Wipro was awarded a $200 million contract by Catholic Health Initiatives, the biggest healthcare outsourcing order for India’s third-largest software services provider.
Under the contract, Wipro will manage computer systems, networks, data centres and servers for more than three years for Catholic Health Initiatives, the second-largest non-profit healthcare chain in the US, two people familiar with the development said on condition of anonymity because they are not authorized to discuss details.
Indian software service providers are poised to get more such orders worth billions of dollars of potential revenue from US healthcare service providers, which are racing against time to upgrade existing infrastructure, as US President Barack Obama’s healthcare legislation—the Patient Protection and Affordable Care Act, popularly known as Obamacare—will come into effect from 1 January 2014.
“The rapid emergence of new models of health care delivery and ever increasing digitization of the value chain doesn’t provide healthcare providers with much time on the runway. Providers have to start changing now, max by 2015,” said one of the persons cited above, adding that other multinational and domestic software services rivals had also vied for the contract.
The US healthcare outsourcing market is currently estimated to be about $20 billion, according to figures provided by outsourcing advisory firm Everest Group.
A Catholic Health spokesperson confirmed it had signed a deal with Wipro without giving further details of the contract. A Wipro spokesperson declined to comment on the matter as the company observes a so-called silent period before quarterly earnings announcements. Wipro will announce its fourth-quarter and full-year earnings in the third week of April.
Healthcare providers in North America—the world’s biggest software services market—are looking to upgrade existing medical systems by deploying newer software applications and giving out big chunks of projects to vendors such as Wipro, Cognizant Technology Solutions Corp. and HCL Technologies Ltd.
Regarded as one of the US President’s most significant achievements, the plan seeks to bring more of the country’s poor under insurance cover and reduce healthcare costs.
Obamacare also creates an opportunity for software vendors at a time of slow growth in the outsourcing market, with companies such as American Express Co. and General Motors Co. cutting back on outsourcing projects to India.
Wipro’s healthcare and life sciences division currently accounts for about 10% of the company’s total revenue and grew by about 6% in their previous financial year. Wipro’s healthcare business also has a partnership with General Electric Co., while rivals like Cognizant and Tata Consultancy Services Ltd count companies such as Merck & Co. Inc. and Johnson & Johnson as customers.
“Healthcare reforms in the US have added fuel to what is already a multi-billion dollar IT services business in health. This is a significant market that will experience strong growth for the next 10 years in the US,” Scott Lundstrom, group vice president at IDC Health Insights, said in an email.