Analyst: Outsourcing can save costs in health care
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BALTIMORE - Health care organizations not considering offshore outsourcing are missing out on significant cost savings, but administrators need to be aware of potential risks, including lax handling of data security by some vendors and the effect on employee morale, a health care IT analyst said Tuesday.
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Infosys Technologies profits from global outsourcing trends.
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Who would have expected this upside to costly medical procedures?
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(InfoWorld) - Indian outsourcing companies have to move beyond low-cost services on an hourly-rate basis to offering complete services, according to an outsourcing consultancy. A model that is based primarily on the low cost of Indian staff will not be sustainable by Indian providers in the long term, as the cost advantage is eroding, said Dennis McGuire, chairman of outsourcing consultancy firm, Technology Partners InternationalÂ (TPI) in Houston, Texas. Large competitors like IBM and Accenture are also expanding operations in India to take advantage of low-cost staff, he said. âWhen I go to a restaurant, I want a chicken dish and not a rate-card telling me how much the chefâs time will cost me,â McGuire told reporters Wednesday. There isnât much risk, nor promise of great reward, in the current labor-cost arbitrage model adopted by Indian providers, he said. Indian service providers must make more investments in senior staff, and industry specific applications and tools if they want to win big contracts, said Peter Allan, a partner at TPI. They will have to develop industry-specific applications, such as a billing system for telecommunications companies, around which they can offer services to customers, said Siddharth Pai, another partner at TPI. Indian providers have been reluctant to trade current margins for long-term revenue opportunities because investors expect far higher margins from Indian service companies than from their multinational competitors, TPI said. Only recently have these outsourcers indicated that they are willing to accept total outsourcing deals that involve transferring customer staff and assets, Pai said. The reluctance of Indian outsourcers to address the lower-revenue domestic outsourcing business will also hurt them as the market shifts from plain coding and testing to higher-end transformation services, research firm Gartner said this week. Working on projects in India in these new areas would give Indian outsourcing companies the opportunity to prove their capabilities to customers abroad, said Partha Iyengar, research vice president at Gartner. Indian outsourcing companies such as Infosys Technologies and Tata Consultancy Services are attempting to go up the value chain into IT consulting and services delivered around their products. â They still donât offer the full array of services, and in applications they only have products in the core banking area,â Pai said. However,Â business is still strong for Indian outsourcers, according to data released by TPI. Of the number of contracts greater than $50 million awarded last year, the share of Indian service providers went up to 11 percent from 8 percent a year earlier, according to the consultancy. Their share of the total value of these contracts went up to 7 percent from 4 percent a year earlier, it said.
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Health savings accounts can help you reduce costs -- if you know how they work.
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Managed care provider inks first international agreement.
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Sept. 10, 2004 -- American workers&#39; soaring health care costs could have a one small upside: They seem to be spurring companies to get more serious about worker health in a desperate bid to save money.
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Consumer-driven health plans (CDHPs) are coming, as businesses shift costs to employees.
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Indian outsourcers already have a large share of outsourced application development and maintenance and are dominant in business process outsourcing. The country is now targeting a larger share of the market for remote infrastructure management services (IMS), and is planning to more than double revenue from these services to $15 billion by 2013.IMS involves managing an enterprise&#8217;s core IT systems, including hardware, software, connectivity and people. The IMS industry is moving towards a remote delivery model where services are increasing delivered from low-cost locations by service providers and wholly-owned services subsidiaries of user companies, according to a report released Thursday by India&#8217;s National Association of Software and Service Companies (Nasscom).Customers in the US and Europe are increasingly willing to outsource IMS to offshore locations, because the data does not move out of the home countries, and is only managed remotely, said Siddharth Pai, a partner at sourcing consultancy firm,Technology Partners International (TPI) in Houston, Texas.In India, IMS business is going both to Indian outsourcers, and the Indian operations of large IT services companies, Pai said. Because of the large staff component involved in IMS, there are cost benefits in outsourcing IMS to low-cost, offshore locations like India, he added.Research done by management consultancy firm McKinsey for Nasscom, suggests that the IMS business could generate between 325,000 to 375,000 jobs in India by 2013, as 70 to 75 percent of the roles in IMS can be moved offshore.Low-cost locations, including India, have so far captured a mere $6 to 7 billion&#160;of the IMS opportunity.Indian outsourcers have so far learned to price their services on the basis of staff time utilized. They now have to learn more sophisticated pricing that takes into account other parameters like amount of computing power being managed, if they are not to risk losing money in the business, Pai said.
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Economic uncertainty prompts companies to delay contracts, but may soon benefit outsource services.
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The costs of colon surgery for enrollees in Medicare health maintenance organizations (HMOs) are no lower than those of similar patients participating in traditional Medicare, according to Tampa-based researchers.
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Survey of U.S. and European companies finds that less than half consider outsourcing financial functions to be cost effective.
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More than a quarter of growth in health care spending over the past 15 years is due to obesity, and experts say prevention is key to control soaring costs.
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With the rising cost of health care and over 45-million Americans uninsured, many believe America&#39;s healthcare system needs work.
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Managed-care service provider Wellcare Health Plans is showing robust returns.
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The growth in health care spending by private employers slowed in recent years, creating some optimism that the employers had turned the corner in their struggle with rising costs. But any relief appears to have been short lived, according to a study to be released today.
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(InfoWorld) - The outsourcing and offshoring of software development work has become such an ingrained part of the technology industry in the U.S. that stories about it no longer rouse the public's interest as they did even a few years ago. That means the only way to gauge the growth of the phenomenon is by watching the bottom line of outsourcing giants like India's Wipro, which recently reported a 41 percent jump in revenue in its latest fiscal year, and the heated debate in Washington over the number of H-1B high-tech visas that the federal government grants. But the runaway growth of offshoring has created its own problems in countries like India, where a substandard infrastructure and stiff competition for talented workers has changed the economics of setting up shop outside the U.S. The decision to hire a staff in India "wasn't even a second thought" when Munjal Shah, CEO of RiyaÂ , was laying the groundwork for his visual search startup back in 2004. (Riya is part of InfoWorldâs Month of Enterprise Startups feature.) "At 30 percent wage rates [the ratio of an Indian salary to a U.S. salary], it still was worth the communication overhead, the travel, and the late-night conference calls," Shah recalls. Those were the good old days. Today, wages in India have risen so much that maintaining development operations in Silicon Valley and India no longer made sense, forcing Riya to make what seems like an unusual decision: In April, the company nixed its Bangalore operations and consolidated operations back in the company's Silicon Valley headquarters. In the end, the cost advantages of lower Indian wages did not outweigh the efficiency losses that came from maintaining some 35 employees in two offices, 12 hours apart, Shah said.Â  Indian software development shops have been the workhorse for countless high-tech firms and U.S. enterprises for more than a decade. But steady demand for development talent is erasing some of the cost advantages that offshore development outfits have enjoyed, according to a report by Gartner. In fact, the wage rates for Indian software engineers will reach between 40 to 50 percent of Silicon Valley wages by 2008 with the gap continuing to narrow after that.Â  Wage increases for Indian engineers averaged 15 percent from 2005 to 2006, compared with a 3 percent average increase for U.S. engineers, according to a recent Gartner report. That's not to say that things will be even-steven any time soon, though. "Even if Indian salaries continue to grow at 15 percent annually, it would take 16 years for Indian software engineers to catch their U.S. counterparts," the report says. But wages among startup employees have been growing much faster than that, especially among top engineers in Bangalore, Shah said. A native of India, Shah paid a premium to hire experienced graduates of the prestigious Indian Institute of Technology. Unlike IBM or Infosys, a startup doesn't have the resources to train the brand-new graduates who would work for smaller salaries. "Startups aren't places where you train people from the ground up," Shah said. "They're places where either you know what you're doing or you don't. We paid to hire the best." To that end, Shah said, wage increases among his engineers in Bangalore tended toward twice the national average. "Salary increases have been 30 percent for more than a year now," Shah said; the engineers who lost a job when Riya decided to close the Bangalore office all have received multiple job offers with significant wage increases, he said. Differences in the high-tech cultures of the U.S. and India also play a part. Indian workers are less likely than their Californian counterparts to be wooed by the prospect of working for stock options instead of cash.Â  "In Silicon Valley, you see your friends from Google driving around in new Ferraris, and you think, 'Huh, occasionally this actually works,'" said Shah. "But there's no comparable value for options [in India]."Â  And without the lure of options that might someday make a software engineer wealthy, money isn't just one reason for a Bangalore engineer to join a company â it's the only reason.Â Â  "If you can't build a core loyalty with options, then you're in for a tough time," said Keerti Melkote, cofounder of wireless LAN hardware company Aruba, which went public in March. Aruba tried outsourcing to India shortly after the birth of the company in 2002 but found that it slowed down operations too much for it to be worthwhile.Â  "You need a critical mass for offshoring to work -- a whole project as opposed to part of one project -- and for a startup, offshoring might not make sense. Especially now, the loaded cost of all the late-night conference calls is high enough that it might not make sense." Melkote said that with its growth in the last few years, Aruba can now afford to support a fairly autonomous Indian operations center in Bangalore. But startups don't have that option. "We found that if you gave a guy less than a 30 percent salary increase every year, then he'd walk," Shah said. "By the middle of this year, we would have been paying [the Indian engineers] 75 percent of a U.S. salary, and at that point, it doesn't make sense because of all the other overheads that take away from productivity." What kinds of overheads you ask? "On average the power probably goes out three or four times a day," said Fran Karamouzis, a research vice president at Gartner who specializes in outsourcing issue. âYou get surges for 15 or 20 minutes, and if you don't have adequate power supplies, then that's a big issue." Thatâs a big issue for startups, whose employees often work odd hours from home, Shah said.Â  Of course, infrastructure problems are nothing new and are considered par for the course in India, but with competition from China, Russia, Eastern Europe, and even Vietnam and Africa, unreliable infrastructure is starting to cost India business, such as Intel's recent decision to locate a $2.5 billion chip plant in China. The nature of work at a startup makes them even less tolerant of those kinds of risks than companies like Intel. "If you're a startup and you're doing a lot of iterative design and you constantly need a higher level of agility, you might find it more burdensome than the cost differential is worth," Karamouzis said. On the other hand, "If you can give the Indian team things that are clearly delineated that they can own and drive on their own, then it works out pretty well," said Pejman Roshan, cofounder and senior director of marketing at Agito Networks, a wireless technology startup in Sunnyvale, Calif. that outsources software coding to a services firm in Bangalore. Roshan acknowledged, though, that the wage gap is shrinking. "I'd heard there was a five-to-one [ratio of Silicon Valley wages to Bangalore wages], and we were salivating at that notion," Roshan said. "We're seeing a three-to-one benefit, and we're still happy with that." Riya's Shah is confident that moving the company's operations back to the U.S. was the right move and expects to see more companies doing the same in the months ahead.Â  "We might be a little bit ahead of the curve in our decision -- maybe six to 12 months -- but I don't think wages are going to stop rising," said Shah, who detailed his decision in his CEO blog, Recognizing Deven. "I don't think weâre isolated." Still, despite wage increases, new startups aren't likely to rule out Indian operations any time soon, Gartnerâs Karamouzis said. In fact, they may have to consider such operations in order to get venture capital. "More often than not, what I hear is that venture companies are almost demanding that [startups] leverage India or Russia both to optimize the cost structure and to maximize a 24-hour cycle to get things done faster," Karamouzis said.