Capitalizing on Trends in the Healthcare Vertical
Imran Khan, industry analyst, Information & Communication Technologies for Frost & Sullivan, highlights the growing opportunities in the booming healthcare market and tells channel partners how to benefit from the spending trends.
The healthcare vertical is a leading target market for IT/Telecom service providers, equipment vendors and resellers. In 2007, there were an estimated 870,000 healthcare establishments across North America. The sector generated an estimated $1.9 trillion in 2007, and it is expected to continue to show relatively strong revenue growth during the next few years, thanks to rising consumer healthcare costs within the U.S.
Despite the sectors growth, the healthcare vertical continues to face a dynamic regulatory, competitive and end-user environment that is driving changes in operating systems and processes. As healthcare organizations restructure their operations to comply with regulation and/or to increase profitability, an increasing number of firms within this sector are investing resources in new, advanced technologies designed to accomplish these objectives. Some of the key trends faced by healthcare organizations include:
-- Rising healthcare costs, as well as growing demand for various healthcare services such as nursing homes and elderly care.
-- A struggle with profitability and cashflow issues due to their rising operating costs.
-- Limited availability of a skilled workforce.
-- Increasing reliance on various technologies including automation to improve patient care and reduce long-term operating costs.
Healthcare firms are expected to continue to invest in IT/telecom solutions that address productivity, regulatory compliance and customer contact/relationship issues faced by the sector. Moreover, the need to reduce the incidence of medical errors and the resulting medical malpractice litigation will likely cause healthcare service providers to invest in technologies such as electronic prescription management solutions.
More healthcare organizations are focused on boosting employee productivity and efficiency, given the rising operating costs and the limited availability of skilled workers. This trend is prevalent across small, medium, and large healthcare systems that struggle with workforce shortages and higher employee turnover rates.
Effective customer contact management is also a high priority as it impacts overall costs and service quality. It is reasons such as these that are driving healthcare organizations to implement telecom solutions such as hosted contact centers that utilize interactive voice response (IVR) and or speech-enabled automated attendants for various applications such as physician locator, patient appointment management and prescription refill services. Regulatory compliance and business continuity also rank as higher priorities among more healthcare firms and are driving investment in new processes and technology.
For instance, the implementation of patient data security mechanisms, as well as electronic health record (EHR) technology, is largely necessitated by HIPAAs various requirements for healthcare providers. It is interesting to note that while budgetary constraints are often touted as the leading factor influencing technology spending, it ranks behind employee productivity/efficiency and customer contact management as a priority for healthcare firms, thereby leaving the indication that budgetary constraints are less likely to be the leading factor influencing technology spending by these organizations.
From an IT/Telecom spending perspective, a number of market variables including regulatory compliance requirements, greater focus on operational efficiency and changing consumer/patient healthcare demands are driving investments in new technology among healthcare firms. Furthermore, the business continuity needs exacerbated by natural and man-made disasters (such as global flu pandemic concerns) are further stimulating healthcare providers to invest in programs that encompass facilities, network infrastructure and personnel.
From a solution providers perspective, the healthcare vertical offers significant new revenue growth opportunities for both traditional as well as next-generation solutions including IP telephony, data transport, business process applications, hardware and network security. Also, the relative lack of in-house IT resources across several healthcare organizations further presents opportunities to provide network consulting, integration and management services.
Success within the healthcare vertical is dependent upon a number of factors including product/service quality, reliability, brand awareness/recognition and channel strength. The larger healthcare vendors, both service providers and hardware vendors, are increasingly expanding their marketing channels in order to reach out to the various healthcare segments. For instance, operators such as Siemens, Verzion Business, and others are increasing their reliance on systems integrators and VARs for marketing of their IT/Telecom products and services. While strong brand awareness is important for a vendor, brand recognition is a single variable on the list of factors impacting vendor selection by healthcare firms. Factors such as pricing and overall service management often take precedence during IT/Telecom decision-making process.
Overall, competition among IT/Telecom vendors vying for a share of the healthcare market is expected to intensify as the sector offers revenue growth opportunities in a variety of areas, including managed/hosted solutions, technology migration and convergence, as well as implementation of advanced applications such as voice over WLAN. Also, rising business continuity and disaster needs among healthcare providers are further driving investment in infrastructure and facilities and stirring greater interest in IT/Telecom network/application outsourcing (such as hosted telephony).
(Imran Khan is an industry analyst, Information & Communication Technologies for research firm Frost & Sullivan.)