The Chromatography Data System Market Heats Up.

One of the fastest growing and most dynamic components of the chromatography market is chromatography data systems (CDS). CDSs are also a prime example of how instrument companies have been able to successfully integrate software with their products to build a new and lucrative market. The

total market for CDS in 2000 is estimated to be well over $450 million, with growth in the double-digits expected to continue into the near future. The expansion of the LC market, the rise in R&D spending by pharmaceutical companies, the flood of information generated by HTS and the need to organize and analyze it have all contributed to push the sales of CDSs from around $230 million in 1994 to over $400 million in 1999. And purchases of upgrades accounted for a sales surge in the late nineties. But market conditions aside, the rapid advances in software design have also spurred sales as systems were adapted to laboratory and instrument users' needs.

With 21 CFR Part 11 regulations, the guidelines for the submission of electronic records to the FDA, now in effect, the CDS market has entered a new phase. New versions of almost all major CDSs have been introduced that include features for 21 CFR Part 11 compliance. But these latest versions also suggest a more significant shift in the CDS market. Software is now independent from the instrument, creating a more competitive and fragmented CDS market.

The software market holds several attractions for instrument companies. First of all, software is relatively easy to design and produce compared to instruments. R&D costs are much less for software and with developments in software technology occurring in all businesses, innovations elsewhere can be adapted to instrument operations. Secondly, software is a product that is continually repurchased through the sale of upgrades and new versions. Whereas an end-user would buy a LC once every five to seven years on average, new versions of a CDS with extensive new features are often available every two years. Also software often comes bundled with the instrument and thus does not require an extra investment for initial sales.

As CDSs have evolved, their increasing sophistication has made them easier to use, more efficient and a more integral part of many laboratories. Newer versions of the most popular CDS programs feature a standardized operating system, networking capabilities and increased security, scalability and flexibility. They are also easier to integrate with other laboratory systems, such as laboratory information management systems, enterprise resource planners and databases, and are customizable. In addition, electronic signatures, report wizards, and data archiving have made CDSs a powerful regulatory compliance tool. In the end, increased software sophistication translates to cost savings for laboratories.

For instrument companies, however, a problem has been how to differentiate their CDS from their competitors' system. Until recently, such a differentiation was unnecessary because CDSs were often bundled with the instrument and, in most cases, still is. But the latest versions of CDSs indicate that this trend is reversing. Waters Millennium32 software version 3.2, Dionex' CHROMELEON version 6.1 and ThermoQuest's latest version of ChromQuest all offer data control and acquisition for Agilent's 5890 and 6890 gas chromatographs. It is obvious that these vendors want to capitalize on Agilent's large installed base of GCs. On the other hand, Agilent's new Cerity networked data system for pharmaceutical QA/QC can control Waters' Alliance HPLC system. So both companies have targeted eachother's customers.

These companies are also betting on the fact that endusers will want to run one vendor's software on a different vendor's instrument. Increased standardization and open architecture has made this possible and thus expanded the CDS market beyond bundled packages. In fact, PerkinElmer's Turbochrom CDS is not sold with an instrument and is compatible with all commercial LCs and GCs. But Shimadzu, the fourth largest CDS vendor, behind Agilent, Waters and PerkinElmer, has chosen not to make its CLASS-VP CDS system compatible with other vendors' instruments. Similarly, Varian's CDS only controls Varian instruments. Consequently, both companies may find themselves at somewhat of a disadvantage.

While Agilent's Cerity system for pharmaceutical applications is compatible with other systems, its latest vesion of ChemStation and its Cerity system for chemical QA/QC are not. The company's software sales may continue to benefit from its large installed base, but the increased competition for sofware controlling its GC has changed the marketplace. And the latest versions of CHROMELEON and TurboChrom are challenging ChemStation as the software of choice for Agilent's 11000 HPLC systems.

But for all the top vendors, the greatest competition could come from software-only companies. The growing market share for these companies illustrates just how far the trend of the separation of a vendor's CDS from its chromatograph has come. From 1998 to 1998, the net income for LabSystems increased 46%. To date, Scientific Software has installed 33,000 of its EZ Chrom systems and is a significant player in OEM agreeements.

However, instrument companies retain some advantages with their ability to sell the end-user a CDS with the purchase of an instrument. But this advantage will fade as software become less instrument-specific and even more geared towards total laboratory solutions. Also, major players in bioinstrumentation such as Beckman Coulter, which makes the Pinnacle CDS, and PE Biosystems, which owns the Turbochrom CDS and licenses it to PerkinElmer, are also expected to play a larger role in the CDS market.

As the relative new role of software in the analytical instrument market continues to be defined, the development of CDSs is an important guidepost. The role of instrument companies in making and selling software will also continue to evolve. For now, software is an important product for instrument companies, both financially and strategically. However, the software marketplace is very different from the instrument marketplace and for instrument companies to maintain a strong position in both could prove tricky.