For IT majors, health services are next big money spinner

Posted on January 2, 2012. Filed under: Uncategorized |

Last month, IT firm Cognizant announced a multi-year contract with AstraZeneca to deliver biostatistics and medical reporting services. Similarly, the global pharmaceutical major also signed an infrastructure outsourcing deal with HCL Technologies recently. Meanwhile, Wipro is aggressively looking at increasing its onsite healthcare capabilities with plans to hire 150 domain experts in countries like Germany, France, Singapore and Israel by March 2012.

While banking, financial services and insurance (BFSI) continues to contribute the bulk of IT companies' revenues, about 40% top-tier Indian IT firms are significantly looking at expanding their businesses in the healthcare vertical. For Cognizant, during the quarter ended September, the healthcare segment grew 42% y-o-y and 11% sequentially, contributing 26% of its global revenues. Currently for Wipro, healthcare and life sciences contribute 10% to its overall revenue. While for TCS, it is about 7% and Infosys around 6%.

According to a recent JP Morgan report, over the next 3-5 years, healthcare as a practice is expected to grow by well over the company average for Indian IT players, emerging as $1-billion plus divisions by revenues. “The primary catalysts include the developments on the payer landscape, ageing populations, evolving technologies, time-to-market of drug development and regulations-linked spending,” the report noted. Experts feel that in a data-driven industry like healthcare, IT plays a major role, both in emerging and developed markets. The ageing population in advanced countries is creating a large pool of above working age population, implying that programmes such as social security and medical care will grow more rapidly than before.

“We now see a gradual change in IT applications, moving from the administrative services like registration, billing and admission to the clinical part, including electronic medical records, remote monitoring and drug interactions. Given the shift, the use of IT in the healthcare space will continue to grow and it will become a robust source of revenue for the IT providers,” says Rana Mehta, executive director and leader, healthcare, PwC India.

For Wipro, healthcare and life sciences is a momentum vertical and its strategy for the coming years is focused on growth. “We see tremendous opportunity in areas like mobility, analytics, remote patient monitoring and remote patient diagnostics (RPD). Our current pipeline are mostly in areas of BPOs, infrastructure outsourcing, RPM and RPD,” says Sangita Singh, senior vice-president, Healthcare and Life Sciences, Wipro. Among geographies, US and Europe are Wipro’s major markets, with US alone contributing about 70-80% to the revenue.

Analysts point out that there has been a significant uptick in activities around remote patient monitoring (RPM) and, with the rapid penetration of bio-sensor and tablet devices, mobility services, including remote monitoring in healthcare, is currently a $20-25 billion market.

Leveraging the popularity of smart phones and tablets, Cognizant has launched a healthcare mobility service. Using this service, healthcare clients can provide applications that enable patients to check and interact with their health data on their mobile devices.

“This service will also help mobile units to integrate with sensor devices and enable nurses to monitor patient data remotely or enable doctors to access medical information or record their diagnosis at the point of care using their tablet device,” says K Vinayambika, senior vice-president, healthcare practice, Cognizant.

“The availability of reliable mobile technology will encourage steep expansion in areas, such as telemedicine, remote monitoring and remote diagnosis,” she adds. Cognizant has over 27,000 professionals working for healthcare clients.

Typically, there are four main sub-segments of healthcare IT, including the payer (healthcare insurance), provider (hospital/physicians), big pharma (both pre-production and post-production phases), and connectivity (which integrates the offline into the online and manages the entire administrative process using digitisation and other technologies). Indian IT has been present largely in post-production life sciences (pharma), mostly IT/BPO/infrastructure management and life sciences’ R&D.

Experts point out that for the Indian IT industry, technology and cost restructuring were traditionally the focus areas as opposed to domain expertise, but, of late, the scenario is changing. “While Indian IT's ability to work on dimensions of domain and industry depth has commendably improved in the past 3-4 years, penetration in verticals, such as healthcare and energy/utilities, has been low — perhaps because the driver for outsourcing and global delivery deployment in these verticals is less cost and more knowledge of the domain,” adds the JP Morgan report.

According to analysts, the shift to higher standard of healthcare measures from ICD-9 to ICD-10 is going to be the healthcare equivalent of the Y2K opportunity. A number of countries have already moved their healthcare systems to these standards, while the US healthcare system still operates on ICD-9 standards. All healthcare organisations have been mandated to move to ICD-10 standards by Oct 1, 2013, offering a significant revenue opportunity for Indian IT companies. To tap into this potential market, experts feel, Indian players need to boost their investments and capability-building.”Unlike the Y2K, which was more mechanistic-and documentation based, ICD10 code transition entails a holistic view of the domain and systems,” says a JP Morgan note.

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