New market research from IDC subsidiary Life Science Insights forecasts a 6.2 percent compound annual growth rate for the life science information technology sector through 2007. This growth “is not a high as has been predicted in the past,” said Jim Golden, VP of research at Life Science Insights, but “it still represents one of the best places we think you can be in information technology.”
In a telebriefing to discuss preliminary findings from the firm’s “Green Book” market overview, Golden said that life science IT spending growth will be second only to government IT spending through 2007, which is predicted to have 6.5 percent CAGR during that period. Growth in life science IT is projected to outpace the 4.4 percent CAGR predicted for overall US IT spending by a wide margin.
But the estimate is certainly more sober than previous assessments. In 2002, Life Science Insights’ parent company IDC predicted a four-year CAGR of 24 percent for the worldwide life science IT market, which it forecast to reach as much as $38 billion in total by 2006.
Life Science Insights hasn’t released figures for the total market size it expects by 2007, but it did provide some estimates for some specific life science IT segments in 2004. High-performance computing, for example, is expected to be a $1 billion market in 2004 (with 12.6 percent CAGR through 2007), while data mining and visualization software will be worth $374 million (with 7.4 percent CAGR through 2007), and content will be worth $130 million (with 7.2 percent CAGR), according to the company.
The overall market in 2004, based on estimates for 14 segments ranging from LIMS to IT outsourcing, is $14.2 billion, according to Life Science Insights.
Additionally, the firm recently published a white paper that offers a bit more detail on projected growth patterns in the industry. For example, the firm predicted that total IT spending in the biotech and pharmaceutical industries will grow at a CAGR of 7 percent in the US and 7.5 percent worldwide through 2008, but spending for R&D IT will grow slightly more quickly, with a CAGR of 8 percent for the US and 9 percent worldwide through 2008. The company estimates that R&D IT spending within pharmaceutical companies accounts for 7-10 percent of total R&D spending, while R&D IT spending for biotechs makes up a bit more, at 11-15 percent of total R&D spending.
Additionally, the industry is much more optimistic about its IT spending now than it was at the end of 2003, according to Life Science Insights’ research. A survey of around 500 firms in the fourth quarter of 2003 resulted in an average projected IT spending increase of 4.0 percent over the next 12 months, but that jumped to a projected 5.6 percent increase for the first quarter of 2004. Hardware and software budgets had the biggest increase — from 2 percent and 2.5 percent, respectively, in the fourth quarter of 2003, to 6.5 percent and 7 percent, respectively, in the first quarter of 2004.
Software spending drivers included bioinformatics, LIMS, database licenses, and data warehouse implementations, according to the company.
“Despite the recent media backlash directed at bioinformatics, respondents reported widespread adoption in use of bioinformatics tools,” said Judy Hanover, a research analyst for Life Science Insights, during the call. Nearly 40 percent of respondents indicated they had “widespread adoption” of bioinformatics tools within their companies. In cheminformatics, Hanover said, “we saw limited adoption, but high awareness of the existence of tools and their functionality.”
Additionally, Life Science Insights found that open source and internally developed tools are used more frequently than commercial vendor-developed applications in bioinformatics, while commercial tools were more common than open source applications in cheminformatics.
The company’s predictions are in line with those of other firms covering the market. In March, Navigant Consulting (formerly Front Line Strategic Consulting) pegged the worldwide market for bioinformatics software tools at $245 million. That report, which focused only on software, predicted 9.3 percent CAGR over the next five years, and a market size of $375 million by 2009 [BioInform 03-08-04].