The majority of India's massive $57 billion software services exports are made up of three sectors – BFSI (banking, financial services and insurance), telecom and manufacturing. However, with the prospect of a lower-than-industry secular growth in BFSI and telecom, the focus is shifting towards untapped opportunities in sectors like healthcare - a much smaller vertical, but one that holds lots of potential.

A recent J.P. Morgan Asia Pacific Equity Research report says that the landscape for offshoring of healthcare services is turning more favourable due to a combination of macro factors, evolving technologies and an increase in offshore of specific sub-segments within healthcare.

In 2009, the US national health expenditure stood at about $2.5 trillion. Driven by the need for greater cost effectiveness to support the healthcare needs of an aging American population, healthcare providers like hospitals are increasingly switching to technology and business services. 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.

J.P. Morgan's Mr Viju K George, who authored the report, said that healthcare is equivalent to the Y2K IT opportunities. “Cracking the healthcare code may well be the next Holy Grail for Indian IT. Over the next three to five years, healthcare as a practice is set to grow by well-over the company average for Indian IT players and could emerge as $1 billion+ divisions by revenue,” he said.

And the big four - Tata Consultancy Services (TCS), Infosys, Cognizant Technology Solutions and Wipro - are well positioned to tap into this potential.

Talking healthcare

To better understand the opportunities for Indian companies from healthcare, eWorld spoke to officials of software companies. One view that clearly emerged was that healthcare will emerge as the next ‘big wave' globally and that more will come to Indian companies, including big and small.

Healthcare straddles many more sub-segments and activities than what Indian IT has been traditionally doing thus far. Four sub-segments are the payer (healthcare insurance); the 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).

Ms K.Vinayambika, Senior Vice-President, Healthcare Practice at Cognizant, says the global healthcare industry is in a state of flux. Traditional models for financing and delivering care, drug development, and also the fundamental operating cost economics in healthcare are becoming outdated. New business models, along with the industry's focus on cost control, increased collaboration and data sharing, and the impact of key healthcare reforms that are underway globally, are driving opportunities in healthcare.

For Cognizant, nearly 27,000 employees are working on healthcare clients, including 27 of the top 30 global pharma companies.

Customers are looking at IT availability with higher value solutions while consolidating their IT partners. They are doing more from offshore and customers are looking for end-to-end IT solutions from offshore said Ms Sangita Singh, SVP, Healthcare and Life Sciences, Wipro Technologies.

Pharma companies are fighting falling R&D productivity (21 new drug approvals in 2010 vs. 56 in 2000), the great patent cliff with almost $234 billion at risk, and the barriers to enter emerging markets. Clients have to adhere to stringent regulations and reforms on the one hand and on the other, manage an exponentially growing consumer base (30 million new customers) and changing demographics.

Smaller players

It is not only the big four that are bullish about the healthcare IT space but medium-sized Ness Technologies too is eager to grab some of the opportunities in this emerging sector.

The US-headquartered company of Israeli origin has domain expertise in healthcare and life sciences. Its largest delivery centre is in India.

Satyajit Bandyopadhyay, President and Managing Director of Ness Technologies (India), said with drug discovery gaining steam, clinical trials are being conducted across the world. This opens up a world of opportunities to provide IT services.

“The clinical trial process requires massive IT to track results and even conduct the trials. From data entry to data retrieval - even 10 years later, the application of IT is immense. A major expense of pharma companies goes into R&D, which takes a lot of time - the drug discovery process happens in phases and it can go on for years. IT helps in reducing the cycle time. IT is almost a hygiene factor in most pharma companies today,” he said.

Ness works with some of the global players like Pfizer, Bristol-Myers Squibb, Sanofi-Aventis, Kaiser Permanente, Johnson & Johnson and Quintiles. Ness also works with platform companies to provide the IT used in hospitals.

It provides the software for development and maintenance. With the big companies too playing in this space, how does Ness fit in? “Since we are a mid-size firm, we have to bring in niche solutions on the product engineering space. We treat each application as a product. For example, tracking ECG is sold as a product. Our applications have a strong R&D flavour,” says Mr Bandyopadhyay.

Take Solutions, the Chennai-based IT company, is another mid-size company that is bullish on the healthcare sector. There are disruptive forces at work within the healthcare industry and it is under siege; from pressures to rationalise investments and reducing costs to simultaneously improving quality of care while addressing the increased prevalence of chronic disease conditions and heightened regulations, the challenges are enormous, said the company's vision holder H.R. Srinivasan.

He feels that the three main stake holders of the healthcare ecosystem - biopharmaceutical and medical device companies , providers and payers - need to invest in new IT strategies to optimise operational, financial, and clinical performance against the backdrop of an ever-changing marketplace. This presents a huge opportunity to technology companies and service providers alike.

This perfect confluence of increased challenges, increased regulatory scrutiny, and availability of funding to tackle the issues presents a plethora of opportunities within the healthcare IT space, he said.

Opportunity in India

India, which has historically underinvested in healthcare relative to other economies, spends only 5 per cent of GDP on health initiatives compared to 10-15 per cent in developed countries. This means that most of the large opportunities continue to emanate from developed countries in the near future.

However, with the government committed to increasing its public spend on healthcare and significant presence of private investment in health), India could emerge as a key market for healthcare IT/BPO services in the mid to long-term, says Vinayambika of Cognizant.

>raja@thehindu.co.in

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