SAN FRANCISCO -- IT services firm
is expanding its role with a key pharmaceutical client, offering new services in an effort to find steadier sources of revenue.
Accenture announced on Thursday that it is working with
to help the drugmaker spot patterns in how patients take its medications and how often side effects occur. The goal is to help Bristol-Myers improve drug safety by making sure patients take drugs as advised and that side effects are spotted early enough to prevent widespread problems.
The arrangement with Bristol-Myers takes Accenture a step farther into the pharmaceutical industry by giving it more of a clinical role, rather than simply supporting information systems. Like research and development, clinical work is a fixed part of the drug business and can't be scrapped for cost-savings efforts like some pure consulting projects.
Adding non-discretionary projects to Accenture's portfolio can help buffer the company against economic downturns or shocks that hit an industry sector, just as credit market turmoil is casting a pall over financial services companies.
Tony Trzcinka, a portfolio manager for Pax World funds, sees the Bristol-Myers project as part of Accenture's strategy to take on longer-term contracts with recurring revenue streams as hedges against market cycles. For example, the company has just sealed a $185 million contract to manage
finance, accounting and procurement systems for the next seven years.
According to its recent securities filings, Pax World owns 575,000 Accenture shares, which had risen over 20% this year before the recent market volatility set in.
Analysts expect Accenture's annual revenue to grow 17%, nearly double the pace that IT research and advisory firm Gartner expects for the entire IT services industry. Trzcinka expects growth in earnings per share to outpace revenue gains. This could boost shares even more and helps justify why Accenture trades at a premium to it its peers
Most of Accenture's $16.6 billion in revenue last year came from projects with government agencies, financial services firms and companies in the communications and high-tech industries. Beefing up its health care services could add a bountiful revenue source as drug companies and life sciences firms push forward with projects to find medications and devices to treat the world's aging population.
Pharmaceutical companies have been spending more money on information technology, especially to monitor safety in drug production and shipping. As drugs move through the supply chain, for instance, data systems can monitor whether they are stored in trucks or depots kept at the right temperature and humidity levels.
Drug companies are also turning to information systems to help control the rising costs of discovering new drugs and bringing them onto the market, says Tony Viola, vice president of marketing for
Patni Computer Systems
In July, Patni spent over $27 million, mostly in cash, to acquire privately-held Taratec, which helps monitor drug handling and clinical trials, among other services. Taratec's clients include seven of the top 10 drug companies, according to Viola.
There are also opportunities to help companies once they have their drugs on the market. Indian tech services giants
and its rival
are vying to acquire MarketRx, a privately held company with software tools that help companies forecast drug sales and measure the effectiveness of marketing programs.
Accenture has assigned 140 employees in India to the Bristol-Myers project. This group may grow as Accenture takes on more safety work for Bristol-Myers or other pharmaceutical companies.
"We view this as a strategic growth area for us and expect other pharmaceutical clients will want to follow suit," said Eric Sandor, who's leading the Bristol-Myers project for Accenture.
Accenture shares were recently trading down 76 cents, or 1.9%, to $38.90.