Obamacare: A shot in the arm for IT outsourcing service providers
The Obamacare healthcare program of the US President is going to boost the outsourcing industry in a big way. The biggest gainer of this comprehensive program will be the IT outsourcing sector which had registered a slump during the last few quarters. The revenue growth on the IT outsourcing front slowed down to $146 billion. This was majorly because the industry's key financial and manufacturing outsourcers have been spending less on software services. The United States being the biggest market for the outsourcing industry has always been a significant contributor to the revenue of outsourcing service providers.
Predictions for a healthy IT Outsourcing in 2015
Research firms like the Everest Group are predicting that ";Obamacare"; will give a major boost to the IT outsourcing. This is because more than 90 percent of all the healthcare related contracts involve IT and related services. The revenue from the IT services to healthcare providers was $31 billion in 2013. ";Obamacare"; is going to boost this figure to $68 billion by 2020. This healthcare program calls for a major reform in terms of healthcare management systems. Obviously, this initiative is going create the need for more advanced software and data management systems. To meet this instant demand, the healthcare providers will have to outsource their IT work. In view of this projected demand the prediction of researchers becomes all the more significant.
Indian IT sector welcomes Obamacare
In an interview with the global news agency Reuters, Rajib Bhattacharya of Tech Mahindra Ltd. was very optimistic about the good effects of "Obamacare"; on the IT outsourcing industry. He said, ";I think it's (Obamacare) a huge opportunity."; Further adding to the importance of healthcare industry in the growth of IT outsourcing service providers he said, ";In terms of technology maturity, other sectors like manufacturing, banking, are a lot more mature than healthcare."; It means that "Obamacare” will be a starting point that will act as a precursor of bigger contracts from other Western healthcare providers. Tech Mahindra happens to be India's fifth largest outsourcing firm and it being highly optimistic about the positive effect of Obamacare on IT outsourcing further reinforces the claim of researchers.
Data from Thompson Reuters shows that in the quarter ending on June 30 the average revenue growth for India's top five outsourcing companies by market value was expected to slow to 13.3 percent year-on-year. This percentage was 18.6 in the previous year. These figures indicate that IT outsourcing was definitely going through a slump. This slowdown this largely attributed to the manufacturing firms, banks and financial companies cutting down on their respective IT budgets. The uncertain economy also had hits effect on the negative growth of IT outsourcing.
However, this trend is going to change and the major contributor to this turnaround will Obamacare. To comply with the new policies of this healthcare program the US states will have to upgrade their systems and build online exchanges where buyers can evaluate and select service providers under Obamacare, creating outsourcing opportunities worth hundreds of millions of dollars.
Another interesting insight on the IT spending of businesses comes from the research firm Gartner which estimates that in 2015 the overall increase in IT budget of companies will be 5.5 percent. In terms of revenue it amounts of a whopping 3.5 trillion. It also means that competition for the booming sectors like healthcare is really going to be tough.
Though the opportunity is huge, the Indian outsourcing service providers will have to address the U.S. concern of privacy and security of critical data. Kevin Parikh, chief executive of U.S.-based management consulting firm Avasant says, ";The best chance that Indian companies will have is to make acquisitions of companies that specialize in healthcare technologies.";