Planning a Global Delivery Model for a Healthcare IT Services Provider

Executive Summary

The client, a healthcare IT services provider to U.S. hospitals, (and a division of a major European conglomerate), wanted to incorporate an offshore delivery component to achieve an anticipated cost savings target well above US$10 million, and thus fund additional investment in new technologies, all while maintaining or improving existing service levels. While it initially engaged Everest Group to support an offshore RFP, the firm’s delivery model guidance quickly demonstrated the right strategic move for long-term benefits would be exploration of an internal captive model that leveraged the parent company’s global footprint. Everest Group supported the client on delivery model assessment, expanding scope, due diligence, solution design, and transition planning. Four months into an aggressive 18-month timeline for hiring and training several hundred offshore full time equivalents (FTEs) and conducting knowledge transfer from their U.S. counterparts, the client is on track for its hiring requirements, cost savings and customer service expectations.

The Client’s Challenge

The U.S. healthcare IT services division of a major European conglomerate had been using an onshore model to deliver technology- and IT-related services to hospitals in the U.S. But given competitive pricing pressures, a mandate to reduce costs, and a desire to have more capital for investments in new technologies, and amidst decreasing customer concerns regarding data privacy issues related to offshoring, the client wanted to evaluate alternative global service delivery options. While the main objectives of a change in delivery model were quickly achieving sustainable cost reduction and maintaining or improving existing customer service levels, the strategic concern of avoiding arming the competition to penetrate existing and potential accounts led to the offshore captive strategy via leverage of the existing corporate global footprint to accelerate ramp-up time and minimize capital investment.

Insight to Action

Everest Group began by conducting value/risk analysis-based assessments of the various delivery model options including offshoring to internal IT services groups, leveraging a third party’s offshore operations, establishing a captive center and creating a joint venture. After comprehensive analysis of the options per the client’s strategic and financial objectives, and the risks associated with each, Everest Group determined the most effective and risk-appropriate model was for the client to build its own offshore delivery capability via its parent company’s internal corporate services entities, based in India. Following initial due-diligence and vetting sessions with the two internal IT service provider organizations, Everest Group helped the client develop a compelling business case and timeline for this approach.

Following senior management’s buy-in, Everest Group arranged and conducted two separate week-long due-diligence workshops – one in the United States and one in India. The U.S.-based workshop was a joint solutioning environment during which the client’s requirements and expectations were fully discussed, and the providers’ capabilities and cultural fit were evaluated. The second workshop in India was final, on-site due diligence, and presentation of the providers’ response to the client’s requirements.

Everest Group then worked with the client’s project team to craft a highly detailed transition plan that covered: 1) hiring and training the several hundred in-scope transactional and judgment-intensive FTEs within an aggressive year and a half timeframe; 2) transferring detailed company, function and role-specific knowledge from the current U.S. staff to the India-based resources; and 3) ensuring the necessary connectivity/systems/infrastructure/data privacy and security provisions were in place. Everest Group also created a comprehensive communications, change management and risk mitigation plan for the client, which enabled it to begin rapidly executing the transition.

Results

Despite the aggressive 18-month transition timeline, Everest Group’s plan has enabled the client to remain on track for meeting its hiring targets, and after only four months since program inception, the client already has transitioned a business critical work process to India. The client is confident of its ability to achieve the aggressive cost savings target on time, which will enable it to invest in new technology, platforms and other areas needed to capture growth opportunities sparked by healthcare reform and other industry regulatory changes. Finally, the client expects an increase in customer service and satisfaction, as it will now be providing round the clock support via higher-skilled yet lower cost offshore resources.