India Outsourcing Industry 2011 – Focus on Healthcare vertical for Growth

Healthcare has become focus vertical for majority of the Indian IT Vendors. Most of the IT/BPO companies like Cognizant Technology, WNS, TCS, Firstsource Solutions, Genpact, Mahindra Satyam, Pacific BPO, CBay Systems, etc already cater to global healthcare industry. Infosys is looking at Healthcare vertical as one of the critical vertical for future revenue growth. Indian IT vendors have been slow in tapping this vertical as major focus earlier was on BFSI and Manufacturing. Indian IT vendors are making use of technology as a platform and offer their service offerings.

US is major market

UShealthcare reform announced by President Obama provides a huge opportunity for Indian IT vendors and the policy focuses on controlling healthcare costs and provides universal coverage. The US healthcare bill, valued at US$ 940 billion, will provide healthcare coverage to 32 million Americans over the next 10 years. Currently UShealthcare is estimated at $2.5 trillion, which is projected to grow to $4.6 trillion by 2020. Major opportunity for Indian Outsourcing vendors lies in revenue cycle management, electronic medical/health records (EMR/EHR), billing & coding and medical transcription. According to ValueNotes, EMR/EHR is a $20 billion IT outsourcing opportunity. Revenue cycle management (RCM) is a $50 billion market in the US.

Medical transcription business is estimated to be worth $25 billion annually and growing at around 15%. According to CBay Systems the size of the US medical transcription (MT) industry is estimated to be approx. US$17 billion for the year 2011 and is expected to reach US$21.2 billion by 2014. 67% was in-house while the remaining 33% was outsourced. CBay also expects the MT industry in India is expected to touch US$1 billion in 2014 from US$ 435 million in 2009. According to ValueNotes, the MT boom phase is over. Speech recognition technology, being used by most healthcare providers has resulted in shrinking the requirement of a medical transcriptionist’s skills to 10-15% of its original requirement. Medical transcription started in India 15 years ago and India is one of the primary locations and there are number of companies providing end to end medical outsourcing services in India.

Rising Indian Domestic Healthcare Sector

According to a report titled, “India’s New Opportunities- 2020” prepared by the All India Management Association, Boston Consulting Group and the Confederation of Indian Industries (CII), the Indian healthcare sector is poised to reach US$ 280 billion by the year 2020, thereby contributing an expected Gross Domestic Product (GDP) spend of 8 per cent by 2012 from 5.5 per cent in 2009. A US$ 36 billion industry in 2009 and growing at 15 per cent compound annual growth rate (CAGR), the Indian healthcare industry will reach the market value of US$ 280 billion by 2022. Indian IT vendors have to look for growth opportunities domestically as the US and European Markets are struggling to overcome the economic slowdown and European Debt crisis. The domestic opportunity may not offer huge profit margins as healthcare in India is mostly government owned but the rising private participation and Public and Private Partnership model is a good sign. State governments across the country have announced specific healthcare schemes sponsored by them for citizens and these schemes need to be monitored and properly implemented.

Indian Top IT Vendor focus on Healthcare Vertical

TCS has started looking at the healthcare vertical since 2009 and has seen annual revenues of US$ 395million in the vertical in 2010. TCS’ Q1 2011 Healthcare and Life Sciences revenue was at US$ 119 million. TCS has been gaining traction in this vertical.

Infosys does not report the healthcare revenues separately which highlights the fact that the company does not have much exposure in this vertical. To overcome this, company is looking for acquisitions in this vertical in US and Europe. Market rumors indicate the company is looking to acquire the Thomson Reuters Health Care vertical business in US.

Wipro healthcare vertical revenues for 2010 were US$429 million. Wipro is looking at healthcare as momentum vertical for growth and is planning to expanding its relationship with seven existing healthcare clients and looking to add at least two new clients on a quarterly basis.

Cognizant is the undisputable leader in healthcare market with more than US$ 1.17 billion in revenues. Cognizant owns IMS Health, which has a strong base in the healthcare practice. Cognizant provides solutions to 27 of the top 30 pharmaceutical companies; nine out of the top 10 biotech companies; nine out of the top 10 US health plans and 12 of the top 20 medical devices companies.

HCL technologies annual revenues from healthcare vertical in 2010 were US$252 million. Healthcare Informatics’ magazine has ranked the ‘Healthcare Practice’ division of HCL Technologies as the 39th largest healthcare company by revenue in the US in 2011.

Smaller players in the market like Firstsource, Genpact etc and pure play MT players like CBay, Pacific BPO also are focusing on Healthcare BPO market. These players have realized that the growth lies in the other than MT market i.e. Revenue cycle management, electronic medical/health records, and coding. These players are also competing with the bigger players in the market for the revenue share.

Healthcare vertical – Growth Driver

Indian IT vendors have to look for growth opportunities in healthcare as the USand European Markets are struggling to overcome the economic slowdown and European Debt crisis and the growth drivers till now BFSI & manufacturing verticals are slowing down due to the slowdown and debt crisis. Apart from the US healthcare policy, healthcare spend is also expected to increase in UK and India which also presents a growth opportunity. Mergers & Acquisitions are expected in this vertical as many big players in the Indian IT industry like Infosys are looking to acquire for jumpstarting revenues in this vertical. Other players like TCS, Wipro and HCL are focusing to increase their presence in this vertical and planning to add more clients in the coming quarters.

The ICD 10 conversion change by October 2013 is expected to impact the medical coding industry and is likely to spur a great demand for outsourcing and most of it may come to India. Technology helps in providing integrated solutions for the client’s healthcare needs, decrease healthcare costs, and improve efficiencies and Indian IT vendors with long experience in using such technology platforms are in a good position to provide the necessary services to the healthcare industry.

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India Third Party /Hosting Data Center Market - Major Challenges

Bandwidth cost has come down, but it is higher compared to western countries and today it constitutes 30% to 35% of operational costs of a data center. Three years back bandwidth price was $2000 - $2500 per Mbps per month and presently it is around $500-$700 per Mbps per month but it has to come down to $150 - $200 per Mbps per month to become a viable data center destination. In US band width rates presently are at $100 per Mbps per month. There has been an increase in bandwidth with speeds progressing from 1G to 10G. With the band width pricing falling down in Indiacompared to US many e commerce companies and travel sites have shifted to Indian Data Centers. Several service providers with bandwidth and/or data centre space are entering into the business. Most telecom companies now offer hosting services.

Cooling systems affect the power consumption in the data centers. Dual core and quad core processors in the servers generate hit and directly affects the power required per square feet. Higher-density cabinets and racks in the data centers are expected to increase in the coming years which will affect the density of both power and cooling required to support them. Row and rack-based cooling are the best for higher-density equipments as it helps in reduce energy consumption by 15%. Cooling cost can also be reduced by air conditioning wands that pinpoint critical hotspots in server arrays to a specific temperature and also free cooling wherein external cold air is used to cool the data center. Proper airflow, temperature and humidity in the data centers help reduce the power cost as the power tariffs in India are raising by 10-15% every year. Availability of uninterrupted power supply is one of the major problems that Indian Data Centers are facing. The Government of India estimated the country will require an installed capacity of over 200,000MW by 2012 to meet electricity demand. Its current total installed capacity is about 160,000MW.

Rising real estate costs are another challenge. Real estate costs are higher because most of the data centers are set up near to the metropolitan and major cities and most of the clients are not keen in having their data centers far away near to smaller cities and town where the cost will be less. Most of the data center clients in Indiaare BFSI, Manufacturing. Mumbai is the financial hub; Delhihas most government and public sector establishments and real estate prices in IT cities such as Bangalore and Hyderabad are also rising. Government can help the data center industry in India by providing the network connectivity and improving the power supply to the cities and towns near to the metros and IT hubs.

Virtualization is the key for making data center more efficient and lower costs. It optimizes the usage of critical underlined compute resources, reduces low equipment utilization rates, enables infrastructure consolidation and helps reducing heat and power consumption. Also Green IT practices such as data center virtualization, better data center design and layout and asset lifecycle management, which reduce the need for CAPEX, are becoming increasingly important. Tools are being developed that help in power efficiency and usage calculators, Building management systems, infrastructure management, that help in improving efficiency and reduce costs.

Other challenges for the industry are lack of qualified and skilled professionals who are needed at mid level and higher levels of management of data centers. Indiahas lot of IT professionals experience in other fields but people with data center experience are hard to find. Data centers in India are running at 80-90% capacity and with rising demand Vendors have to look for ways at increasing their capacities fast and at low cost. Setting up full fledged data center takes a minimum of three years to complete and become operational. Data security concerns is another issue as India in the BPO sector has experienced pilferage of data by employees. With rising cost and competition there has also been pressure on the margins of the data center vendors. Cost of adoption and integration of new technologies in hardware, software and facilities management is a concern and vendors have to realign their pricing strategies and business models to maintain the profitability.

Please visit the blog for India Major Players chart:  http://analyzechartsgraphs.blogspot.com/

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Global HR Outsourcing, Procurement Outsourcing, Finance & Accounting Outsourcing - Everest Group 2011

Global HR Outsourcing Market 2011

The multi-process Human Resources Outsourcing (MPHRO) market is expected to grow by 8-10 % and will reach $3.35 billion in 2011 from US$3.07 billion in 2010. Cost reduction, compliance and technology are the key drivers for growth. Indiais the preferred destinations with North American companies followed by European companies are the major outsourcers. BFSI and Manufacturing are the early adopters of HR outsourcing but the trend is presently decreasing in these verticals but picking up in new verticals like insurance, technology, healthcare and energy. Payroll and benefits are common processes in MPHRO contracts and market was earlier affected by global recession in 2009 and market rebounded in 2010 and is expected to continue good performance in 2011. 

Please Click here for Detailed Chart (ACV-2007-2011) http://analyzechartsgraphs.blogspot.com/

Global Procurement Outsourcing Market 2011

The multi-process Procurement Outsourcing (PO) market is expected to grow by 15-20 % and reach US$1.5 billion in annual contract value (ACV) in 2011. Cost reduction, compliance, savings and technology are the key drivers for growth. North American companies followed by European companies are the major adopters. Manufacturing followed by consumer packaged goods and retail sectors are major outsourcers. Procurement, supply chain processes such as fulfillment and transportation and logistics management are common processes outsourced. 

Please Click here for Detailed Chart (ACV-2008-2011) http://analyzechartsgraphs.blogspot.com/

Global Finance & Accounting Outsourcing Market 2011

The multi-process Finance and Accounting Outsourcing (FAO) market is expected to grow 15-20 % and reach US$4 billion (ACV) in 2011 from US$3.5 billion in 2010. Cost reduction, compliance, savings and technology are the key drivers for growth. North American companies followed by APAC companies are the major adopters. Manufacturing, financial services, retail, travel and logistics, and energy and utilities are key verticals. Accounts payable, accounts receivable, general ledger, financial planning and analysis are common processes outsourced. 

Please Click here for Detailed Chart (ACV-2008-2011) http://analyzechartsgraphs.blogspot.com/

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Internet Users in India 2011 – Forecast to 2015

History of Internet in India

Videsh Sanchar Nigam Limited (VSNL) launched Internet Services in India in August 1995 and was the sole provider of internet services in India till 1999. In late 1997 after several months of speculation, India’s Department of Telecommunications (DOT) announced a new policy for Internet service providers (ISPs).In November 1998; the Government ended VSNL’s monopoly and allowed provisioning of Internet Services by Private Operators. There are 153 ISPs in operation today, although the majority market share (62 per­cent) remains with the public-sector corporations Bharat Sanchar Nigam Limited (BSNL) (43 per­cent) and Mahanagar Telephone Nigam Limited (MTNL) (19 percent).

India Internet 2011

With penetration level of 8% of 1.2 billion populations online, Indiais third ranked after USAand Chinain the list of countries with the most Internet users. Boston consulting Group sees India Describing India as a "low-maturity and high growth market".  India's Internet use is concentrated mainly in the Urban, where many users are migrants from rural. Internet users in Indiaare predominantly college going students(30%), Young men(28%), school going kids(14%). Major activities done, according to Juxt IndiaOnline 2011 Report is:

India Internet Users Forecast:

According to Google India Country Head, India has about 100 million Internet users, and the number will increase to 300 million by 2014.

According to BCG India will see its number of internet users triple to 237 million from the 81 million (2010) by 2015.

McKinsey research states that by 2015, the Indian Internet user base would touch 450 million from the 2010 estimates of about 81 million and digital-content consumption can rise as high as $9.5 billion with rising adoption of mobile internet.

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