India Healthcare BPO 2013 – ICD-10 conversion next Y2K of healthcare

The US healthcare industry is about $1.8 trillion in size and is expected to be about $2.5 trillion by 2018. The healthcare revenue cycle market (claims processing) is estimated to be about $11 billion segment representing only the provider segment and in this segment around $3 to $4 billion is outsourced globally and Indian healthcare BPO vendors currently have a  share of only about $300 to $400 million. Claim processing and settlement, i.e. healthcare revenue cycle management, is one of the core services in the health insurance industry and has to be handled promptly and accurately and Indian vendors are handling this work effectively. The Indian Healthcare BPO story started with basic claims processing (data entry) and over time India has become preferred destination for US Healthcare and Insurance companies to outsource their medical coding work including in-patient coding work, which is a complicated process. There is also a lot of growth in the claims adjudication space and other insurance company related work that is being done in India. The global healthcare BPO market is growing at a CAGR of 21.4%.

Healthcare provider outsourcing has the highest growth rate of 31.9% from 2013 to 2018 because of the conversion from ICD-9 coding system to ICD-10 coding system to be implemented by October 2014 in the US. Healthcare payer outsourcing market will also grow at about 30% in the forecast period. Omega Healthcare President and CEO Gopi Natarajan explained that the transition of the medical coding process from ICD-9 (The International Classification of Diseases) to ICD-10, a standard used in the US to classify diseases, is slated for October 2014 throughout the US, and is expected to be a huge boost for the outsourcing industry. Manish Hemrajani, Executive Director and Senior Analyst at Oppenheimer & Co. Inc. says Genpact, EXL Services  and WNS have traditionally served the BFSI verticals, but they are now moving increasing their exposure to health care, one vertical where he expects meaningful growth. He says the transition from ICD-9 to ICD-10 is expected to translate into a meaningful amount of business. “The differences between ICD-9 and ICD-10 are significant, and none of the payers or providers in the health care industry are ready for it with a deadline set for October 1, 2014, and that’s where the BPO vendors come in. So you’re going to see a meaningful growth coming from health care in this space. Some are touting it as the Y2K of health care.”

ICD-10 is the new version of the World Health Organization's International Classification of Disease. The 155,000 codes in this massive compendium are used on everything from hospital records to insurance claims to death certificates. Most of the Indian Healthcare BPO vendors have set up separate practices for this and are well prepared to offer the conversion services to the US clients. ICD-10 is going to require a large amount of changes and training the new codes will affect medical collections for both patients and providers. Indian Vendors help the clients in transitioning their systems and coding mechanisms to the latest ICD 10 system and also help in providing training that is required to use the codes. Practice managers or billing staff must be trained on all the details of the new system, patients too have to know about the coding changes will impact the amount they pay on insurance claims as well as nurses, doctors, and other staff members that will come into contact with diagnosis codes. 

Discussion Points: 
1.How are Indian Outsourcing vendors targeting the ICD-10 conversion projects and are they profitable? 
2.What type of talent and skill sets required for ICD 10 conversion projects and availability of talent in India?
3.Since ICD 10 conversion is a temporary project, what should Indian vendors do post the expiry of conversion projects?

Outsourcing Deals Slowing down: Should Indian Outsourcing Industry worry in 2013?

Indian IT-BPO industry aggregate revenues crossed the $100 billion mark and exports reached $69 billion in FY 2011-2012 and within the global outsourcing industry, India had increased its market share from 51% in 2009 to 58% in 2011, highlighting India’s continued competitiveness and the effectiveness of Indian providers in delivering transformational benefits. As a proportion of national GDP, the sector revenues have grown from 1.2% in 1998 to an estimated 7.5% in 2012, says NASSCOM. The industry has seen a tremendous growth earlier but since past few years the year on year (YoY) growth rates have been falling reflecting the effects of the 2008 financial crisis and also the present European Sovereign Debt crisis.  Continuing on the decline the $100-billion IT industry is expected to meet the lower end of 11-14% growth projection in FY2012-2013, according to NASSCOM and the revenue from IT exports is estimated at $75-77 billion for the current fiscal year.

                                                                   

Analyst firm Ovum said that the total contract value (TCV) of outsourcing deals fell a record 30% during the Q3, 2012; lowest in nine years and TCV of IT services deals announced in the three months ended September 2012 was $18.9 billion, down 33 per cent on the same period in 2011. The volume of deals fell sharply to 332 from 438 last year, representing the least activity in five years which highlights that companies are no longer aggressively outsourcing their IT and business processes, which also hit an 11 year low. TCV is a measure by which outsourcing deals are valued. Add to that the fact that public sector or government-owned companies have also reduced their outsourcing spends, which, according to Ovum, is at a three-year low. This data also highlights the fact that the Indian IT sector is facing one of its most turbulent years in its short history.

Infosys told analysts that the demand environment continues to be weak, and led some of them to conclude that the company may lower its annual growth guidance to 3.5% compared with the current growth target of 5%. Even the star performer Cognizant that has been consistently growing by 20% YoY has recently announced that its board had set a revenue growth target of 16% for 2013, which will be used as a base to determine whether its top executives will earn 100% of their equity incentives for the year which shows that their growth will also slowdown from 20%. Tata Consultancy Services (TCS) on the other hand is positive and hopes to keep up its double digit growth for the current year. Both TCS and Cognizant have said growth is expected to be lower in the December quarter, 2012 and in FY2013, respectively. The recently announced results of Accenture too indicated slowdown where the growth of outsourcing business segment has seen fall in growth compared to previous quarter and consulting services flat.

The National Association of Software and Services Companies (NASSCOM) has said that the Indian IT industry is likely to meet the lower end of its growth forecast of 11-14% for FY2012-13 as customers tread cautiously on technology spending due to global economic uncertainty and companies in United States, who are the largest outsourcers to India and businesses in Europe that are increasing their outsourcing to India are curbing spend and reducing their IT budgets in a difficult business environment. The statement, made for the second time since September, comes after several IT firms gave guidance which was lower than the industry body’s forecasts. Banking Financial Services and Insurance companies that dominated outsourcing to India are facing severe troubles in their businesses and are forced to reduce their outsourcing spends.

Discussion Points:
1.European Sovereign Debt crisis and volatile US economy is expected to continue next year in 2013, what should Indian Outsourcing Vendors do to tackle this?
2.Overall the Outsourcing Industry is not expected to keep up the double digit growth rates which is happening all these years, the growth rates will slowdown and are Indian vendors prepared for this new normal?
3.Indian Outsourcing vendors have to definitely shift their Geographic focus from US and Europe to other locations. So where should they focus? What about Indian Market?

Global Applications Stores 2012 – Big growth led by iTunes & Android Apps stores

The mobile applications market has survived the volatile economic conditions and crises since July 2008 when Apple launched its App Store, a digital application distribution platform for iOS, as an update to iTunes Store through which iOS users (iPhone, Mac, iPad, iPod) can browse and download applications. Following Apple App Store success Google launched its own App Store, Android market place (currently known as Google Play) in October 2008. According to ABI estimates revenue from mobile app store purchases could increase from $8.5billion in 2011 to $46billion by 2016 dominated by iPhone App Store, Google Play, Blackberry RIM ( presently not doing well), and Windows 8 Apps (aggressive push from Microsoft). As per a report by IHS, formerly called iSuppli, downloads in both stores combined will cross 85 billion by the year 2016. The app revenue generated in 2012 is $1.68 billion for Google Play, and $2.53 billion for the App Store.

Apple's App Store currently contains about 700,000 apps, for iPhone, iPad, or both and more than 35 billion downloads till to date. According to Telecom Lead America, Apple App Store revenue is expected to increase to $4.9 billion in 2012, up from $2.9 billion in 2011 and commands about 65 percent share of the global application store market in 2012. Apple has said it has more than 435 million active accounts with credit cards and that it had paid out a total of $6.5 billion to developers as of October 2012, up from $4 billion in January. Apple takes a 30 percent cut of transactions made in its App store. According to ABI, Apple's strengths include a powerful development environment, a curated App Store promoting quality apps, and smooth commerce integration with iTunes accounts and credit cards. But off late Apple App Store revenues are seeing slight slowdown.

In March 2012, Google redesigned its app store, Android Market Place and re-branded it Google Play, with a new look and increased content including digital music, movies, games and apps all available on Google Play and recently it crossed more than 700,000 applications equal to Apple App Store. Google has significantly improved its app store but it still suffers from weak commerce tools or monetization issues, as most of the apps are free on Play. That has an impact on app revenue, as Android apps only earn 24 cents per active user for every $1 earned on iOS according to ABI research. Recently Google announced the downloading of the 25 billion applications. Google mobile revenues rose to $8 billion in 2012, a significant increase over the company’s $2.5 billion in mobile ads revenue reported in 2011. Google’s Sr.VP and CFO Patrick Pichette pointed out that the $8 billion in revenue includes mobile ads and sales of Google Play mobile content and spending on Play apps. Google Play revenue includes app purchases, in-app purchases, eBooks, movie and TV purchases, and more. As of 19 October 2012, developers in 32 countries were able to distribute paid applications on Google Play and developers pay $25 for registration to distribute on the Android Market.

Windows Phone Store (formerly Windows Phone Marketplace till August 2012) is a service by Microsoft for its Windows Phone platform that allows users to browse and download applications that have been developed by third-parties which also features "Metro UI", the UI is presented in a "panoramic view" where the user can browse categories and titles, see featured items, and get details with ratings, reviews, screen shots, and pricing information, according to Wikipedia. The Windows Store now has 120,000 apps, accessible in 191 countries and the company highlights the fact that 46 of top 50 smartphone apps are available on Windows phone Store. Microsoft’s has launched a revamped Windows Phone Store to go hand-in-hand with the official arrival of Windows Phone 8.

Nokia Ovi Store was launched worldwide in May 2009 and customers can download mobile games, applications, videos, images, and ringing tones to their Nokia devices. In May 2011, Nokia announced plans to rebrand its Ovi product line under the Nokia brand and Ovi Store was renamed Nokia Store in October 2011. Globally, there more than 150 million registered Nokia Store customers and Store offers more than 120,000 apps, and currently sees more than 17 million downloads per day, with 50%+ coming from Series 40 phones.  To date, Nokia Store has driven more than 6 billion downloads and offers operator billing supported by 145 operators, across 52 markets. 80% of Nokia Store traffic converts to a download, and apps are No. 1 among paid-for and free downloads. Nokia Store is available in 190+ countries, of which 90% are served in their local language. 505 developers have achieved more than 1M downloads through Nokia Store, while 63 have achieved 10M or more, 41 with 25M or more, 13 with 50M or more, and 3 developers have now passed the 100M downloads milestone according to Nokia Developer site.

At BlackBerry Jam in September 2012, RIM announced that App World had more than 105,000 apps. Based on Vision Mobile data, BlackBerry developers generate an average of 4 percent more revenue per app a month than those on iOS. BlackBerry App World is an application distribution service and application by Research In Motion (RIM) for a majority of BlackBerry devices. The service provides BlackBerry users with an environment to browse, download, and update third-party applications. The service went live on April 1, 2009 according to Wikipedia. App World recently crossed 3 billion downloads since the store launch.

Michael Walkley, a Canaccord Genuity analyst estimated that Samsung would be able to sell 303.6 million handsets in 2013 while the American iPhone-maker is likely to sell 194 million iPhones and 102 million iPad units. Smartphones powered by Microsoft’s Windows Phone 8 software also posted a boost in the third quarter, increasing the company’s market share by 2 percent. Blackberry is also expected to launch its new smart phones based on BB10 OS in January 2013. App Store Industry is expected to continue its growth in near future as more and more apps are developed by developers and store access is extended to other countries which do not have access right now. All the App Stores are investing in further developing the platforms and devices, monetizing and revenue sharing with developers and encouraging developers by investing millions of dollars. 

A look at Verticalization strategy adoption by Indian Outsourcing Vendors 2012

Indian outsourcing vendors have adopted verticalization strategy since 2008 and they have restructured their organizations based on specific industry verticals like Banking Financial Services & Insurance (BFSI), Pharmaceutical, Manufacturing, Retail, etc. and have appointed business heads for each vertical with significant responsibility and accountability in terms of revenue maximization, profit & loss, developing specific domain skills and expertise that includes acquiring the required human resources for this purpose and train them accordingly.  All the Indian Outsourcing vendors like TCS, Infosys, Wipro, HCL Technologies and even BPO players like Genpact, WNS, Aditya Birla Minacs, etc. have all adopted the verticalization strategy and invested significant amounts in developing the domain skills, products, platforms, and intellectual property and also used M&A strategy to acquire companies/players with specific domain skills.  According to NASSCOM, the Indian BPO industry is moving from efficiency to effectiveness while focusing on re-engineering themselves in order to deliver transformational impact to customers. The industry is developing future-ready solutions by following a verticalized approach by developing in-depth capabilities across verticals and creating customer impact through service delivery excellence.

Indian Outsourcing industry that included IT and Business Process vendors both are experiencing slower growth rates since past five years where the slowdown is because of the Global Financial Crisis and European Sovereign debt crisis. Outsourcing clients are constantly demanding lower prices for the work, increasingly rationalizing their portfolio, looking to do more work with fewer Vendors and are also demanding the Indian Outsourcing Vendors bring more value to their relationships by providing them services that will have significant impact on the clients businesses. These are some of the reasons that have forced the Indian Vendors to adopt Verticalization strategy and Verticalization is one of the ways providers are seeking to deal with this changing industry and looking to create more value to their clients. According to Peter Bendor-Samuel, Chief Executive Officer, Everest Group, the move to verticalization is a reflection of a maturing services industry and secular pressures on the provider community. Large Indian IT Vendors like TCS, Cognizant Technologies, Infosys, Wipro, and HCL Technologies have realized and adopted the vertical strategy for the past five years and have reaped significant benefits from this strategy.

Verticalization strategy helps the vendors to focus on key verticals and since organizations are aligned according to key verticals, accountability and responsibility at the account level and enterprise level will help in increasing revenues and also enable sharing domain specific knowledge and expertise across accounts thereby enhancing vertical group’s ability to engage with existing clients and potential clients in the specific industry verticals. Products and Platforms based on reusable IP can be developed based on the domain specific offerings of the existing accounts/clients, thereby increasing the nonlinear revenues of the vendors as the Indian vendors are aggressively looking to increase nonlinear revenues. Biggest challenges for the Indian vendors are recruiting the domain specific skilled talent and training the existing talent to enable them offer innovative and client requirement based offerings and also vendors have to invest millions of dollars for developing the products, platforms and Intellectual property. Acquisitions is another way Indian Vendors are looking to build industry vertical expertise where in TCS acquisition of Citi Bank back office in India and its acquisition of Diligenta, insurance outsourcing specialist which got the US$ 2.2 billion Friends Life deal, Infosys acquisition of Lodestone Consulting and sourcing & procurement vendor Portland Group and Infosys 3.0 strategy emphasizes the vertical specific focus, HCL Tech acquisition of Axon and Wipro acquisition of Promax and it also kept a budget of US$ 1 bn for M&A. Vertical strategy is key for the nonlinear revenue growth that all the major Indian Outsourcing vendors are focusing on for future revenue growth.

Discussion Points : 
1.Is the present verticalization strategy adopted by Indian Outsourcing vendors is effective?
2.What factors forced the Indian Outsourcing Vendors to adopt the Verticalization Strategy?
3.What are the advantages of the Verticalization strategy particularly for Indian Outsourcing Vendors?

Big Data will drive Business Organization IT spending till 2016

Big data is gathered from everywhere be it  posts, updates, comments, etc. to social media sites, digital pictures and videos uploaded onto internet and stored on the various devices, purchase transaction records, and cell phone GPS signals, etc. According to IBM, every day, we create 2.5 quintillion bytes of data — so much that 90% of the data in the world today has been created in the last two years alone. Big data is any type of data - structured and unstructured data such as text, sensor data, audio, video, click streams, log files and more and these data sets are huge and complex which cannot be analyzed and processed using normal data base tools and technologies. Big data sizes are a constantly moving target, as of 2012^[update] ranging from a few dozen terabytes to many petabytes of data in a single data set and requires "massively parallel software running on tens, hundreds, or even thousands of servers.” According to IDC, the volume of digital content is expected to grow to 2.7 zettabytes (ZB), up 48 percent from 1.8 zettabytes in 2011. With more than one billion smartphone users worldwide, and more than billion consumers are active on the social media platform like Facebook , are generating zettabytes of data (1 zettabyte equals more than a trillion GB), giving out information on their likes and dislikes, shopping preferences and much more.

According to Gartner, Big data will drive $28 billion of worldwide IT spending in 2012 and is forecasted to drive $34 billion of IT spending in 2013. Big data will drive $232 billion in spending through 2016. It will directly or indirectly drive $96 billion of worldwide IT spending in 2012, and is forecast to drive $120 billion of IT spending in 2013. Big data currently has the most significant impact in social network analysis and content analytics with 45 percent of new spending each year. Most of the current spending is used in adapting traditional solutions to the big data demands — machine data, social data, widely varied data, unpredictable velocity, and so on — and only $4.3 billion in software sales will be driven directly by demands for new big data functionality in 2012. “However, through 2018, big data requirements will gradually evolve from differentiation to 'table stakes' in information management practices and technology. By 2020, big data features and functionality will be non-differentiating and routinely expected from traditional enterprise vendors and part of their product offerings”, according to Mark Beyer, research vice president at Gartner. Gartner expects leading organizations to begin to use their big data experience in an almost embedded form in their architectures and practices by 2015.

According to IDC estimates, Big Data market is expected to grow from $3.2 billion in 2010 to $16.9 billion in 2015. This represents a compound annual growth rate (CAGR) of 40% or about 7 times that of the overall information and communications technology (ICT) market. IDC also forecasts a significant opportunity for both Large IT vendors as they acquire smaller players and launch their own product offerings and Startups where more than half a billion dollars in venture capital has been invested in new Big Data technology. IDC study also highlights the five-year CAGR for the worldwide market is expected to be nearly 40%, the growth of individual segments varies from 27.3% for servers and 34.2% for software to 61.4% for storage. Over time with the growth in appliances, Cloud, and outsourcing deals for Big Data technology business organization focus will shift from technology capabilities towards the business value arguments. Most of the vendors will focus on system performance, availability, security, and manageability and there will be very little differentiation among the various vendors.

According to Wikibon, the Big Data market will see rapid growth spurt that will see it top the $50 billion mark worldwide within the next five years and as of early 2012, the Big Data market stands at just over $5 billion based on related software, hardware, and services revenue. Big Data is going to be critical for business success in near future as businesses are looking to utilize the data for making critical decisions, develop new products and services and improve the existing ones. For some of the businesses Big data has already become a strategic advantage in comparison to their competitors who are still looking for ways to crack data. New technologies and tools are being aggressively developed and in next five years most of these technologies will be part of traditional IT architectures and businesses will learn to use big data effectively and big data will become just data and not more of strategic advantage.

Discussion Points:
1.What is Big Data, where is it gathered from and what is its role in Business Organizations?
2.What are the technology implications of Big Data and how to analyze it and use it for Business growth?
3.How should business organizations deal with Big Data and how to use it in strategic decision making?


Major Big Data Vendor revenue 2011: 
Source: http://wikibon.org/wiki/v/Big_Data_Market_Size_and_Vendor_Revenues 

Vendor	Big Data Revenue (in $US millions)	Big Data Revenue as Percentage of Total Revenue
IBM	$953	1%
Intel	$765	1%
HP	$513	0%
Fujitsu	$285	1%
Accenture	$273	0%
CSC	$160	1%
Dell	$154	0%
Seagate	$149	1%
EMC	$138	1%
Teradata	$120	5%
Amazon Web Services	$116	18%
SAS Institute	$115	24%
Capgemini	$111	1%
Hitachi	$110	0%
SAP	$85	0%
Opera Solutions	$76	76%
NetApp	$75	0%
Atos S.A.	$75	1%
Huawei	$73	0%
Siemens	$69	0%
Xerox	$67	1%
Tata Consultancy Services	$61	1%
SGI	$60	9%
Logica	$60	1%
Mu Sigma	$55	85%
Microsoft	$50	0%
Oracle	$50	0%
Splunk	$45	68%
1010data	$25	83%
Supermicro	$23	2%
MarkLogic	$20	25%
Cloudera	$18	100%
Red Hat	$18	2%
Informatica	$17	2%
Calpont	$15	60%
ClickFox	$11	31%
Fractal Analytics	$12	100%
Pervasive Software	$10	20%
Tableau Software	$10	14%
Think Big Analytics	$8	100%
MapR	$7	100%
Digital Reasoning	$6	50%
ParAccel	$5	45%
Couchbase	$5	84%
DataStax	$4.5	100%
10gen	$4.5	100%
Datameer	$4	100%
Hortonworks	$3	100%
RainStor	$2.5	100%
Attivio	$2.5	13%
QlikTech	$2	1%
HPCC Systems	$2	100%
Karmasphere	$2	100%
Other	$25	n/a%
Total	$5,125	1%