HEALTHCARE IT OUTSOURCING MARKET

HEALTHCARE IT OUTSOURCING MARKET By Application [Provider (EHR, RCM, LIMS) Payer (CRM, Claims Management, Fraud Detection, Billing) Life Science (ERP, CTMS, CDMS) Operational (SCM, BPM) & Infrastructure (IMS, Cloud Computing)] & Industry Global Forecast to 2018 MarketsandMarkets sales@marketsandmarkets.com www.marketsandmarkets.com

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1 MARKET DYNAMICS 1.1 INTRODUCTION Healthcare and life sciences are amongst the fastest-developing industries that have witnessed many breakthrough discoveries and developed new technologies for the purpose of diagnosing and treating illnesses in patients. The two prominent goals of the healthcare industry are to deliver quality care at low costs and to streamline the process of healthcare delivery systems. From pre-medication services to post-medication services, an improved patient experience is likely to improve the whole healthcare system in terms of quality care, thereby reducing the pressure of rising healthcare costs on the national economy. To achieve these goals and to maintain a proper balance between quality care and the care delivery process, healthcare information technology solutions, outsourcing of healthcare IT services, and IT support have emerged as effective and efficient solutions. However, the healthcare industry still lags behind other industries in implementing IT solutions. This is due to its fragmented nature. The healthcare industry is comprised of two segments, namely, providers and payers. The provider segment is comprised of sole practitioners and large multi-specialty practices as well as small rural hospitals and large multifacility health systems. Payers comprise of various government and non-government organizations offering insurance policies and claims processing services to patients. This fragmentation creates a barrier in the flow of information across each stage of the value chain, from the supplier to the end users. Traditionally, information technology was viewed as an administrative function rather than an essential element of healthcare operations. The biggest challenge faced by the HCIT industry is the lack of trained and skilled IT staff members to maintain and upgrade HCIT solutions. In spite of this, HCIT has gained importance in the industry by delivering quality care at reduced costs and time as compared to paper-based traditional healthcare systems. The rapidly changing needs of the healthcare industry have led to the introduction of electronic claims processing systems, electronic payment processing, and intranet and internet applications. In order to support these applications, there is a need for trained and skilled IT staff as well as in-house training programs for unskilled professionals, but this is likely increase the costs for healthcare organizations. Furthermore, healthcare MarketsandMarkets Sample Page 3

organizations prefer to concentrate on their core businesses. Consequently, this has led the industry to adopt the strategy of outsourcing HCIT services and support for various solutions, such as Electronic Medical Records (EMRs), Computerized Patient of Order Entry (CPOE), Revenue Cycle Management, and Customer Relationship Management Systems, among others. Outsourcing is the most common trend in the IT industry and is now considered as the backbone of the healthcare and life sciences industries. Healthcare IT outsourcing is an arrangement in which one company provides IT services and support to another company or healthcare provider/payer. The healthcare industry, on the whole, generates huge amounts of data. Healthcare providers/payers need to electronically track data related to medical records, billing codes, electronic monitoring systems, and patient care. In order to track and manage this valuable data via electronic systems, there is a need for strong information technology infrastructure and devices, such as servers, desktops, networks, personal digital assistants (PDAs), and laptops. Due to the lack of required skills and IT domain expertise, maintaining IT infrastructure and services is a challenging task for the healthcare industry. This has resulted in an unprecedented demand for IT infrastructure outsourcing and IT services, which enable healthcare providers to focus on their core service areas, thereby curtailing costs and enhancing quality care. For instance, in 2009-2010, Mercy Hospital & Medical Center, Chicago, modernized its medical information systems by outsourcing various healthcare information systems to Cerner Corporation. Similarly, Memorial Health University Medical Center, an ambulatory medical care center, outsourced its revenue cycle management to McKesson Corporation. The growing demand for clinical solutions such as Electronic Medical Records (EMRs), Computerized Physician Order Entry (CPOE), Laboratory Information Management Systems (LIMS), and Pharmacy Information Systems (PIS) is leading to a significant growth in the outsourcing of IT support and services. The various factors driving this trend are growing healthcare reforms in the U.S., growing pressure on healthcare providers (to achieve the criteria of meaningful use in order to receive incentives offered by the Affordable Care Act in North America), growing pressure on the healthcare industry to curtail costs, and the need to modernize the healthcare system. Network services, data center services, desktop, webhosting, and application services for varied HCIT solutions are some of the IT services that are currently being outsourced by organizations, both in the public and private sector. MarketsandMarkets Sample Page 4

Life sciences predominantly deal with drug discovery, clinical trials, diagnostics, and medical technology. At present, the life sciences industry faces various challenges, including rising R&D costs, declining new drug pipelines, patent expiry, fierce competition, and stricter regulation norms regarding patient safety. These factors have propelled the life sciences industry to shift towards patient-centric healthcare and personalized medicine. Currently, the life sciences industry is looking for more aggressive business models such as outsourcing of IT support for R&D activities and clinical trials as well as outsourcing of the entire IT infrastructure. This is to deliver superior patient and business outcomes while optimizing costs. The healthcare IT outsourcing market is a fragmented market with the presence of a few prominent players and numerous small players. Key players in the market are Cognizant, Accenture, TCS, CSC, Dell, ACS-Xerox, IBM, Infosys, Wipro, and Anthelio Healthcare Solutions. FIGURE 1 KEY REASONS FOR HCIT OUTSOURCING Improve Focus on Core Business Reduce Operating Cost Access High Technology Key Reasons Flight for HCIT Management Outsourcing Reduce Cost Incurred in Hiring and Training In-house IT Experts Proper Allocation of Internal Resource to Core Work MarketsandMarkets Sample Page 5

1.2 HEALTHCARE IT OUTSOURCING: PROCESS MODEL FIGURE 2 GLOBAL HCIT OUTSOURCING: FIVE-STAGE PROCESS MODEL To Determine the Sourcing Strategy To Analyse the Sourcing Needs and the Operational Relationship Five Stage Model To Select a Qualified Vendor and Legal Contract Proper Documentation for Smooth Transformation of IT Services To Manage the Performance of the Service Provider 1.3 HEALTHCARE IT OUTSOURCING MARKET SEGMENTATION Outsourcing in the HCIT industry began in the 20 th and 21 st centuries due to the growing demand of IT services and support in the healthcare and life sciences industries. Various factors such as the growing patient consumerism towards quality care and the growing pressure to reduce healthcare costs are forcing healthcare providers to track every detail of their care delivery in order to reduce excess operational expenses. The HCIT outsourcing market can be segmented by application and industry. The healthcare IT outsourcing market has been studied from the perspective of providers, payers, and life MarketsandMarkets Sample Page 6

sciences. The need for outsourcing IT services and support for clinical trials systems and research and development has been rising increasingly in the life sciences industry. The factors influencing the outsourcing of IT services in the life sciences industry are the growing need to manage and control operating costs (that enable companies to focus on their expertise area), easy access of IT skilled resources, process modernization by introducing innovative technologies, and easy access and management of huge data available in the life sciences industry. The HCIT outsourcing market, by application, is further segmented into provider outsourcing, payer outsourcing, life sciences outsourcing, operational services outsourcing, and infrastructure outsourcing. Healthcare providers consist of hospitals, clinics, nursing homes, research/educational institutions, and independent physicians, and they are responsible for providing healthcare services to patients. For this study, the healthcare provider IT outsourcing market is segmented based on the outsourcing of IT services, applications, and support for different HCIT provider solutions such as Electronic Medical Record Outsourcing, pharmacy information system outsourcing, laboratory information system outsourcing, revenue cycle management outsourcing, and others. Payers comprise of various government and non-government organizations offering insurance policies and claims processing services to patients. Healthcare payer IT outsourcing has been researched from the perspective of IT applications, services, and support. The healthcare payer IT outsourcing market is segmented into claims processing system outsourcing, customer relationship management system outsourcing, billing system outsourcing, and fraud and detection system outsourcing. Life sciences comprise of pharmaceutical, biotechnology/bioinformatics, and clinical research organizations. The life sciences IT outsourcing market is segmented based on the outsourcing of IT applications, services, and support for various IT solutions used in clinical trials to manage huge patient data information, namely, Clinical Trial Management System (CTMS) outsourcing, Clinical Database Management System outsourcing, Enterprise Resource Planning (ERP) outsourcing, and R&D IT optimization services outsourcing. MarketsandMarkets Sample Page 7

Operational services outsourcing is segmented into Supply Chain Management outsourcing and Business Process Management outsourcing, including sales and marketing, research and development, among others. HCIT infrastructure deals with the delivery of end-to-end, effective, and reliable solutions that transform business operations. It is a setup of information technology systems that help businesses expand smoothly. IT infrastructure includes hardware, network components, software installations, maintenance and up-gradations, help desk support, and data center services. For the study, HCIT infrastructure outsourcing is divided into two parts, namely, Infrastructure Management Services (IMS) outsourcing and cloud computing outsourcing. The market has also been segmented by industry such as the healthcare system (including hospitals, clinics, diagnostic laboratories, etc.), the healthcare insurance industry, pharmaceuticals, clinical research organizations, and biotechnology companies. For this study, the HCIT outsourcing market has been segmented into four prominent geographic regions, namely, North America (U.S. and Canada), Europe (EU5 and Rest of Europe (ROE)), Asia-Pacific (Japan, China, India, Rest of Asia (RoA), and Rest of the World (RoW) (LATAM and the Middle East). MarketsandMarkets Sample Page 8

FIGURE 3 GLOBAL HCIT OUTSOURCING SEGMENTATION Global HCIT Outsourcing Market By Application By Industry Geography Healthcare System North America Provider ITO Payer ITO Life Science ITO Operational ITO Infrastructure ITO Healthcare Insurance Europe EMR LIMS CRM Claim Management ERP CTMS SCM BPM (Sales & Marketing) IMS Cloud Computing Pharmaceutical Biotechnology Asia-Pacific ROW PIS Billing System CDMS CRO RCM Fraud & Detection System R$D IT Services 1.4 MARKET DYNAMICS The market is witnessing a surge in the adoption of HCIT technology and is driven by the financial support provided by governments to implement HCIT solutions, such as clinical information systems and non-clinical information systems. The growing pressure to reduce healthcare costs across the world has helped healthcare providers and payers to improve their administrative and clinical functions that reduce operational wastages and improve quality care. However, factors such as the fragmented nature of the HCIT market and the lack of an in-house skilled IT staff have restricted the growth of the HCIT market. This, in turn, has increased the need for IT outsourcing among healthcare providers and payers. Factors such as the shifting trend towards patient-centric healthcare and personalized medicine provide lucrative opportunities to healthcare providers and the life sciences industry to outsource their IT infrastructure, services, applications, web-hosting, and IT support. The MarketsandMarkets Sample Page 9

growing need for applications that can integrate the three key participants, namely, the healthcare providers, payers, and consumers, in a better way also provides opportunities to IT outsourcing players as integration of the HCIT solution is a challenging task for them. The introduction of new technologies such as cloud computing, business process management, and fraud detection systems is likely to propel the HCIT outsourcing market by ensuring data security and streamlining the work flow processes of both, the healthcare and life sciences industry. FIGURE 4 GLOBAL HCIT OUTSOURCING MARKET DYNAMICS RESTRAINTS Fragmented end-user market restricts development of standard IT platforms Rising incidences of data breach and loss of confidentiality Cultural difference and language barriers DRIVERS HCIT outsourcing is a viable solution to curtail healthcare costs in each region Shortage of in-house IT professionals Requirement to meet the criteria of Meaningful use to receive incentives by the Federal Government Growing need to integrate healthcare IT solutions Improved quality of care and clinical outcomes Accountable Care Organizations Reduction in operational costs U.S. Healthcare Mandates propel the healthcare IT outsourcing Market MarketsandMarkets Sample Page 10

2 GLOBAL HCIT OUTSOURCING MARKET, BY APPLICATION TABLE 1 GLOBAL HCIT OUTSOURCING MARKET, BY APPLICATION, 2011 2018 ($MILLION) Application 2011 2012 2013 2018 CAGR% (2013-2018) IT Infrastructure Outsourcing XX XX XX XX XX Payer IT Outsourcing XX XX XX XX XX Provider IT Outsourcing XX XX XX XX XX Life sciences IT Outsourcing XX XX XX XX XX Operational IT Outsourcing XX XX XX XX XX Total XX XX XX XX XX IT Infrastructure Outsourcing accounts for the largest share XX% of the global HCIT outsourcing market at an estimated $XX billion in 2013; it expected to reach $XX billion by 2018 at a CAGR of XX% from 2013 to 2018. MarketsandMarkets Sample Page 11

TABLE 2 PROVIDER IT OUTSOURCING MARKET, BY APPLICATION, 2011 2018 ($MILLION) Application 2011 2012 2013 2018 CAGR% (2013-2018) Revenue Cycle Management XX XX XX XX XX Electronic Health Records XX XX XX XX XX Laboratory Information Management System XX XX XX XX XX Pharmacy Information system XX XX XX XX XX Others XX XX XX XX XX Total XX XX XX XX XX Revenue cycle Management accounts for the largest share XX% of the provider IT outsourcing market in 2013, at an estimated $XX billion. This segment is expected to reach $XX billion by 2018, at a CAGR of XX% from 2013 to 2018. RCM captures the largest share of the Provider IT outsourcing market as the provider markets are experiencing low returns. The U.S., which is a major market for provider IT applications, is mandated by healthcare reforms to adopt EMR and conduct ICD-10 conversions. These mandates are further increasing the expenses for providers without causing changes in their revenues. Installation of a new RCO application also incurs expenses for the providers and thus outsourcing of RCO is increasing, as it enables the providers to focus on increasing the revenue without increasing the cost. EHR is the fastest-growing market at a CAGR of XX% from 2013 to 2018. There is a widespread adoption of the application in the major market for healthcare IT: the U.S. Providers not adopting the application would be penalized from 2017. Providers adopting and demonstrating Meaningful Use of EMR are liable for incentives. However, a MarketsandMarkets Sample Page 12

comprehensive EMR application is costly and incentives cannot cover the entire cost. Thus, the outsourcing market for EMR is growing at a faster pace. TABLE 3 PAYER IT OUTSOURCING MARKET, BY APPLICATION, 2011 2018 ($MILLION) Application 2011 2012 2013 2018 CAGR% (2013-2018) Customer Relation Management XX XX XX XX XX Claim Management XX XX XX XX XX Billing System XX XX XX XX XX Fraud and Detection XX XX XX XX XX Others XX XX XX XX XX Total XX XX XX XX XX Customer relation management accounts for the largest share XX% of the payer IT outsourcing market in 2013, at an estimated $XX billion. This segment is expected to reach $XX billion by 2018, at a CAGR of XX% from 2013 to 2018. Claims Management is expected to be the fastest-growing market due to the increasing number of insurance, which causes an increase in claim processing activities. MarketsandMarkets Sample Page 13

TABLE 4 ERP OUTSOURCING MARKET, BY GEOGRAPHY, 2011 2018 ($MILLION) Region 2011 2012 2013 2018 CAGR% (2013-2018) North America XX XX XX XX XX Europe XX XX XX XX XX Asia-Pacific XX XX XX XX XX RoW XX XX XX XX XX Total XX XX XX XX XX North America accounts for the largest share of the enterprise resource planning (ERP) IT outsourcing market at an estimated $XX billion in 2013; it expected to reach $XX billion by 2018, at a CAGR of XX% from 2013 to 2018. North America is expected to be the fastest-growing market as there is high demand for the application, particularly by pharmaceutical companies. The U.S. pharmaceutical industry is the largest, and has a large number of front-office, core, and back-office activities. These highvolume tasks require ERP applications that undertake activities with ease and at a faster pace. However, the high cost of implementation and the risk of failure of ERP systems make outsourcing a viable option. MarketsandMarkets Sample Page 14

TABLE 5 IT INFRASTRUTURE OUTSOURCING MARKET, BY APPLICATION, 2011 2018 ($MILLION) Application 2011 2012 2013 2018 CAGR% (2013-2018) Infrastructure Management Services XX XX XX XX XX Cloud computing XX XX XX XX XX Others XX XX XX XX XX Total XX XX XX XX XX Infrastructure Management Services (IMS) accounts for the largest share XX% of the infrastructure IT outsourcing market in 2013, at an estimated $XX billion. This segment is expected to reach $XX billion by 2018, at a CAGR of XX% from 2013 to 2018. Infrastructure outsourcing and management services capture the largest share as the cost for installing and maintaining IT infrastructure is significantly large as compared to outsourcing. MarketsandMarkets Sample Page 15

TABLE 6 HCIT OUTSOURCING MARKET, BY GEOGRAPHY, 2011 2018 ($MILLION) Region 2011 2012 2013 2018 CAGR% (2013-2018) North America XX XX XX XX XX Europe XX XX XX XX XX Asia-Pacific XX XX XX XX XX RoW XX XX XX XX XX Total XX XX XX XX XX North America accounts for the largest share XX% of the global HCIT outsourcing market at an estimated $XX billion in 2013; it expected to reach $XX billion by 2018, at a CAGR of XX% from 2013 to 2018. Rising government investments and support for adopting and implementing HCIT solution, expanding healthcare insurance coverage in U.S., rise in aging population, growing pressure to cut healthcare cost, and growing patient consumerism for quality care is expected to propel the global HCIT outsourcing market in the coming years. Asia-Pacific is expected to be the fastest growing market with an estimated CAGR of XX% (2013-2018) due to growing outsourcing: off shoring (from western countries), near shoring and domestic outsourcing. Factors driving off shoring outsourcing in Asia-pacific region are presence of large pool of talented IT professional, low labor cost, improving Intellectual Property Protection (IPP) in few countries like Singapore, India and China that triggers clinicaltrial activities causing increased outsourcing of trial specific IT applications. Factors stimulating near-shoring and domestic outsourcing are growing medical tourism, government initiative for digitizing the healthcare system, increased participation of private healthcare providers in MarketsandMarkets Sample Page 16

outsourcing IT applications, and inadequate IT infrastructure in few selected countries such as India, Philippines, and Malaysia. TABLE 7 ASIA-PACIFIC: HCIT OUTSOURCING MARKET, BY COUNTRY, 2011 2018 ($MILLION) Country 2011 2012 2013 2018 CAGR% (2013-2018) Japan XX XX XX XX XX China XX XX XX XX XX India XX XX XX XX XX ROA XX XX XX XX XX Total XX XX XX XX XX Japan accounts for the largest share of the Asia-Pacific HCIT outsourcing market, by country, at an estimated $XX billion in 2013. It is expected to reach $XX billion by 2018, at a CAGR of XX% from 2013 to 2018. Growing healthcare costs, need for quality care, rise in aging population, and need to meet the goal of government initiatives such as the e-japan policy, New IT reform Strategy, and ijapan Strategy will drive Japan s HCIT outsourcing market. Furthermore, the frequency of visits to doctors in Japan is higher as compared to other countries, increasing the burden on the healthcare system to manage patient data effectively and securely. Such burden cannot be easily coped with by healthcare providers alone, and hence the need for a strong IT infrastructure and efficient data centre is evident. According to an OECD study, the frequency of visits to doctors per person per year is 14, whereas it is ~8 in the U.S., ~6 in Germany, and ~4 in the U.K. MarketsandMarkets Sample Page 17

3 COMPANY PROFILES 3.1 DELL, INC. 1 Dell Way Round Rock TX 78682 U.S. Tel: 1-800-2893-355 Fax: 1-302-6365-454 Website: www.dell.com 3.1.1 OVERVIEW Founded in 1984 and headquartered at Texas, U.S.; Dell, Inc. provides a wide range of products in four business segments, namely, Large Enterprise, Public, Small and Medium Business, and Consumer. The Public segment provides IT solutions for the healthcare sector. The company offers various outsourcing services to the healthcare sector. These services are categorized as Hospital solutions, Application Solutions, Business process solutions, consulting solutions, and Infrastructure solutions. Dell, Inc. conducts its business through its subsidiaries that are present all over the world. Some of its subsidiaries include Abu Dhabi Branch of PSC Healthcare Software, Inc., Dell GmbH, Dell Computer spol, Dell Technology Products and Services S.A., Health Systems Design Corporation, Perot Systems Government Healthcare Solutions, Inc., and PSC Healthcare Software, Inc. The company has its geographical presence in the U.S., Europe, Middle East, Asia, and Rest of the World. As of February 2013, it had a headcount of 111,300 employees worldwide. MarketsandMarkets Sample Page 18

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