Global Healthcare IT Outsourcing Market growth fuelled by Cloud Computing till 2018

Global Healthcare IT Outsourcing market is expected to grow at a CAGR of 7.6%, to reach $50.4 billion by 2018 from $35 billion in 2013 according to a report provided by MarketsandMarkets, a global market research and consulting company. US Healthcare companies accounts for the largest share - 72% - of this market and is expected to reach $36 billion by 2018 from $25 billion in 2013. Asia-Pacific and Rest of the World are expected to register CAGRs of 8.1% and 7.8% (2013 to 2018) respectively, followed by North America (7.6%), and Europe (7.2%). Health insurance companies, healthcare services providing companies, healthcare systems and equipment companies are part of this market segment that have to reduce their operational costs, administrative costs, focus on core processes, implement information technology to run processes and also manage risks and develop new product offerings. Particularly information technology has become a core component for running the companies and offer product and services to customers and in some instances IT has become the competitive advantage. There is a huge demand for Healthcare IT professionals both on the medical and the process front and highly skilled professionals like actuaries, medical coders, medical writers, biostatisticians, physiotherapists, nurses, general physicians, ayurvedic and homeopathic practitioners are needed for healthcare IT industry to offer services like medical coding, medical writing, bio-statics, healthcare and data analytics. Some of the healthcare companies have completely outsourced their IT systems and some have outsourced only key applications like electronic medical records, medical transcription, billing services, claims processing, data analytics.

Availability of low cost highly skilled IT professionals, implementation of new technologies, government regulations like Obama Care, ICD 10 coding and integration of different technologies already being used with the new technologies like cloud computing, mobility and analytics have presented a big opportunity for the Indian IT service vendors like TCS, Infosys, Cognizant, Wipro, HCL Tech, etc. Cloud Computing is being widely adopted by healthcare companies across the globe as there are significant cost benefits associated with this technology as the companies need not invest heavily on hardware like servers, datacenters, etc. Cloud computing is highly flexible, can be accessed from everywhere, uninterrupted service and also helps to scale up the operations at a faster pace but there are certain disadvantages like data security and reliability issues like downtime. Despite these disadvantages the need for reduction in costs, operation times and efficient back office management is must for the success of healthcare companies. Healthcare IT outsourcing vertical has been dominated by Cognizant Technology Solutions, but other players in the Indian IT Services industry like TCS, Infosys, Wipro, HCL Tech have built up significant capabilities and acquired the much needed technical expertise and skills through mergers and acquisitions and also captured some big deals in this segment. All the Indian vendors both the ITO and BPO vendors have exclusive focus on the healthcare IT outsourcing segment and have even referred to this segment as a key growth driver for the industry in terms of both revenues and profits.  

Healthcare Outsourcing 2013 – Indian IT Vendors current scenario & Outlook 2020

Cognizant Technology has a far lead in this regard as they moved into healthcare long before and for them Healthcare is the second largest vertical after BFSI. Cognizant is the largest IT services provider in healthcare, earning $1.97 billion from the segment in the year to 31 March 2012, more than three times the $602 million healthcare and life sciences revenue of India’s largest software services provider TCS. Infosys earned $680 million from healthcare, Wipro $615.5 million and HCL $500 million. As on 31 March 2012, healthcare was the second-largest source of revenue, behind only financial services, for Cognizant. It made up 25.2% of the company’s revenue, compared to 11.3% for HCL Technologies Ltd, 5.2% for Tata Consultancy Services Ltd (TCS), 9% for Infosys Ltd and 9.9% for Wipro Ltd. Cognizant ranked sixth in the 2013 ‘Healthcare Informatics 100’ list of healthcare IT services providers by revenue in the US, while Infosys Public Services Inc. a subsidiary of Infosys, ranked 15 and was the only Indian IT services provider to figure in the list.

HCL Technologies has also seen growth in its healthcare revenue, which grew 55.8% in the 12 months to 31 March, and at a compounded annual growth rate of 37.66% in the last three years. The company acquired UK-based SAP consulting company Axon Group Plc., in December 2008, which enabled it to position itself as a system integrator to its life sciences and healthcare clients globally. The company also announced that it will actively engage in new business (accountable care) and technology business models by 2014. The focus areas include healthcare reform and member experience management and testing. Infosys and Wipro are also sharpening their focus on healthcare capabilities. Infosys over the last three years has invested in building several key capabilities in healthcare in the US. Infosys is assisting several clients in multiple opportunity areas: setting up state exchange, onboarding health insurers to public exchanges, end-to-end testing etc. according to Eric Paternoster, chief executive officer and president, Infosys Public Services.

Sangita Singh, senior vice-president and head, healthcare and life sciences, Wipro said Company strategy is to focus on select few customers to co-create solutions that can drive patient-centricity and reduce costs. There is, therefore, a huge thrust on domain-specific solutions, combined with Wipro’s strongholds of infrastructure services, BPO (business process outsourcing) and custom apps. Indian outsourcing companies have mostly focused on presence in the health insurance sector but not in the provider (hospital) market. There has been a significant slowdown in health insurance sector which forces Indian vendors to look at healthcare provider market where they have not been able to make a dent in the provider market, which is growing rapidly. The established players make $50- 60 million from each large EMR implementations in the provider segment. Healthcare outsourcing in India is growing at about 31% and is expected to reach USD 280 billion by 2020 and the global healthcare BPO market is growing at a CAGR of over 21%. Healthcare BPO offers tremendous opportunity to companies in India, according to Talent Neuron blog post.