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Outsourcing: Biotech booms overseas

India and Asia grow, while most product development stays at home

By Mignon Fogarty    LISTEN TO THE PODCAST

If India brings to mind visions of call centers, it’s time to think again. Biotech and bioinformatics are booming in countries formerly known for low-skilled workers handling customer service calls. Today, that Indian voice on the other end of the line may just as easily be updating an IT manager about biotech database development as helping a consumer understand their credit card statement. For better or for worse, the trend appears to be gaining momentum. “Of 27 organizations now offering life sciences IT services in India, 22 have been established since 2000, “ says Adrienne Burke, a principal at Genomic Society Consulting who recently spent two months in India researching the new report Outsourcing Biotech IT Jobs.

And don't think that India is the only country growing up fast. India’s Hyderabad, where the government has provided land for biotech parks, may be called “Genome Valley,” but China, Singapore, and Taiwan are also nurturing biotechnology at home, and increasing their efforts to entice U.S. and European companies to set-up shop locally or outsource their jobs overseas. Tiny Taiwan for example, just barely bigger than Maryland, boasts about 250 biotech companies and 95 institutions engaged in life science research according to Grace Yu of China Development Industrial Bank (CDIB) Bioscience Venture Management, in San Diego, CA.

COST SAVINGS

As with industries ranging from financial services to software development, life science companies were initially drawn to Asia and India for the cost-savings. “Scientists are cheaper there,” says Yu.

GOVERNMENT INCENTIVES

Government incentives and reduced regulation also play a role in attracting jobs. These countries’ governments recognize the benefits they gain from an influx of foreign investment, and devote considerable resources to making themselves even more attractive. “There are matching grants and low interest loans, whole packages of incentives, for the local company as well as the overseas partner,” says Yu. Burke confirms that in addition to government-backed biotech parks in Hyderabad, she saw biotech friendly policies in other large cities she visited such as Bangalore.

RETURNEES

Biotech growth overseas is not only being driven by government incentives and a lust for savings, but also by an increasing flood of returnees – scientists who are trained in the U.S. or Europe, perhaps worked in industry, and then return home. Burke notes that although many U.S. companies express concerns that workers in India won't understand U.S. cultural issues and needs, many people working in India have extensive experience in the U.S. “In one of the companies, the founder taught at MIT…most of these guys have worked over here [in the U.S.],” she says.

Asian and Indian scientists appear to be returning home (or staying there in the first place) in part because fewer U.S. employment visas have been available for foreign workers in the last year or two; but they also return in the hope of a better life. “I think people see opportunity, and they believe that they will have more in terms of their career development in China than in the U.S. where they [can] hit the glass ceiling because they are a foreigner or a minority,” says Yu. Furthermore, wages paid by U.S. or European companies to overseas workers can be enticing, in relative terms. For example, Burke reports that although the per capita income in India is about $500 a year, a software developer with a Ph.D. can earn as much as $14,000 per year. “If you’re making $13,000, you’re doing really well [in India],” she says, noting that the standard of living would be roughly equivalent to making between $75,000 and $100,000 per year in the U.S.

MODERN FACILITIES

Further, Burke notes that while Americans might imagine Indian IT workers slaving away in grimy offices with lights flickering from an unreliable power grid, the reality is another story. On her journey around India Burke reported seeing “beautiful facilities with espresso machines on every floor, racquetball courts, and beautiful lawns [graced by] swans.” She added, “People are treated pretty well in the high tech industry over there.”

INTELLECTUAL PROPERTY CONCERNS

Nevertheless, barriers still exist to transferring many life science jobs overseas. Patented technology is typically the foundation of biotech and pharmaceutical companies, and concerns about intellectual property (IP) protection still keep many companies firmly planted in the U.S. and Europe. China in particular has a reputation for playing fast and loose with proprietary technology. Although Brad Lee, executive vice president of operations and business development at Epitomics, a biotech company in Burlingame, CA with a new antibody manufacturing subsidiary in Hangzhou, China, believes the country is making progress toward better protection of proprietary technology, he says, “No one is wanting to test the waters…it is just too big a risk to take.” Burke notes that India is poised to strengthen their IP laws and if the international community is convinced they are serious it could result in more work for businesses in India. “It’s just a matter of time before companies over here trust companies over there,” she says.

HOW TO ADAPT

So facing this highly educated, well-treated, but low paid competition, what’s an American worker to do?

At first blush, one might think that becoming more cultured would allow American workers to play a role as liaison with their foreign counterparts, and in some cases this might be true. Ida Chen, a founder of Clingenix in Sunnyvale, CA, a company that is outsourcing some clinical trial and research functions to Taiwan and China, emphasizes the importance, and value, of being truly bilingual. “I think the foreign researchers here [in the U.S.] have a lot of potential if they truly can speak both languages. When I say multiple languages, I mean read, write, speak, really be able to do it,” she says. Presumably, U.S. researchers could have similar value if they were bilingual. Yet Burke notes that most of the liaison jobs she sees in U.S. companies go to foreign nationals. “Many companies that outsource have someone in-house who is managing that relationship; but it seems to be that all the Indian guys get those jobs,” she says. Further, in countries like India and Singapore, English is already the language of business, so becoming bilingual may not provide much of an advantage.

Finally, many experts say not to overreact. The majority of jobs being sent overseas are the kind of jobs skilled workers should be glad to hand off. “Anything that depends on a lot of manpower…will go. But when things are highly creative and truly revolutionary changes in the way we function, those things will stay,” says Chen.

Burke’s case studies revealed the same trend. “[For example,] a pharmaceutical company has some lower priority projects or back burner data analysis that it needs done. Their in-house staff is working on much higher priority work and science, so they say ‘We can get this done if we send it over to a team in India’,” she explains.

Despite the fear that over time U.S. companies will take advantage of the pool of highly skilled talent overseas, the best way to ensure job security still seems to be to situate yourself as closely as possible to the product development process. “Nobody is saying to a team in India ‘Invent our next product for us’. They’re saying ‘Our in-house team has developed this new product, and we need software that will enable it to interact with the users’ desktop computer,’ says Burke.


This article originally appeared in Workforce Diversity, Winter 2005