Outsourcing Times

Medical outsourcing catches on

Just days after the story of an American couple traveling to India for surgery hit the news, there is another case of an individual traveling from the U.S. to the Bumrungrad Hospital in Bangkok for a herniated disk repair in his neck.

This trend is on the rise not only because of the substantial savings in medical costs as compared to a similar surgery in the U.S., but also because the quality of service in countries like India, Thailand, Singapore, and Malaysia is as good as anywhere in the world. No wonder, individuals--and even some corporates-- are making a beeline for outsourcing medical requirements. Bumrungrad Hospital alone has seen a quantum jump in the number of American patients to 55,000, a 30 percent rise. Indian medical facilities are also witnessing a similar jump in "medical tourism.”

The net effect is one of globalization of the U.S. hospitals, leading to competition and, one hopes, to better service. For companies in the U.S. that offer medical insurance to employees, the trend to move outside the U.S. for treatment is acting as a catalyst. Such companies are offering added incentives to employees who are willing to travel to Asian countries for their medical needs.

Once the stigma of India being a "developing country" is removed in the American mind, the number of people coming in to places like New Delhi will surely see a further leap. As Time magazine reports:

...As the medical-cost crisis deepens, the corporations who pay insurers are likely to find the lure of outsourcing as irresistible in health care as it is in software.

Dispute between Sprint and IBM on Outsourcing

When Sprint started business with IBM, it was confident that outsourcing IT jobs to IBM would improve the company's software, increase productivity and ensure cost saving for the company. However, situation has taken an interesting turn with Sprint suing IBM over the loss incurred by the company because of outsourcing to IBM. According to Sprint sources, IBM failed to meet contractual promises for productivity improvements. Kansas City reports:

In its simplest form, Sprint executives contend that IBM owes them for about 119,000 hours of uncompleted work. That is the equivalent of 57 years’ work for a single employee.

Medical Tourism: A byproduct of the outsourcing logic

Outsourcing has become a global phenomenon because of a fundamental assumption: outsourcing helps cut costs dramatically, adding up to a higher return on investments. Countries such as India and China have become the centers of outsourcing deals because of the cost factor that works well for companies extending an outsourcing deal to vendors in these countries.

The same logic is now being extended to new frontiers. According to the Time magazine, the high-quality health facilities and cut-rate surgery in countries such as India, Thailand, Singapore, and Malaysia is encouraging Americans to travel to distant countries for resolving complicated health problems.

This trend has been aptly described in a recent article as the "outsourcing of hearts, eyes, and teeth to India.” Skepticism still rides high about the health facilities in India, but the fact is that there are many real-world instances of people traveling to India for eye surgeries and orthopedic and neurological ailments. 

Video games: Child's play no more

It's a common enough sight to see a child busy with the controls of a video game. However, it's time to ponder about the economics of manufacturing a video console. A recent study has shown that the cost of developing a game for a home console outside India can be anything between US$10-13 million, while the same can be accomplished at one-fourth the price in India.

Thus, this market sector has high potential for success and gains in India. Leading players such as Mumbai-based Paradox Studios, Indiagames, and Hurix Systems have already started calculating the pros of developing the market in India with a possible partner in the global market.

US Companies Benefit from Outsourcing

According to a recent study conducted by Capgemini, the US companies have greatly benefited from outsourcing. They are not only pleased with the benefits delivered by current outsourcing efforts, but also they plan do more outsourcing in future. The US companies believe that focusing attention on matters that are core to business will augur well for further growth. Improving process speeds and providing near-term cost savings are also part of outsourcing initiatives.

The US executives understand that the benefits of outsourcing go well beyond cost saving. Outsourcing is a shortcut to business success as companies use it to fuel growth and innovation. In today's competitive environment, executives are looking for ways to drive benefits and improve corporate performance. The US companies have realized that outsourcing is an efficient way to increase competitiveness, improve speed to market, and transform their businesses.

Legal firm benefits from outsourcing

Lumen Legal, a firm that changed its name from Royal Oak to its current name to be more representative of its national presence is deriving the benefits of outsourcing. Its growth story is largely dependent on outsourcing document review services. DetNews reports:

The company, with 30 employees and 2005 revenues of $6.7 million, used to be best known for providing temporary lawyers and legal support personnel in the Midwest.

Aronson & Co. steps onto the outsourcing bandwagon

Aronson & Co. has initiated the Deltek Outsourcing group to meet the requirements of Metro Washington's large government contracting community. This outsourcing group will cater to the accounting operations management among federal contractors as well as companies which lack the skills necessary to perform accounting tasks. WebCPA reports:

According to the firm, internal accounting departments cost most government contractors between $100,000 and $500,000 a year. The accounting firm will offer its outsourcing services in tandem with Deltek software for government contractors. The services available from Aronson include accounts payable processing, time sheets, payroll preparation, financial reporting, job summary reports and labor utilization.

The outsourcing business has taken wings

The first three months of 2006 has been a golden quarter for global outsourcing as the total contract value (TCV) saw a staggering figure of $22.7 bn for contracts over $50m. This is a 173 percent year-on-year growth with a record 83 transactions happening during this period.

These figures have been released by TPI Inc., an advisory firm in it's quarterly report catering to the state of the global outsourcing industry.

BPO transactions saw the same trend as they grew by 63 per cent year-on-year. Research reveals that cost reduction remains the primary motivating factor for outsourcing for the companies and at the same time there is an increasing trend which shows quality improvement and innovation to be other driving forces to hop into the outsourcing bandwagon. TMCnet reports:

"Restructuring of the first-generation agreements have yielded an increased impact on both the volume and the value of contracts in the broader market this quarter, with restructuring representing 33 percent of the TCV signed as against 24 percent of TCV during all of 2005, " said Siddharth A Pai, partner & managing director, TPI India.

European Healthcare Outsourcing Market to witness significant growth

The increasing costs of healthcare and the complexity of healthcare IT systems is forcing European hospitals to look at outsourcing as a solution to these problems. The vendors catering to the Healthcare segment are gearing up to take advantage of the opportunities from this sector.

A Frost & Sullivan Study reveals significant growth estimates in the European Healthcare IT Outsourcing market. The revenue figure is expected to touch $697.7 million in 2010 from $396.4 million in 2005. This growth path will be fuelled by IT initiatives from governments of countries in Europe which will require a greater role from the Application Service Providers. Market vendors will see increased competition and have to opt for appropriate pricing strategies to meet the offerings from rivals in the sector. Black Enterprise reports:

"Globally, the healthcare IT sector is set to witness organic growth due to the interest generated by clinical systems such as electronic medical record (EMR) and administrative ones such as patient administrative systems (PAS)," notes Frost & Sullivan Research Analyst Sumanth Kambhammettu.

MAN AG considers outsourcing as a cost reduction measure

MAN AG is considering outsourcing some of it's truck production to derive the benefits of cost reduction. The Krakow unit in Poland is most likely to ride the outsourcing bandwagon. Forbes reports:

The outsourcing partners being considered include not just external firms but also a unit belong to MAN Ferrostaal.