From dot-coms to dot-genomes

Now that VC funding for dot-coms has dried up, integrators are beginning to eye a different sector for customers, biotechnology, an industry that is suddenly doused with capital investment.

Integrators that rode the dot-com bandwagon are now eyeing another venture-capital-fueled vehicle: biotechnology companies

Indeed, a number of service firms view biotech as a target of opportunity. IBM Global Services, for example, earlier this month launched a life sciences practice, emboldened by a Frost & Sullivan study pegging the biotech market for IT products and services at $6.5 billion in 2004. Razorfish, Scient and Zefer are among the integrators joining IBM in pursuit of biotech and the broader life sciences arena.

The biotech sector features numerous start-ups that resemble dot-coms in their need for computing infrastructure and speedy time to market. Jim Corgel, general manager for IBM’s Net Generation Business, agrees that "compute-intensive" biotech firms share parallels with the dot-coms. IBM’s Net Generation unit was launched in 1999 to focus on Web-based businesses, but now is addressing biotech as a newer venture, Corgel explains.

Will Biotech save integrators? YES

To some degree, integrators simply are following the money. As VC funding for Internet firms wanes, dollars for biotech have become more plentiful. That’s partly to do with the completion of the mapping of the human genome, which has inspired a multitude of biotech entrepreneurs. Last year, VC investment growth in biotech outpaced funding for Internet-specific companies, according to the National Venture Capital Association. The Institute for Biotechnology Information reports that more than 400 VCs are backing biotech and estimates that $20.2 billion may be invested in biotech and associated fields.

"It’s an exciting time," says Michael Parker, VP of health care and life sciences for Razorfish and formerly of KPMG. He notes that biotech’s computing requirements range from molecular modeling to knowledge management. "An industry such as biotech simply doesn’t exist without sophisticated, powerful information solutions," he says.

But while the market opportunity is large, the barriers to entry are significant, according to industry executives. Steven Yecies, general manager of Scient’s Global Health and Wellness business unit, says biotech calls for considerable domain expertise. Biotech firms "have a lot of scientists in upper management," he says. "It’s pretty easy for them to flush out the people who really understand the domain and the environment they are working in, and those who don’t."

Parker adds that biotech has become a competitive space for IT services, noting that traditional consultancies are active in the area, as well as some boutique operations. "Quite frankly, there’s a lot of competition right now."

New entrants
The emerging biotechnology arena also is creating opportunities for product companies. For example, Linux NetworX Inc. has found biotech a ripe market for its turnkey Linux cluster solutions. Among its customers is the Baylor College of Medicine’s National Center for Macromolecular Imaging, which uses a 32-processor Linux cluster for modeling microscopic proteins.

"We do see [biotech] as a real growth opportunity, especially with the genome projects that are trying to take shape," says Clark Roundy, VP of marketing and sales for Linux NetworX.

Roundy says customers are finding Linux clusters more cost-effective than supercomputers, which were once the only viable solution for heavy-duty computational requirements. Biotech companies also respond favorably to Linux in light of the scientific community’s traditional use of Unix, he adds.

Overall, integrators entering biotech will need flexibility and science savvy, as well as a competitive spirit. Biotech companies range from startups to giant pharmaceutical companies, and customer requirements can vary dramatically depending on where a given company stands in its product development cycle.

Opportunity awaits for those who can crack the code.