Outsourcing and IP
A key concern related to outsourcing centers on IP and the desire of medical device firms to keep such property proprietary. Many outsourcing firms, including IBM, can contribute their own IP to customer solutions. "What each company brings to the table is its own," Prabhakar says. "But what develops from the collaboration is up for negotiation."

Typically, clients negotiate for ownership of the collaborative IP, and IBM is allowed to license the IP for noncompetitive uses, according to Prabhakar. To protect a client's IP, outsourcing firms are organized in client silos so that engineers have little or no contact with peers who may be working on projects for a client's competitor. An outsourcing firm's engineers share processes and have equal access to the firm's own IP--but no access to other clients' projects or the collaborative IP that results from other engagements.
For many years, vertical integration and proprietary solutions have been the dominant business strategies for medical device vendors. But both vertical integration and proprietary product strategies are under tremendous pressure due to changing technology and market requirements. The concept of a `virtual' medical device company, embodied by Mayo Clinic, represents a unique example of the breakdown of such strategies. According to IBM's Prabhakar, other institutions similar to Mayo are expressing interest in following in the clinic's footsteps.

New strategic options are available to both established vendors and new entrants. Success with these new business strategies could significantly change the face of the medical device industry.

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