Like the traditional offshore business services, this industry has started seeing a captive versus outsourced debate, though it is nowhere as intense. “There are myriad financial benefits to outsourcing research (from direct-cost savings to capital-expenditure savings) that are incurred even if the contractor is next door in New Jersey. I would argue that the movement offshore is only an add-on in savings, but that initial move out of the house is where the major benefits are realized — where the contractor is only a matter of degree,” says StevenHeffner, Kalorama Information, the author of a report on the drug-discovery outsourcing opportunity, adding that offshoring is still very small.

The growth has been made possible by a supply of top managers from the ranks of early movers, as well as the global Indians in the U.S.A. and other developed countries, returning to India. “Reverse brain drain has also fueled this industry growth, as it has in the IT industry,” says Dr. Kher, though he belongs to the other dominant category of homegrown managers coming from early movers, having worked in Eli Lilly and then subsequently DiagnoSearch.

The evolution and maturity of the pharma value chain has followed patterns familiar to other forms of BPO. Starting with the comparatively high volume, low value work of clinical research, the offshore drug-discovery industry has moved across the value chain to provide services in the preclinical phase, especially in the area of chemistry services, for which talent is available in plenty in India, thanks to the large number of generics companies based there. A few players are also beginning to provide services in the area of molecular biology and bioinformatics.

“India has proved its expertise in systems, quality and cost,” says Dr. Kher. “Now, it is moving to more knowledge-intensive work,” he adds.

Meanwhile, the IT-services companies are making their “entry” into this space and at the moment it is gaining steam. TCS, Infosys, HCL, Cognizant and Infosys are making serious moves to enter the drug-discovery domain. “Many of the processes are systems driven, where IT companies excel,” says Dr. Mattoo of Eli Lilly.

While almost all major IT players agree that life sciences presents one of the best growth opportunities before them, there is still no consensus on where they will fit themselves. Infosys and HCL have so far largely restricted themselves to building solutions and algorithms for the drug-discovery industry, and are flirting with clinical-data management. TCS has announced its foray into areas like bioinformatics aggressively. Accenture and Cognizant have actually bagged large deals for managing clinical data from Wyeth and Pfizer respectively. Accenture’s Bangalore center is executing the project. But the IT-services company that is clearly ahead of the pack in taking a complete plunge into drug discovery is iGate. The U.S.-based offshoring company has acquired Mumbai-based DiagnoSearch to form iGate Clinical Research, which makes it a player in the whole value chain of clinical research, including clinical trials.