India's IT Outsourcing Firms Eye Healthcare Opportunities Amid Economic Uncertainty

Strategic Insights -

India's IT outsourcing firms are looking to capitalize on the anticipated growth in the US healthcare sector due to President Barack Obama's healthcare reform, commonly referred to as Obamacare. The industry, dominated by Tata Consultancy Services (TCS), Infosys, and Wipro, is expected to see revenue growth slow down due to reduced spending by key clients in the financial and manufacturing sectors. However, with the healthcare sector forecasted to more than double to about $68 billion by 2020, Indian firms see a huge opportunity in this area. Despite challenges, such as addressing US concerns about data privacy, Indian firms are exploring acquisitions of companies specializing in healthcare technologies.

Key Takeaways:

  • The US is the biggest market for India's IT outsourcing industry, accounting for 90% of all healthcare-related contracts.
  • Researchers at Everest Group expect healthcare contracts to more than double to about $68 billion in 2020 from nearly $31 billion in 2018.
  • The top five outsourcing firms by market value are expected to experience slower revenue growth, with an average of 13.3% year-on-year growth in the quarter ended June 30.
  • Indian firms must address US concerns about data privacy and illustrate their intent to protect sensitive medical and personal data for US patients.
  • Healthcare deals currently account for less than 10% of the sales of market leader TCS, but are expected to increase.
  • Researchers Gartner estimate global IT spending will fall 5.5% from a year ago to $3.5 trillion.

Statistics:

  • 90% of all healthcare-related contracts in the US are held by Indian IT outsourcing firms.
  • Healthcare contracts are expected to grow to about $68 billion in 2020 from nearly $31 billion in 2018 (Everest Group estimate).
  • Average revenue growth for top five outsourcing firms is expected to slow to 13.3% year-on-year in the quarter ending June 30.
  • Global IT spending is expected to fall 5.5% from a year ago to $3.5 trillion (Gartner estimate).
  • TCS's healthcare deals account for less than 10% of its sales.

Sources:

  • Reuters
  • Thomson Reuters
  • Everest Group
  • Gartner
  • Hindustan Times
  • SyndiGate Media Inc.