Taking the Pulse of the Pharma R&D Outsourcing (RDO) Market, Part 2 – RDO Process and Benefits Sought
Stan Lepeak, Managing Director, Global Research
with Vicki Phelan, Managing Director, Pharmaceutical and Life Sciences Practice
New EquaTerra research and field experience from the EquaTerra pharma practice is tracking the growing trend of life sciences and pharma R&D outsourcing (RDO). While the global pharma industry is of the most experienced when it comes to back-office business process and information technology outsourcing, the level of penetration and maturity is mixed when it comes to other emerging outsourcing areas such as R&D. A confluence of drivers are spurring most major global pharma firms to further considering expanding RDO more aggressively.
Current RDO levels vary across functional and process areas. Many firms are mature relative to outsourcing activities such as preclinical and clinical trials RDO work but most are still exploring, for example, drug research and registration RDO work. Given that most global pharma firms have grown via extensive M&A efforts, both the level and philosophy towards RDO varies across the organization. EquaTerra typically does not find, for example, that most pharma firms have a single unified RDO strategy much less an operational plan of action and timeline. This is much less so the case when it comes to more traditional and established BPO and ITO efforts.
The result is that there is much RDO “dabbling” among pharma firms in the market today, at least in activities beyond clinical trials work. Firms are engaging tactically while simultaneously defining a strategic direction. There typically exists clearer “visions” than strategies due to competing priorities, numerous decision makers, and uncertainties or disagreements over the expected maturation and adoption pace of RDO. As a result, RDO is not progressing monolithically across organizations and different areas have different agendas, goals and risk profiles.
The RDO benefits sought by firms are also mixed and sometimes inconsistent with identified RDO drivers. While EquaTerra has not yet confirmed a clear set of common RDO drivers across major pharma firms, in part due to the diverse range of RDO decision makers and influencers, it has identified some directional trending. EquaTerra recently polled a series of RDO decision makers on what they felt were their organizations’ key RDO drivers. The top RDO drivers cited are:
- Gain cost savings to fund R&D transformation,
- Shift internal R&D focus to more strategic activities
- Improve RDO performance
The driver of gain access to talent, skills and expertise is identified somewhat less frequently, despite commonly being cited as a driver. One potential reason for this is that talent challenges are being accounted for in shift internal R&D focus to more strategic activities wherein existing in-house talent is focused more intently on the most value-added activities and more mundane or repetitive tasks are passed to third parties.
Most respondents indicate it was too early to fully assess whether their firms are consistently achieving the RDO benefits sought. More straightforward goals such as cutting costs are being more frequently achieved while more complex ones such as shifting the retained R&D organization to more strategic activities are so far proving more elusive. The next blog in this series will lay out the critical success factors to RDO success.