Portfolio Perspectives

The Looming Technology Workforce Shortage Continued: The Challenge for 2013

In professional services with IT, software as a service, hardware, networking services and management consultancies depending on individuals with strong technology backgrounds, the talent cliff becomes the most important issue facing the market.

As evidenced in the 2013 PS Maturity Benchmark, talent management is the most important challenge according to 234 companies that completed the survey in the 4th quarter of 2012. The No. 1 challenge in 2011 of "supporting rapid growth and expansion" has been surpassed in 2012 by "talent management," as outlined in Table 1.

Two years ago, PS executives were mainly concerned with sales, given the prior three years of the economic downturn. Last year, with improved sales and record year-over-year revenue growth of 13.5 percent, the focus turned to service execution. That meant efficiently delivering more projects, which led to higher revenue growth. In 2012, because of the success of the previous two years, the foremost challenge shifted to talent management. The ability to find, hire and engage a high-quality consulting workforce has become the primary concern.

Table 1. Year-over-year Change in Talent
Management Challenges (image version)
Year-over-year Change in Talent Management Challenges (text version)

The second-most critical challenge found in this benchmark is improving quality and consistency. Higher-quality services require high-caliber consultants, and generally required skills are based on problem-solving abilities, typically found in individuals with a STEM (Science, Technology, Engineering and Math) background.

Populations in the U.S. and other developed nations continue to grow. Educational systems continue to graduate students, and thousands of people immigrate to the U.S. and other developed countries every day. Unfortunately, the balance of supply and demand for individuals with the skills necessary to succeed in technical disciplines is lacking, and without a major commitment from federal, state and local agencies, developed countries, especially the U.S., will suffer over the long-term.

Insights and Preventive Actions to Consider in Avoiding the Talent Cliff

Continue reading this article on SPIglass in the article, Warning: Talent Cliff Ahead ‒‒ Part 2.

A Prolog From Planview: Additional Materials for Project-Based Service Organizations

In the continuation of this article, SPI Research describes best-practices in personnel enlistment and talent satisfaction. For those involved in consulting services and operations, recruitment will be a stop-gap but not necessarily a solution. For individuals looking to combat the talent cliff with purpose-built technologies, these web articles and research reports are a resource developed for your interests:

• 2013 PS Maturity Benchmark, SPI Research, February 2013 ‒‒ cited throughout this series, this benchmark research conducted by SPI Research is available for purchase.
• Planview Approach to Services Resource Planning ‒‒ learn what features should be required in a technology solution built specifically for project-based businesses.
• Four Questions on the State of Technology for Professional Services ‒‒ in this interview, industry veteran, Steve Beaumont, details his research and firsthand experience evaluating PS technologies.

The Looming Technology Workforce Shortage

A Guest Contribution by Service Performance Insight

This article is the first of a two-part series on the pending "talent cliff," an important topic to professional services leaders. We discuss why this critical situation exists and provide some related insights from the newly published 2013 PS Maturity™ Benchmark for professional services.

By now, most professional services executives realize it is increasingly difficult to find, hire and retain an exceptional consulting workforce in a tight global race for talent. The bad news is that it will only get worse in developed countries as workforce demographics change, the educational system continues in disarray and immigration policies remain rigid.

To understand the growing human capital challenges, one must look at the trifecta of external forces that are creating the talent cliff.

It's the Baby Boomers!

Figure 1. Growth of U.S. workers aged 45 or older

This year, the average baby boomer (people born between 1946 and 1964, as defined by the United States Census Bureau) will be 58 years old. The graph in Figure 1 shows the impact that aging baby boomers are having on the U.S. workforce. In 2000, the number of older workers was 49.2 million. In 2012, this number increased to 63.1 million. While the number of workers older than 45 has exploded, the number of U.S. workers age 25 to 44 has fallen by 6.8 million. Every day, 10,000 U.S. baby boomers retire, meaning 3.65 million experienced workers exit the workforce every year.

Historically, retirement begins to accelerate when people are in their late 50s. Analysts project that by 2018, there may be more than 5 million unfilled jobs in the U.S. And the number of unfilled jobs requiring STEM (Science, Technology, Engineering and Math) skills is projected to be more than 200,000. Unfilled jobs coupled with the loss of baby boomer knowledge, skills and experience could severely impact workforce productivity and the U.S. economy. Furthermore, the shortage of qualified replacement workers makes filling those jobs more difficult.

It's the Schools!

One of the most important and hotly debated topics is the state of the U.S. educational system. Regardless of political perspective, the facts are sobering. On the 2009 Program for International Student Assessment exam, the U.S. ranked 25th in math, 17th in science and 14th in reading among 34 OECD (Organization for Economic Co-operation and Development) member countries. When the 37 partner countries (including China, Singapore and Taiwan) are incorporated into the list, the U.S. dropped to 31st in math, 23rd in science and 17th in reading. Clearly U.S. K-12 schools lag behind those in other developed countries.

Further, an insufficient number of students who go to college are pursuing STEM disciplines to meet market demands for these skills. Microsoft recently published a report underscoring this labor shortage by citing that the company has 3,400 unfilled research, development and engineering positions in the U.S. And this workforce deficit is not just a U.S. issue, as recent headlines declare a worldwide labor shortage of critical IT skills.

Multiple think tanks and nonprofit organizations have published extensively on this topic. While their proposed solutions for education system reform may differ, they all appear to agree on the future STEM-skilled workforce shortage.

It's the Immigration Policies!

Immigration has been a powerful economic engine for the U.S. More than 40 percent of the U.S. Fortune 500 companies were founded by an immigrant or a child of an immigrant. The current immigration policy doesn't provide the requisite number of visas needed to allow companies to recruit internationally to fill open jobs, specifically those requiring technology skills. Moreover, the worldwide shortage for these skills means U.S. companies hiring for domestic positions are competing against firms in other countries. The immigration policy in many other countries is strategically aligned to the urgent need to globally source these highly skilled workers.

Ironically, many of these foreign workers may have been educated in American colleges and universities. Right now, no targeted immigration program exists to keep foreign students in the U.S. after they earn advanced degrees.

A Prolog from Planview: Additional Reading

In the continuation of this article, SPI Research will describe how these factors have contributed to empirical data evidenced in the 2013 PS Maturity™ Benchmark and how the concerns of the looming "talent cliff" have increased dramatically over the past years. Until then, learn more about resource management for professional services organizations in these available reports and articles:

• Report for Purchase: 2013 PS Maturity Benchmark, SPI Research, February 2013
• A Collection of Articles and Case Studies: The New and Needed Solution that is Services Resource Planning
• Free White Paper: Your Project-Based Service Organization: Paper Plane or Rocket Ship?

According to recent research, the professional services industry is growing aggressively and seeing very specific growing pains in talent attrition, project profitability, and resource management. In trying to encapsulate what organizations can do to alleviate these issues, we asked subject-matter expert, Steve Beaumont four questions to help us grasp the state of the industry and the solutions described in his white paper, Your Project-Based Service Organization: Paper Airplane or Rocket Ship?.

Q: Steve, over the course of 25 years, you've worked for some very large IT consultancy organizations, and over that span, the "professional services industry" has grown nearly three times (in net profits) since 2010¹. What do you think has attributed to this growth?

Steve Beaumont: The consulting world's reliance on technology has increased rapidly, and the need to call upon specialists with expertise on how to drive business success has grown with it. As the businesses they serve have become more global or at least multi-national, the consultancies themselves have had to mirror this. This has resulted in larger firms with a range of services that need to be delivered to geographically complex clients. Whilst revenues continue to be strong in comparison with some other industry sectors, this increasing complexity and the pressure on daily rates provides very real challenges.

Q: What do you consider the "consulting world"? Does your research serve many industries considering this wide-ranging perspective?

Steve Beaumont: In the white paper Your Project-Based Service Organization: Paper Airplane or Rocket Ship?, I point to case studies that have embraced newer technologies because they exemplify efficiency and a rapid ROI. Specifically, I cite a technology services firm because the complexities of their organizational requirements and a clinical research organization (CRO) because of the impact integrating a purpose-built solution had an additional benefit of enhancing all of their process technologies.

However, there are several more industries that have allowed me and subject matter experts to expound on the subject data. Along with technology services and clinical research organizations; the "professional services industry" has come to include IT services, software solutions, technology consultancy, business services, advertising, and marketing organizations among others. For all of these organizations, people are the product and therefore, resource management has a direct impact on the bottom line.

While these industries may seem to have completely different business models, what I have learned in my research and my years is that those in charge of project delivery or operational standards have likeminded accountabilities. They all have a project delivery revenue engine and many of the larger organizations are burdened by trying to get an ERP to function for service organization-based requirements ‒‒ a task an ERP tool was not built for by any stretch of the imagination.

Q: Is this why you think Services Resource Planning (SRP) software has established itself as the purpose-built, for these types of organizations²?

Steve Beaumont: To an extent. More so, research has shown that the more mature services organizations have processes and purpose-built systems in place to allow them to operate their business more efficiently, and to provide the information they need to make better business decisions. It is not just about planning and managing projects, it is about maximizing the value from your people and keeping your clients satisfied. The increased complexity of managing successful project driven service organizations with resources or partners in multiple locations requires more sophisticated resource planning and controls. As SRP has gained prominence as a purpose-build solution that has helped project-drive organizations reach these goals, the attribution is a natural conclusion.

Q: In your new white paper you very distinctly classify project-driven organizations into two types. Is it your belief that these types of organizations can be classified so succinctly³?

Steve Beaumont: In very black and white terms: yes. Study after study has indicated there are organizations that automate their resource planning and those that do not ‒‒ or that they automate portions of the process in isolation and then manipulate ad hoc systems, for example, to get the answers they need to improve resource management processes. Correlation is definitive that those organizations that truly automate resource demand, capacity planning and resource allocation are the most successful when it comes to getting the right person on the right project and delivering successful, profitable projects.

Thank you Steve for your valuable insight!

What is remarkable to point out is how consistent Steve's research is with the analysis conducted by SPI Research, Aberdeen Group, and the IDC. Steve is among great company of researchers evaluating systems that are empirically tied to improving processes and profitability. Learn more about this research by downloading the white paper, Your Project-Based Service Organization: Paper Airplane or Rocket Ship?

About Steve Beaumont

For nearly 25 years, Steve Beaumont has been a part of professional services industry with many of those years as a management consultant for Deloitte, Coopers & Lybrand, and Ernst & Young. Steve's expertise lies in team management, pipeline, resource allocation, and project delivery. Currently, Steve is a Planview Solutions Market Manager where he is responsible for understanding and enhancing software solutions designed to help PSOs manage their businesses and deliver successful projects.

Got a question for Steve? Leave a comment for prompt reply.

¹ SPI Research: 2013 Professional Services Maturity™ Benchmark, February 2013

² IDC Executive Brief: Services Resource Planning: Systems for Effectively Managing a Project-based Business, June 2012

³ White Paper: Your Project-Based Service Organization: Paper Airplane or Rocket Ship?, March 2013

Revealing the Global State of Resource Management and Capacity Planning in a New Benchmark Study

Unfortunately, many organizations can't answer the question in the title of my blog post. Can you?

This is an ideal time and opportunity to benchmark your organization's capabilities and maturity level in terms of resource management and capacity planning. I've had the pleasure to be the chief researcher on the most comprehensive study ever on resource management and capacity planning at complex, global organizations. With more than 600 participants from more than 17 countries, we've identified the state of their organization through the lens of a maturity model, designed for specifically for this research (2013).

And what did we find?

Many organizations are continuing to operate in a state of chaos or limited visibility into what their resources are working on today and what they are available to do tomorrow. A third of organizations have achieved some level of visibility but have to continue to significantly improve productivity; and a third of organizations have made good, steady progress to truly gaining control and optimizing their resources. It is this top third, or even the top 5% of truly optimized organizations, that have some very interesting characteristics and best practices that all organizations could follow to intentionally move up the maturity spectrum (2013).

Here is a brief look at some of the findings of the study (2013). Get your copy of the Resource Management and Capacity Benchmark Study today.

• 80% of organizations are using shared resources and often in multi-country, dispersed locations to deliver projects, products, and services.
• The top business risks are "lost productivity" and "remaining in crisis mode." The risk of remaining in crisis mode reduces by half or more as organizations move up the maturity spectrum. "Delayed time to market" is also a key risk of not addressing these areas.
• The top pain point is "constant change," followed by "not enough visibility into capacity," and "ineffective demand prioritization." Lower maturity organizations have less insight into demand making project prioritization challenging.
• Two-thirds of organizations are in low to mid-tier maturity brackets.

Software is used by mature organizations; lower maturity organizations tend to rely upon spreadsheets and basic project.

The study warns if organizations do not get control of their resource management and capacity planning challenges they risk lost productivity, not leveraging resources for high-value projects, losing time to market and basing decisions on bad data (2013).

This is just a glimpse into the findings of the study. The report provides a deeper look into the characteristics and best practices of higher maturity organizations. There are a host of tangible recommendations to intentionally address these areas more proactively. In the words of one of the participants, the best way to improve is to "just do it", start small, and find pockets of success and then continue to address these critical areas of resource management and capacity planning. The research shows that organizations that have graduated from chaos into control are addressing much more strategic, competitive business decisions versus wondering (or hoping) that their precious resources are working on the highest priority opportunities.

I'd like to hear from you. How do you ensure your resources are working on the right work? Post a comment or ask me a question pertaining to the research by leaving a comment below.

Carlson, M. (2013). Resource Management Capacity Planning Benchmark Study. Planview.

In mid-2012, two independent research organizations published unique reports about the best practices of top-performing, project-driven organizations. Each had their own focus on the subject matter regarding the emphasis of their research metrics or how differing project-based companies can be collectively considered successful despite a wide variety of nomenclature, product offerings, and organizational structures. Regardless of their intention; however, both came to a remarkably similar conclusion.

Best Practices of Top-Performing (Best-in-Class) Professional Services Organizations

If PSA is not enough and ERP is not enough…

Juxtaposed against one another, the Aberdeen Group and Services Performance Insight agree that the more typical software offerings are not successful in providing project-driven organizations applicable solution.

Services Resource Planning (SRP) is a solution designed to improve upon ERP with the project-based business solely in mind. Specifically, where PSA, ERP, and CRM all fall short, SRP saves the day by giving project-based service organizations the tools to access:

• Accurate project data
• Deep visibility into resources, skill set, individual capability, and scheduling
• Universal tracking of client issues
• SRP and ERP integration
• Broad visibility into all active projects

For more information on how Planview considers Services Resource Planning (SRP) the key solution to the technology gaps discovered by Services Performance Insight and Aberdeen Group, take a look at The Planview Approach to Service Resource Planning.

Did you take one of these surveys conducted between 2011 and 2012? Are these findings reflective of your company's technology requirements? Share by leaving a comment below.

Related posts: SRP and PSA -- There IS a Difference -- Part 1 and Managing Project-Based Businesses in Turbulent Times

Addressing CRO Challenges with Services Resource Planning

December is often a time to reflect on achievements, ponder on lessons learned, and set goals for the New Year. It is as if Charles Dickens' A Christmas Carol has saturated the subconscious and I expect the Ghost of Christmas Future to appear this evening and tell me what I missed when all of the telltale signs were there.

For resource managers within clinical research organizations (CRO), all signs are particularly focused on the transformations underway in the market. To echo Wolfram Eberstein's latest blog series, CROs are facing unprecedented levels of challenges in regards to regulations, corporate mergers, growth, and increased outsourcing.

How these changes will affect cost and performance should be of concern. Here's a quick review of some of the headlines of 2012 that emphasize the degree of urgency.

• The results from sweeping regulatory reform are in. In Europe, the impact of the EU Clinical Trials has been such that CROs are seeing their manpower costs essentially double (Telegraph Media Group, 2012).
• Marketing dynamics are changing. According to a Booz & Co. survey targeting pharmaceutical sales and marketing executives about their commercialization strategies; 60% of respondents are expecting their service models to change, and as a result, estimate corporate strategies to rely heavily on "innovative pricing" (FiercePharma, 2012).
• The pressure for transparency and reliability is paramount. Phase II costs range between $4,000 to $20,000 per patient. According to Timothy Scott of Pharmatek Laboratories, "…the reliable supply of clinical trial material (CTM), whether manufactured in-house or outsourced to a contract manufacturing organization (CMO), absolutely critical" (FierceBiotech Clinical Trials, 2012).

What might the creepy ghost forecast tonight knowing what we know today about new costs, technologies, and solutions? What might I be able to do about it as soon as I wake?

We know that services resource planning (SRP) technologies are now available and have been designed to assuage many of these concerns directly. Not by implicitly reducing costs or making magically accurate predictions. Rather, SRP takes off where enterprise resource planning (ERP) and professional services automation (PSA) fail at recognizing the resource challenges of project-based organizations that need to link business operations from end-to-end.

During their evaluation of available enterprise-focused software offerings, analyst firm IDC has defined SRP solutions as an important tool for CROs:

"SRP systems pull three major business components ‒‒ resources, projects and clients ‒‒ together into one system supported by strong analytical and collaborative capabilities. Integration is the key to removing to driving more effective business strategy, and beyond strategy, an integrated system provides a solid operational foundation often preventing problems from getting out of control and enabling proactive business decision-making" (IDC, 2012).

Will implementing a system designed to manage and predict capacity and resources for CROs keep the Ghost of Christmas Future from appearing in your dreams this week? Perhaps not… I do know, regardless, you will be sleeping better with an SRP solution than without one in 2013.

To learn more about SRP for CROs download the Planview Approach to Services Resources Planning for Clinical Research Organizations. Dive into the five functional areas an SRP solution must have to help CROs produce effective resource planning practices.

What market changes/challenges are you reflecting on within your CRO? What steps are you taking to improve resource planning in 2013? Share your thoughts by leaving a comment below.

EU red tape making drugs impossible, The Telegraph Media Group, February 13, 2012 (as cited by Planview Approach to Services Resources Planning for Clinical Research Organizations)
Pharma sales execs: Current model is broken; changes are coming, FiercePharma, March 21, 2012
eBook: Supplying Global Clinical Trials Keys to Avoiding Costly Delays, FierceBiotech Clinical Trials, April 2012
IDC Executive Brief: Services Resource Planning: Systems for Effectively Managing a Project-based Business, June 2012

In the first section of this two part series, 13 Key SRP Metrics Vital to Profitability for Tech Services Companies, I outline specific metrics necessary to measure performance across multiple business units for successful resource planning within Technology Services organizations. This blog will discuss the top dashboards required to provide visibility of those key metrics, giving the current status and historic trends needed to support effective decision making.

For a comprehensive view into business performance, technology services companies should use the dashboards to look at information from four perspectives.

1. A top-level business perspective dashboard will typically focus on the financial performance of the business. It should monitor revenue and margins, as well as unbilled work in progress and future revenue forecasts. Controls should be in place to avoid revenue leakage. Monitoring on-time submission, review, and approval of timesheets is critical.
2. A client perspective illustrates the revenue and margin achieved from projects delivered to them, their satisfaction levels, and their current demand for additional services.
3. A service perspective summarizes all projects being delivered for each service line. The demand for and profitability of each service can then be determined, as well as any changes needed to be made to increase the margins achieved. The actual daily rates achieved by each role should be monitored against targets. Non-billable effort such as rework should also be tracked.
4. A resources perspective is critical. As a global services company, increasing the utilization of resources across each region is the key to driving revenue and profit. Creating global resource pools that can be utilized on projects across the world can reduce local headcount and increase productivity. Each day a resource is on the bench equals lost revenue that can never be regained. Ultimately, every Technology Services organization should attempt to drive up their resources billable utilization, as every 1 percentage increase you can get from resources goes directly to the bottom line in terms of profitability. Getting good visibility of future demand and the knowledge and experience required to deliver it successfully will allow the most effective planning of resources.

The dashboards outlined provide access to the 13 key metrics critical to the profitability of Tech Services organizations. When considering a software solution for services resource planning (SRP), I recommend Tech Services organizations include these 13 metrics and dashboards on their list of requirements. Look for a solution with in-depth reporting and analytics capabilities that provide visibility into information that helps drive decisions that are most important within the organization.

What's on your dashboard software? Is information readily available? Share by leaving a comment below.

Related post: 13 Key SRP Metrics Vital to Profitability for Tech Services Companies

The Solution for CROs

The previous blog in this series discussed the increasing growth rates and related issues seen the Clinical Research Organization (CRO) space due to strategic partnerships, globalism, and market consolidation from mergers and acquisitions. This kind of growth inevitably presents challenges for CROs trying to generate data from fragmented, non-integrated systems. There are high-cost pressures to integrate processes and information systems, while optimizing resources to lower costs.

The industry is working almost exclusively on paper with the need to enter data twice to check for inconsistencies. As is the case with most mergers and acquisitions, technology and process incompatibilities are leading to divergent data storage and availability. Furthermore, integrations are non-existent between applications specific to CROs, like clinical trial management systems and electronic data capturing, and corporate systems such as enterprise resource planning (ERP) and project portfolio management (PPM). The situation is resulting in significant inefficiencies, data inconsistencies, and process failures.

To remain competitive in a worldwide market, creating global data visibility and transparency while maximizing resource capacity has been imperative for CROs. This can be achieved only by first integrating processes and then integrating the systems that support those processes. CROs need to further advance and support best practice processes with state-of-the-art technology systems to appropriately utilize resources.

CROs depend heavily on resources (human and non-human) for both strategic and operational support and have a big impact on the cost of the studies themselves. Services Resource Planning (SRP) is an ideal application to optimize the use of resources and drive the cost of studies down, while enabling an organization to ensure:

• More effective use of resources, such as clinical monitors, investigators, and research partners
• Better communication and alignment across study sponsors, partners, and investigators
• Improved resource budgeting and financial visibility between study sponsors and partners
• Rapid response to changing circumstances that would otherwise consume resource time

Of course, organizational adoption of these processes and systems is an integral part of any new deployment and is supported by a SRP enterprise solution. SRP is purpose-built for project-driven organizations to enable optimization of global resource pools with best-in-class tools and techniques to increase revenue and maximize profits. For more on this topic, I invite you to read the IDC Executive Brief titled, Service Resource Planning: Systems for Effectively Managing a Project-based Business.

What solutions are working in your CRO? Share by leaving a comment below.

Related post: How Clinical Research Organizations Are Transforming in Today's Environment -- Part 1

Having worked in the Professional Services industry for nearly 25 years, I have helped numerous PSOs and IT organizations utilize software solutions to manage their businesses. My extensive experience as both a management consultant and software design has given me a unique perspective into Services Resource Planning. As the need for it becomes increasingly prevalent, I am eager to share my insight.

Services Resource Planning (SRP) is critical for success for all service-driven companies, particularly in the technology services industry. Accurately identifying project requirements and optimizing resources to deliver those projects is essential. This two-part blog series will provide a high level overview of the types of metrics and dashboards that are commonly used in tech services organizations that have mastered SRP.

Fundamental to managing any services business is good visibility across a number of functional areas. Insight into how each area is contributing to or hindering profitability is vital. There are key metrics that need to be monitored from three perspectives: Enterprise-wide, Services and Client. Looking across the enterprise, the starting point is on the financial side. There must be a clear understanding of:

• 1. Total Revenue – a sum of revenues from individual projects, including consulting revenue by service type and location
• 2. Margin – revenue minus direct costs
• 3. Overhead costs – indirect costs such as facilities and administration, etc.
• 4. Profitability – margin minus overhead costs

From a services perspective, metrics should be broken down by service type, from implementation to training. Analytics will help determine:

• 5. Revenue by each service
• 6. Margin by each service
• 7. Which services are driving revenue and growth
• 8. Which services are under performing
• 9. What factors may be driving margins down, such as revenue leakage and low billing rates

From a client perspective, the focus is always on keeping the client happy and buying additional services. Client retention is based primarily on client satisfaction, which can be measured with surveys and post-implementation reviews. To ensure client satisfaction and ongoing revenue, however, there should be tools in place that provide real-time access to:

• 10. Project Status, including milestones, financials and risk
• 11. Revenue & Margin from current and completed projects
• 12. Demand for additional services reflected in the pipeline
• 13. Cost of sale per client (effort taken to close a deal) – this can have a significant impact on the true profitability of a project

As previously stated, visibility into all areas of the business is paramount. Beyond the financials, resources are another major component to consider because tech services companies aren’t selling a product as much as the knowledge of their people. Employee satisfaction and turnover rates, in addition to utilization, are valuable metrics to observe since good, skilled people take their knowledge with them when they leave an organization. This puts the company at increased risk of being unable to deliver the expected service without interruption or modifications.

Decisions that change and improve a services business rely heavily on all of these metrics so their accuracy and reliability must be ensured. When companies understand what's driving the top level revenue and margin, they have greater control in boosting profitability across the business.

Do you have visibility into the metrics from the enterprise, employee and client perspectives? What are some of the key metrics that drive profitability in your organization? Share by leaving a comment below.

The Challenges

There is a significant transformation underway in the clinical research organization (CRO) space. The CRO market revenue amounts to approximately $30 billion, which is primarily generated from its core business of conducting clinical trials required for drug market admission by regulatory authorities like the United States Food and Drug Administration (FDA) and the European Medicines Agency (EMA). Further revenue is generated by consulting services around market introduction and support in medical communications.

The CRO industry has seen significant growth and consolidation in recent years. This two-part blog series will discuss the challenges CROs are facing and what they can do to manage the growth.

Over the last 15 years, CROs have seen a 10-15% growth rate primarily because of increased outsourcing of clinical research from the big pharmaceutical companies and the emergence of numerous biotech companies creating new business. According to industry analysts, this trend is expected to continue.

Although growth may be inevitable, CROs remain challenged to adapt to this volatile environment. The emerging initiative for CROs is to form strategic partnerships with big pharmaceutical companies to obtain clinical research outsourcing resources like staff and facilities while merging processes as much as possible. Some examples of these partnerships are Eli Lilly with PAREXEL®, Sanofi with Covance, Astellas with INC Research®, and Pfizer with Icon and PAREXEL.

Adding to the challenges of rapid growth is the need for a global footprint to service international customers and market consolidation due to mergers and acquisitions. As a result, many CROs:

• Are pressed to establish global, cost-efficient processes that provide corporate data of the operational business in a consistent way
• Struggle with a desire to deliver studies quickly and with reliable results within the strict regulatory framework, yet are severely obstructed by fragmented, regional or partly existing processes
• Have systems that aren't fully integrated, leading to duplicate data entry and inconsistencies

In the new CRO world, clinical data, general project data, financial management data, and planning data will be integrated more effectively and made readily available. The next blog will discuss how CROs can spearhead their existing global data challenges to effectively align resources to the right projects while improving financial visibility to drive better business decisions.

For more information on this topic, read Louise Allen's blog titled SRP -- Changing the Game for Services Driven Organizations. I'd like to hear from you. How are the changes in the clinical research industry affecting your organization? Share by leaving a comment below.