinical trials, and life science companies moving away from paper-based systems to EDC, vendors have an opportunity to gain a competitive edge by developing a suitable SaaS product. Since many companies are still in the testing phase of choosing their EDC system, Datamonitor predicts that they will prefer a SaaS delivery option rather than the traditional on-premise model because there are no upfront hardware and software costs, and it allows them to simply 'turn off' their service should they choose to. A SaaS option is ideal for small and mid-size companies that have only one or two drugs in clinical trials, as it allows them to pay for an EDC system only during the time that a trial phase is actually being run.
In the life sciences, islands of opportunities do exist for SaaS. Technologies geared for pharma sales and marketing, such as CRM solutions, are the most readily-available in SaaS form. As the pharma industry moves to the global arena, it becomes essential for sales representatives to have access to CRM systems 'round-the-clock' to accommodate business hours in varying time zones and to cope with the generalized urgency of the sales process. Therefore, organizations must ensure 24/7 reliability of their CRM systems, which is a costly feat for internal IT departments. SaaS providers, on the other hand, have the resources and know-how to provide companies with this 24/7 reliability.
In addition to the reliability aspect, Datamonitor predicts that SaaS-based CRM will flourish in the pharma industry due to its subscription-based, pay-as-you-go pricing structure. The sales and marketing landscape is extremely dynamic, so the sales force is continuously changing based on organizational needs. With an on-premise model, companies would be required to purchase user licenses up-front and it is nearly impossible to predict how many licenses will be required. Many companies could drastically overpay or have a significant shortage, leaving them scrambling for more licenses. With a SaaS model, companies are able to add or delete users as needed, allowing them to pay only for those users accessing the system at any given time.
As the adoption of CRM within the pharmaceutical industry increases, Datamonitor believes that the SaaS delivery model will have a huge impact on which solution is chosen. Vendors that recognize this growing demand for SaaS CRM in the life sciences, and are able to offer such a solution, will provide a much needed value-added service to their clients.
Although all indicators suggest that the acceptance of SaaS in the pharma industry will not be immediate, the model is definitely here to stay and will offer considerable opportunities to vendors over the long-term. SaaS only emerged in this complex market recently and, due to its unfamiliarity, pharma companies have not yet open-heartedly embraced the model. In addition, Datamonitor predicts the growth of SaaS will be limited in the short- and mid-term because of the skeptical nature of the scientific industry, as well as the lack of SaaS offerings currently available to the life sciences. This will change as familiarity with SaaS and technology as a whole increases, and best practices are developed and leveraged for processes across the entire pharma product lifecycle.
Datamonitor suggests that, in the short-term, vendors should evaluate which sectors of the pharma value chain would most benefit from SaaS-enabled IT solutions, as well as which solution areas would be most profitable for them. As the development of these applications progresses and pharma becomes more accustomed to SaaS, both vendors and the life science industry will realize the overall benefits and return on interest provided by such a delivery model.