After capturing a huge chunk of the outsourced financial services market, traditional IT services companies are now gunning for the healthcare and pharmaceuticals segment—the largest industry in the US and the second-largest outsourcer after financial services. Frost & Sullivan estimates that the US healthcare market alone is expected to touch $4 trillion by 2015 (it was worth $2.16 trillion in 2006).
Apart from the higher dollar billing rates ($30-60 per hour, which is three times the billing rate for plain-vanilla outsourcing work), the size of the healthcare outsourcing market is also huge.
The size of the US hospital care market is around $700 billion and administrative costs are estimated to be around 14 per cent or $100 billion. In the past few months, companies like Infosys, Wipro, Firstsource, TCS, IBM and Patni Computer have confirmed their commitment to the segment by getting into newer services like data management, clinical programming and pharmacovigilance. Some of them are also on the look out for buy-outs or to grab market-share.
Wipro recently paid $600 million for Infocrossing, (the company’s businesses include IT infrastructure outsourcing, Healthcare IT and BPO solutions). Wipro and Infosys are also reportedly in the race to buy out MarketRx (a New Jersey-based pharma-focussed market analytics firm) which analysts say could fetch a price of between $150 million and $160 million, some five times its annual revenue. Firstsource had bought Med Assist, a US BPO vendor providing revenue cycle management to the healthcare industry, for $330 million earlier.
Says T.R Madan Mohan, Director —Consulting, Information & Communications Technology Practice, Frost & Sullivan, South Asia & Middle East: “There has been a push to reduce the cost of service across the board and hence non-critical areas such as radiology, documentation and diagnostics are increasingly being outsourced to India.
It is important to be closer to the customer (especially for offering highend support and for favorable regulatory acceptance) and inorganic growth is best way to do it.”
Some of the processes in healthcare outsourcing that Wipro is looking at are revenue cycle management, claims administration, backoffice, pharmacovigilance, and clinical data management. TCS recently signed an agreement with Roche to provide clinical services.
The company has clients like GSK, Eli Lilly and now Nordisk in the healthcare and life sciences outsourcing market. Patni Computers recently acquired the New Jersey-based Taratec Development Corporation, a life sciences consulting firm. “We are looking at both inorganic and organic growth in this sector. Patni’s scale, IT services knowledge combined with domain expertise and innovative solutions gives us an edge while tapping this market,” says Milind Joshi, Vice President-Life Sciences BU, Patni Computers.
Wipro estimates that the total healthcare BPO market will exceed $34 billion in 2008 (it stood at $26 billion in 2004). “BPO services will increase from 6 per cent of the overall healthcare budget in 2005 to 8 per cent in 2009, representing a cumlative average growth of approximately 10 per cent,” adds Mythily Ramesh, Vice President, Wipro Technologies.
Agrees Amitabh Chaudhry, CEO, Infosys BPO: “The healthcare and life sciences practice has been witnessing a considerable increase in new customer traction and fruitful activity”. Chaudhry adds that having built a global delivery model and a global footprint, Infosys would service markets other than the US. “We anticipate that this trend will gain further momentum in the coming quarters. Going ahead, looking at the future market potential of these areas and our delivery competencies, we expect these domains to grow faster than our average growth,” points out Chaudhry.
Back home, IT adoption in the healthcare sector is in its early stages. Cisco has clients like Apollo Hospitals, Aditya Birla Hospital and Dinanath Mangeskar Hospital in healthcare and Vimta labs, Dr Reddy’s, Ranbaxy, Matrix, Cipla, Aurobindo Pharma, Apotex India Ltd and Astra Zeneca in the pharma segment. “With the launch of Cisco Clinical Suite and Medical Grade Network we look forward to educating hospitals and doctors on the benefits of technology in the healthcare sector through our partners and healthcare seminars across the nation,” says Anil Bhasin, Vice President-Enterprise, Cisco India & SAARC.