Off-Shore Options

by Sina Adibi

The growing number of potential new drugs entering clinical development — combined with increasing global competition and rising trial costs — is creating tremendous pressure throughout the global bio/pharmaceutical industry to speed up the development process and improve cost efficiency. As a result, technology companies serving the industry face the challenge of finding additional resources to meet client demands for faster turnaround times and lower costs, while maintaining the high level of quality demanded by the industry. That challenge is compounded by a competitive technology job market that has created a shortage of qualified graduates and trained professionals in North American and western European countries where most of these companies are located.

The solution for many technology companies is “off-shoring.” This consists of either supplementing their domestic resources by hiring skilled employees in other countries — an approach sometimes referred to as “in-sourcing” — or making arrangements with third parties in those countries to hire and manage the employees — the practice that is commonly called “outsourcing.”

An overly simplified view of outsourcing, which associates it with domestic job losses and cost-cutting, has made off-shoring a sensitive issue in some quarters. However, the reality of off-shoring is more complex than the headlines. For most technology companies serving the pharmaceutical industry, the primary goal of off-shoring is not only to reduce costs. Instead  many companies use it to meet the demands of their clients for faster results and accommodate the ever-shorter development deadlines of the bio/pharmaceutical industry. By locating their technology resources in multiple markets to match the desired skill-sets with the available pool of qualified employees, technology providers can deliver the services their customers need within the required timeframe and budget.

While off-shoring holds the potential to help technology companies improve their response to clients, the improvements are not automatic. The benefits of adding resources through off-shoring can be offset by the challenges and costs of managing quality control, cultural differences, communications issues, data security risks, and other factors. Many technology companies have established off-shore development programs only to abandon them in a short period of time, with expensive and damaging consequences. To fully leverage the advantages of off-shoring, companies must understand the challenges and have processes in place to successfully coordinate and manage a multinational workforce in a competitive — and highly regulated — environment.

Benefits of Off-Shoring

When bio/pharmaceutical companies approach a technology provider for assistance, they are typically seeking solutions that will speed up a software development project or a clinical trial launch. A technology company that can react quickly and provide the resources needed to meet the industry’s increasingly short timetables is the one most likely to win the business. The ability to draw on off-shore technical personnel to meet staffing requirements is often essential to providing the level of service the bio/pharmaceutical industry is demanding.

With appropriate management oversight and quality controls in place, a wide range of both technology and operational services can be successfully provided by off-shore resources. The systems being developed and supported by these technical resources encompass the full range of bio/pharmaceutical industry technical requirements, but are typically focused on the technology that supports the clinical development process, such as Clinical Trial Management Systems (CTMS), Interactive Voice Response Systems (IVRS), medical imaging systems, and web-based portals.

What are the key benefits of off-shoring for technology companies in the bio/pharmaceutical marketplace?

Availability of qualified people

A major benefit of off-shoring is the ability to access a large pool of qualified technical resources. Off-shoring gives a company the flexibility to reach out to graduates and skilled professionals in major university and technology centers around the world. Rather than being constrained to recruiting just those who live near the company’s headquarters or those who are willing to relocate there, companies are able to draw upon a much larger number of qualified professionals. Numerous universities in India, Russia, Belarus, China, and other countries in eastern Europe and Asia offer strong engineering, science, and computer programming curricula. Some offer technology degrees that are not widely available in the U.S. or western Europe — such as software validation — recipients of which are highly sought after by technology companies. This availability of large numbers of well-trained people gives technology companies the ability to quickly add resources when given tight deadlines by their bio/pharmaceutical clients.

India is the most mature labor market for technology workers, with many excellent public and private universities producing software engineers and other technology professionals. There are currently more than 2.5 million college graduates nationwide in India with technical or engineering degrees. This available pool of technical graduates and professionals — concentrated in major Indian technology centers such as Bangalore, Hyderabad, and Mumbai — offers near-universal fluency in English, as well as widespread familiarity with the technical requirements of the pharmaceutical industry because of the large number of bio/pharmaceutical companies located in the country. Most of the technology workforce is well-versed in international coding practices, and many have professional certification.

Russia also offers a large pool of skilled technology workers. Approximately 250 universities across the country provide technology-related degrees. It is estimated that 1.3 million people graduated from Russian universities within the past seven years with degrees in physics, mathematics, informatics, and computer engineering, with a high concentration of those graduates in Moscow and in the Saranov region.

The Republic of Belarus is another country with a high concentration of university graduates with technical training, centered around the capital city of Minsk. Nearly half of the 46,000 annual graduates from Belarus’ 57 universities specialized in information technology or related fields.

Workforce mobility

Both university graduates and professionals in the countries where off-shoring is common are typically more willing to relocate to accommodate the needs of their employees when compared with potential new hires in the U.S. or western Europe. This greater degree of mobility among the workforce allows technology companies to access potential employees across widespread geographic areas in these countries, without major concerns about relocation costs.
Existing technology infrastructure

Countries such as India already have sophisticated technology systems in place, making it relatively easy for technology companies to establish the robust infrastructure they need to support their off-shore technical resources. Other countries are rapidly developing these capabilities as their volume of off-shore work increases.

Ability to leverage time zones differences

While locating a technology workforce in widely separated countries and time zones presents logistical and management challenges, it also offers some distinct advantages. For example, computer programmers in the U.S. can send the code they have been writing during their workday to software engineers in India, China, or Russia for de-bugging and testing “overnight” and have the validated code waiting for them when they arrive at work the next morning. By strategically leveraging time zone differences, a technology company can literally have people working on a project almost 24 hours a day. This approach can dramatically reduce the time it takes to develop and test software and other technology applications. It also reduces the pressure on the headquarters technology staff, which might otherwise have to work significantly longer hours to complete a project with a short deadline.

Lower costs

While saving money is not the primary driving force behind off-shoring by technology companies serving the bio/pharmaceutical marketplace, costs are always a consideration in this highly competitive industry. The ability to add technical resources quickly at a relatively low cost can have a major impact on both the ability of a technology provider to compete for business and on the ultimate success of the project itself. The cost to recruit and retain skilled technical employees to meet customer demands is clearly lower in eastern Europe and Asia than in North America or western Europe — although the additional costs of operating and managing a co-located technology workforce can reduce the cost advantages.

A global workforce for a global market

The bio/pharmaceutical industry today is truly global, with offices, manufacturing facilities, clinical trials, and patients around the world. That means that the next generation of technology systems and software being developed for the industry must also be global, with user interfaces and terminology that can be utilized and understood internationally. With a workforce located in multiple countries, technology providers can draw on a broad range of experience, local knowledge, and language skills to develop systems and applications with greater usability in growing worldwide markets.

The Challenges of Off-Shoring

While off-shoring offers significant potential advantages for technology companies serving the bio/pharmaceutical industry, it also presents numerous challenges and risks that must be carefully weighed against the benefits before a company makes a substantial investment to locate its technical resources in multiple countries. The challenges include:

Maintaining and validating quality

Millions of dollars can be at risk if a clinical trial is delayed or has to be repeated because of technical errors. Given these high stakes and the exacting regulatory environment of the bio/pharmaceutical industry, technology companies involved in off-shoring must place a high priority on maintaining quality levels. It is essential for these companies to have strong processes, detailed procedures, and robust training programs in place to validate all software and ensure strict compliance with regulatory, industry, and client standards.

Language barriers

Although not a problem in India, there are obviously language issues to be overcome between managers and technology workers located at company headquarters in North America or western Europe and the off-shore employees or third parties in eastern Europe and Asia. The key is to have local managers or agents who can effectively manage interchanges between the company and the local workforce to avoid errors due to miscommunication and ensure that instructions and standards are clearly understood. In circumstances where language is an issue, written process methodologies that require detailed project documentation and tracking (such as CMMx or ISO900x) are effective substitutes for informal, remotely coordinated meetings.

Cultural issues

There are major cultural differences between the countries in Eastern Europe and Asia where off-shoring is growing, as well as differences within a single country. Whether a technology company is in-sourcing or outsourcing its technology resources, it is essential to have experienced management in place that understands the culture of the local workforce. With that knowledge, a technology company will be better able to capitalize on the strengths of the local culture and manage any shortcomings. In addition, cross-cultural training for on-shore management and staff provides is an excellent investment that will more than pay for itself.

Employee retention

Because of the intense competition within the bio/pharmaceutical business and across the technology sector in general, the ability to not only attract but retain qualified off-shore technology resources is critical. Employees in some markets can be lured to new employers for much smaller incentives than would be typical in the U.S. or western Europe. Like all employees, the off-shore workforce must be managed and compensated fairly to be retained, with incentives and motivation that maintain morale, create team spirit, and reward company loyalty.

Data security and intellectual property protection

Data security is a major management issue everywhere, so security concerns are not unique to off-shoring or to any particular country. While the countries where most off-shore technical resources are located provide some form of copyright and intellectual property protection, enforcement of these laws can be more difficult to address in foreign courts, just like any other legal issue. Companies must be aware of data security issues and the differences in various legal systems when deciding whether to locate their off-shore technical resources in a particular country, and, more important, in determining what kind of work is being performed and what type of data may be at risk.

Time zone differences

Although there are possible benefits of time zone differences as noted above, there are clearly some challenges in managing and monitoring the work of people halfway around the world. Frequent reports, clear milestones, on-site visits, and teleconferences during overlapping work hours are some of the ways to keep off-shore projects on schedule and on budget.

Hidden costs

Although labor costs will be lower in other countries, there can be significant start-up costs to open an in-sourcing operation in another country, including investments in facilities and infrastructure. Even third-party outsourcing arrangements require some investment for management, monitoring, and remotely accessible systems. Delays because of government red tape must also be anticipated, ranging from delayed project start-ups to payment challenges. These factors can reduce anticipated savings and increase costs, and must be accounted for when planning any off-shore projects. In general, organizations with existing global projects and experience will have the greatest chance for success in anticipating these issues.

The overall challenge for technology companies is to make sure they have robust processes in place to manage an off-shore workforce and monitor the work that is being performed. It is crucial to ensure adherence to schedules, budgets, regulations, and industry quality standards. In addition, the presence of experienced local management at each remote location is critical if a technology company is to gain the greatest benefit from off-shoring while minimizing the drawbacks.

For organizations with limited global experience, the best way to reduce the risk is to begin slowly when off-shoring in a new location. That could mean assigning projects with lower priorities or less rigorous technical requirements to gain an understanding of the particular strengths and weaknesses of the workforce, as well as the cultural environment — establishing “proof of concept” just as a bio/pharmaceutical company would do for a potential new therapy. As the company gains experience and confidence in a particular location, the workforce there can be assigned greater technological challenges.

Looking Ahead

The world has changed in the last 20 years with the evolution of the global economy, global services, and a global workforce, supported by the growth of the Internet and the addition of innovative communications tools. It is now feasible to leverage technical resources in multiple locations around the world. More important, it may no longer be possible to meet the demands of a highly competitive and cost-conscious global industry such as bio/pharmaceuticals with the technical resources available in a single geographic area or even a single country. Technology companies must have the flexibility to use off-shoring to access the widest possible pool of resources if they are to deliver the level of service their clients require.

What is required is not just off-shoring, however, but effective off-shoring that maximizes benefits and mitigates risks. The bottom line for the technology companies serving the bio/pharmaceutical industry is that there is tremendous potential for utilizing off-shore technical resources to provide improved customer service and lower costs, but there are also challenges and risks that must be carefully managed to realize the greatest benefits. Companies should move forward with caution as they establish off-shore resources to ensure they understand the regulatory, cultural, logistical, and management challenges — and have the systems and organization commitment in place to meet those challenges — before making major off-shoring investments.

Sina Adibi is vice president of software development and chief technology officer of Perceptive Informatics. He can be reached at [email protected].