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August 18, 2004 | For a small biopharma company on a tight budget, $150,000 is a significant sum. It represents what an electronic data capture (EDC) system to administer a company's clinical trials can cost in the first year, including license fees, hardware, support personnel, and installation.

Options such as application service providers (ASPs) are attractive for companies averse to the large capital investment associated with perpetual software licenses. ASPs are less expensive initially, and software is paid for incrementally as it is used. Applications are configurable, allowing a degree of customization at lower cost. Hosting at the ASP's site removes hardware requirements for the end-user.

ASPs have had mixed success in life sciences. While reasonably successful under certain conditions in clinical trials and laboratory information management systems (LIMS), many companies attempting to deliver ASP-model applications in areas of basic research, drug discovery, and development have met with either poor results or outright failure.

Clinical trial data management is a natural fit for the ASP model. But ASPs have not been successful with bioinformatics tools.
Life Science Insights has examined vendors providing software as a service to life science end-users. Three criteria predict success and differentiate new offerings:
  • The offering must be relevant to the customer's core business, yet not so specialized as to limit the market to a size below the threshold of profitability for the vendor.
  • There should be minimal or no competition with open-source or free products.
  • The ASP delivery model must fit with and expand the application's functionality.

In clinical trials, the ASP model meets these criteria — the Internet-based format and the service-based delivery model add value. Clinical trial data management applications are distributed across trial sites in multiple countries and involve a large number of users. This is a natural fit for ASP-model delivery.

The same is true for LIMS. Acquisition-hungry pharmas have been left with globally distributed drug pipelines and a need to share information between multiple labs and countries. Market pressures require that development data be used to submit parallel regulatory applications to multiple international regulatory agencies. Data have to be collected, centralized, and redistributed, creating the need for a new breed of application well suited to the ASP model.


The Bioinformatics Problem 


More Online 
Read more about ASPs in life science at

www.idc.com/getdoc.jsp?containerId=31275 


ASPs have not been successful at creating bioinformatics tools. Most developed for this market compete with open-source tools that access peer-reviewed data, and are well maintained by academic researchers. Examples include BLAST and MitoProt. Public-domain data and tools makes it difficult for vendors to establish value for their query tools, even with a low-investment licensing model such as an ASP. These sophisticated users also have unique needs, making it unlikely that one application will allow enough configurability to create a market large enough for vendor profitability.

Proprietary content in for-fee applications is also an issue. In scientific circles, privately curated content is treated with suspicion. It is a classic catch-22: If the data are proprietary and you charge for them, they are not peer reviewed and therefore not trustworthy. Only publicly available data are available for peer review, but if they are public, you can't really charge, can you? Few companies have been able to add "enough" value to the data or tools to entice cash-strapped researchers to pay an ASP.

Failures of bioinformatics companies and product offerings based on curated content, customized tools, or both offered in an ASP model include DoubleTwist, Incyte, and Viaken. These three alone absorbed more than $190 million in venture capital funding before they either ceased operations or left the ASP space.

ASP tools in areas such as bioinformatics must significantly reduce the IT burden on researchers by a margin sufficient enough to justify payment, while using only rock-solid content sources. It remains to be seen if the ASP is a valid business model in bioinformatics.



Judy Hanover is an analyst with Life Science Insights. E-mail: jhanover@idc.com. 





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