IT spending in U.S. pharmaceuticals to reach $5.5bn, says Gartner

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The pharmaceutical industry has been relatively immune to the U.S. economic downturn, and IT spending in this industry will continue to grow. According to a report* by the Dataquest unit of Gartner, IT spending in the sector is forecast to grow from $3 billion in 2000 to $5.5 billion in 2005.

Demand for pharmaceuticals is tied to the general health of the populace, which has remained fairly constant over the past few years, and is expected to rise dramatically as the elderly population - the single largest group of prescription drug users - grows. Pharmaceutical drugs will continue to be in demand, regardless of economic conditions, and this will result in continued investment into IT.

"The pharmaceutical industry is poised for tremendous growth in the next five years, and much of the emerging opportunities have yet to be captured by a single IT vendor," said Geraldine Cruz, analyst for Gartner Dataquest's IT services worldwide group. "IT product and service providers that plan to address this growing market must have domain expertise in the business pressures, regulatory issues and technological needs that affect the receptivity of the industry to IT solutions."

Spending for software and external services in the U.S. pharmaceutical industry will outpace spending for hardware, network equipment and internal services. In 2000, external services spending represented 53 percent of total external spending for the U.S. pharmaceutical industry. Hardware spending accounted for 18 percent followed by network equipment spending at 15 percent and software spending representing 14 percent of external spending for the industry.

By 2005, external services spending and software spending will account for a larger portion of external spending for the U.S. pharmaceutical industry. In 2005, external services spending is projected to account for 58 percent of external spending, followed by software spending at 17 percent. Hardware spending is expected to represent 14 percent of external spending in the market, followed by network equipment spending, which will total 11 percent of external spending for the sector.

Dataquest analysts said that vendors also need to find e-business initiatives that could have an impact on the industry in the future. While marketplaces, e-procurement and other e-business initiatives captured a large share of the budgets of enterprises in other manufacturing industries last year, such initiatives, while important for the pharmaceutical industry, did not capture as much mind share as drug discovery technologies.

"The industry is examining how Internet technologies can affect or transform existing business processes, particularly drug discovery and development and sales and marketing - the two processes most important to the industry today," said Geraldine Cruz. "Web-based data capture, mining and reporting for clinical trials and e-detailing and e-sampling for sales and marketing are a few of the initiatives that could impact the pharmaceutical industry."

* U.S. Pharmaceutical Industry: IT Spending Forecast 2000 - 2005. This perspective presents top-level IT spending forecasts for the pharmaceutical industry. The forecasts are designed to give IT product and service vendors market size information based on economic data, IT end-user interviews and secondary research. This information is produced by Gartner Dataquest's IT Services group.

About Gartner Dataquest
Dataquest provides market intelligence for the semiconductor, computer systems and peripherals, communications, document management, software, and services sectors of the global information technology industry.
Founded in 1979, Gartner, Inc. is headquartered in Stamford, Connecticut and consists of 4,600 associates, including 1,400 research analysts and consultants, in more than 80 locations worldwide. The company achieved fiscal 2000 revenue of $859 million.

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