Everest Group PEAK Matrix Identifies Three Leaders in the Healthcare Payer Applications Outsourcing Market
DALLAS, July 31, 2012 ─ The US$20 billion healthcare IT outsourcing (ITO) market nearly doubled its cumulative contract value in 2011 compared to 2009. Additionally, the number of transactions grew by more than 35 percent annually in the last three years. IT Application Outsourcing (AO) in the Healthcare Payer Industry – Annual Report 2012, published by Everest Group, an advisory and research firm on global services, examines the factors driving the increased outsourcing activity in the healthcare vertical, including significant trends in the AO market.
“Outsourcing in the healthcare vertical has witnessed remarkable growth much of which is attributed to regulatory reform, increased customer centricity and focus on efficiency,” said Jimit Arora, Vice President, Everest Group. “To respond to growing market demand, service providers are investing in delivery capabilities, particularly for domain-centric IT application outsourcing.”
The annual report reveals the following key trends:
- AO is included in the scope of more than 60 percent of all healthcare ITO transactions; the payer segment has the highest proportion of pure-AO transactions
- Payer AO transaction activity peaked in 2010-2011, coinciding with the passage of the Patient Protection and Affordability Care Act in the United States
- Large transactions (total contract value greater than US$25 million) account for more than half of the payer AO activity during the last five years
- North America is the dominant market for large payer AO transactions; smaller-sized payer firms (<US$10 billion in revenue) dominate transaction activity
- Application development and maintenance, testing services, and software package implementation form the primary components in more than 80 percent of AO contracts
- Offshore penetration in the payer services market is currently low and presents an opportunity for future expansion. India is the preferred delivery location for AO in the payer segment; China, the Philippines and Latin America are emerging as newer low-cost locations
- Over US$3 billion worth of payer AO contracts are due for renewal between 2013 and 2018
Five key themes are fuelling IT services demand in the U.S. healthcare payer market:
- Compliance with regulatory reform
- Claims transformation
- Convergence of information across healthcare entities
- Consolidation and M&A
“Healthcare payers need to develop a technology strategy to realign IT with the evolving healthcare ecosystem, identify strategic partners to assist in that journey, and leverage optimal delivery locations,” said Arora. “Service providers need to invest in domain expertise across people, processes and technology if they want to grow and stay ahead of competition.”
The annual report is part of Everest Group’s new Healthcare Outsourcing research program launched in response to the market need for fact-based insights specific to sub-segments of healthcare – payers, providers and life sciences. A companion piece, IT Applications Outsourcing (AO) in the Healthcare Payer Industry – Service Provider Landscape, provides a comprehensive assessment and maps service providers on the Everest Group Performance | Experience | Ability | Knowledge (PEAK) Matrix.
The Service Provider Landscape analyzes more than 15 AO service providers, eight of which are mapped on the PEAK Matrix. The Leaders include Accenture, Cognizant and IBM; Major Contenders include CGI, Dell Services, Infosys and TCS; and Emerging Players include Mphasis. Other aspiring service providers in the payer AO space include Fujitsu, HCL, Hexaware and Mahindra Satyam. These service providers currently have limited experience with large-sized payer AO contracts but are gradually building their strength in this field.
For more information on the reports, IT Application Outsourcing (AO) in the Healthcare Payer Industry – Annual Report 2012 and IT Applications Outsourcing (AO) in the Healthcare Payer Industry – Service Provider Landscape, or inquire about other research services, please visit research.everestgrp.com, email [email protected] or call +1-214-451-3110.