Why Are Pharmaceutical Companies Reluctant to Adopt Cloud Technologies?

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Despite its understandable hesitancy, the pharma industry is facing a need for more widespread adoption of cloud-based solutions.

According to the Cloud Industry Forum’s (CIF) 2023 annual report, 95% of businesses across the public, IT and technology, financial services, retail, and manufacturing sectors are now operating within the cloud, in one form or another (1). This figure highlights the rapid growth of the technology, which saw the global market value reach more than $569 billion in 2022 and is estimated to exceed $677 billion (2) in 2023 expanding at a compound annual growth rate of 20%.

Further findings from the survey also revealed that 55% of those polled are now operating a hybrid (cloud and on premise) approach, while “42% are embracing a cloud first strategy” with “96% saying their cloud strategy has delivered against expectations” (1).

Growth of the technology in the pharmaceutical industry is slower, however. Globally, uptake in the sector was valued at $4.8 billion in 2022, and reports suggest that growth will be around over 13% in 2023(3). While this growth does show acceptance of the technology by those working in the industry, it highlights that the sector is behind in its adoption compared to other major industries.Those companies in the sector that have transitioned to a cloud-based environment though have been reaping the benefits, which includes enhanced data analytics, reduced time required for innovation, and establishing standardized processes across sites.

While the benefits are well reported, these findings do raise the question, ‘Why are pharmaceutical companies reluctant to adopt cloud technologies?’

Several reasons are commonly given for why pharmaceutical companies don’t adopt the cloud. These reasons include regulatory compliance, data security, data privacy, costs, risk aversion, and data sovereignty.

The reality is that while there is a framework already in place to guide pharmaceutical companies around the implementation and use of cloud technologies, for example the International Society for Pharmaceutical Engineering’s (ISPE’s) Good Automated Manufacturing Practice (GAMP) guides, the industry’s hesitance to invest into new systems and its “late adopter” approach when onboarding new technology is slowing the sector’s widespread adoption of this hugely beneficial technology.

Data security as well as data privacy laws like the European Union’s (EU’s) General Data Protection Regulation (GDPR) or the US Health Insurance Portability and Accountability Act (HIPAA) demand that cloud providers are compliant with these laws. Requirements include consideration and controls related to geopolitical jurisdiction of data, and where they reside can provide compelling reasons for some multinational pharmaceutical companies to adopt the cloud and avoid the difficult decisions right now.

Though dependent on the benefits and risks of the overall program of work, cost will always play a part of a final decision to some greater or lesser degree. Pharmaceutical companies must ultimately ensure their products and services are compliant with regulations such as EU: Annex 11 (4), MHRA Orange Guide (5), and US 21 Code of Federal Regulations (CFR) Part 11 (6), as well as others, and thus going with a legacy technology platform that is understood but less efficient or less flexible in the short term, may be perceived as less risky than adopting new technologies such as the cloud. The typical approach taken by many pharmaceutical companies has been to adopt the cloud where patient safety is not directly impacted and the systems that are deployed on them are of a lower risk (such as marketing, training), and only after a period of stable use, will a wider adoption to host production and patient safety critical systems occur.

With the qualification criteria of any patient safety system so stringent, delays to resolve issues or acceptance of defects often allowed in other industries are generally not permitted in the pharmaceutical sector. This added burden of resilience and efficacy often sways organizations from making the decision and postponing until confidence or circumstance force their hand.

Reasons behind the industry’s reluctance to widespread adoption of the cloud

The pharmaceutical industry’s hesitance to fully embrace cloud technologies, and digital transformation, can be boiled down to three concerns: regulatory, solution efficacy, and the underlying cost of validation.

It is not an understatement to say that adopting new systems can be a large undertaking, and just like any other organization, the switch can come at a significant cost, both in terms of the outright purchase, license, and support, but also the cost of integrating these into the existing business. These costs for example may include extended training, new hires, and their related onboarding, in addition to upgrading of existing infrastructure to allow the new systems to be able to work with each other. Furthermore, the industry’s need to manage risk and ensure their systems are verified and validated also demands significant time and a sizeable investment, adding to the challenge of the rapid adoption of digital technologies. Numbers can vary dramatically, but in the author’s experience between 25% and 40% of the overall software implementation budget for a cloud hosted solution is spent on the qualification and validation of the solution. This significant proportion of the overall project cost can at least delay the investment decision and at worst halt them altogether.

There is also the perceived risk with adopting new, “fresh out of the box” systems, and the associated effort in identifying the necessary tests and operational controls to ensure confidence and compliance of the system. These controls must ultimately ensure that any doubt in the systems efficacy is covered by reliable processes, procedures, and systems to mitigate the potential for failure.


As a result of this expansive effort and suitable controls, the pharmaceutical industry generally falls into the “late majority” technology adopter category by not utilizing new technology until it has proven its worth over time and thus has shown demonstrable reliability and extensive uptake in the market before doing so. This approach often results in staying locked in a technology path which “works” but which runs the risk in the long term of becoming out of date and a liability for future migration into the cloud.

Globally, cases exist of pharmaceutical companies operating on legacy and thus no longer supported infrastructure and systems—hoping that they continue to work until the decision to replace or upgrade is taken. As regulation advances, however, the assessment and subsequent decision to remain on these legacy platforms will become less likely until such time that a decision to move must be taken at all costs.

However, here are successful examples (7) of pharmaceutical companies utilizing cloud hosted systems in the development of drugs. In 2021 for example, UCB partnered with Microsoft, using its cloud and artificial intelligence (AI) solutions to improve the development of drugs in immunology and neurology. During the same year, Pfizer partnered with AWS to utilize machine learning and cloud capabilities to streamline its drug discovery and development efforts. It is therefore possible that the switch to cloud-based solutions can lead to significant benefits.

Other recent challenges facing the pharmaceutical industry

Like many sectors over the past few years, but more so for the pharmaceutical industry, the impact of COVID-19 has challenged the way in which business operates and tested processes and systems sometimes beyond their designed capabilities. This momentous challenge forced change and set deadlines beyond what was thought possible to an industry that measured success in delivery of drugs and vaccines in years not months that ultimately meant companies had to adapt far more quickly than what they would have historically done—with the cloud playing its part in enabling this rapid transformation.

Cloud-based systems allow organizations to securely capture and share clinical data far more rapidly. The unprecedented global health crisis prompted several changes within the industry that supported the acceleration of cloud-based operations and resulted in the delivery of vaccines around the world in record time. These included cloud-based remote R&D laboratories and supported secure collaborations and sharing of data between different research teams to streamline and accelerate the development phase of the program.

The potential of the cloud

The cloud enables pharmaceutical companies to face such challenges as described above, head on, by supporting their regulatory compliance needs through the delivery of a secure and reliable platform that underpins and supports their validated systems. Reliable cloud-based systems provide scalable real-time monitoring, data analytics, and predictive maintenance that detects performance changes alerting support staff of potential problems before they become issues to end users.

Furthermore, auditing and security features inbuilt within cloud platforms ensure data are safe and secure, giving pharmaceutical companies the reassurance that their data are compliant and that the systems are capable of scaling and adapting to cope with the pharmaceutical businesses future needs. The next COVID event may be just around the corner, and business continuity plans and risk mitigation strategies should factor in those tools that provide support for scaling up to meet demand and secure collaboration when required.

Cloud computing allows for scalable and cost-effective storage resources that can also support a common platform streamlined validation approach. However, choosing the right partner to implement those systems, one who has the right level of expertise and experience is considered essential to save on the cost and onboarding and mitigate concerns when implementing a new cloud based digital system.

The right partner can support user and system requirements definition, testing, and qualification and validation activities, thereby reducing the operational impact on the pharmaceutical company. Following implementation, this transfer of responsibilities to the cloud platform provider reduces business overhead and time necessary to manage these complex systems. With less physical infrastructure, the responsibility for the pharmaceutical company should reduce, with the pharmaceutical company more able to focus efforts on the management of change and transition to cloud focused operations, thereby maximizing the benefits of security, accessibility, and integrity of data with an overall reduction in operational overhead.

While the benefits of widespread cloud adoption are clear in terms of efficiency, scalability, and collaboration and rewards achievable, the sector’s hesitant approach is clearly rooted in valid concerns around data security, regulatory compliance, cost, and the ability to partner with a knowledgeable and reputable service provider to successfully make the change happen.

However, the industry and pharmaceutical landscape is evolving, and several industry leaders have already recognized the potential that the cloud can have on the sector. It is anticipated that interest in cloud adoption within the industry will continue to grow in the coming years, which will pave the way for an industry that is secure, compliant, and has the ability to scale and adapt at pace to meet the challenges that will be presented in the future.


1. CIF. Cloud Industry Forum: Breaking New Ground with Cloud. Research Report (April 2023).
2. Fortune Business Insight. Cloud Computing Market Size, Share, and COVID-19 Impact Analysis, by Type, by Service, by Industry, and Regional Forecast, 2023–2030. Market Report, May 2023.
3. Industry Research. Cloud Computing In Pharmaceutical Market in Pharmaceutical Industry Research Report 2023, Competitive Landscape, Market Size, Regional Status, and Prospect. Market Report, September 2023.
4. European Commission. Annex 11: Computerised Systems. EudraLex Volume 4, Brussels (2011).
5. MHRA. Good Manufacturing Practice and Good Distribution Practice. Guidance Document, Dec. 18, 2014 (updated Dec. 27, 2020).
6. CFR Title 21 Part 11 Electronic Records; Electronic Signatures. March 20, 1997.
7. GlobalData. The Impact of Cloud Computing on the Pharmaceutical Industry. Theme Impact, 2023.

About the author

Adam Goulder is head of Project Management at Peacock Engineering Ltd.


When referring to this article, please cite it as Goulder, A. Why Are Pharmaceutical Companies Reluctant to Adopt Cloud Technologies? Pharmaceutical Technology, Online Exclusive Article, March 4, 2024.