October 2007

Asian Healthcare IT market Riding High on India : Dipanjan Banerjee, eHealth

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Asian healthcare IT market is sizzling. Big investments are pouring in and much more is yet to come. Time for vendors and solution providers to go ‘ga-ga’. But how exactly does the  market look like? How should you go about it? What are the dynamics and crtiticalities that lie ahead?  Read on…

 

The phenomenal growth witnessed over last few years in the healthcare sector across Asia have received a lot of attention from both local and global markets. To meet the surging demand for quality healthcare, coupled with an increasing need to conform to global standards in delivery and management, healthcare service providers across most developed and developing economies of the region are fast gearing up their IT  investments.

Latest findings of Springboard Research a leading global IT market research firm estimates the total Healthcare IT market in Asia (excluding Japan) to be US$ 2.95 billion (INR 11,800 crore) in 2006 and expects it to accelerate with a compounded annual growth rate (CAGR) of 13.1% to reach US$ 4.83 billion (INR 19,320 crore) by 2010.

Market Geography

While these figures are exciting enough for vendors and solution providers to raise toast, it is interesting to note that current geographical spread of this market is largely skewed towards China and Australia. Considering proportions of actual spending in healthcare IT, China emerges as the most lucrative destination with 46% of overall spending coming from across the ‘The Great Wall’, while ‘Down Under’ seems to be the next best market, with 25% spending coming from this island country.

Advantage India

While China glitters and Australia shines, there are opportunities are galore in the emerging Indian healthcare sector. The market potential in healthcare is getting so high in the land of Taj, that businesses in Big Apple are already celebrating – amply evident from the summary of recently held Bear Stearns 20th Annual Healthcare Conference in New York, with top notch industry leaders unanimously chanting India as the next Asian healthcare hub.

Going by the research result, India emerges as the leading Asian market on ground of percentage growth of investment in healthcare IT. The expected growth rate of Indian market has been pegged at 22%, closely followed by China, Vietnam and Australia.

In value terms, the overall healthcare market in India is estimated to reach a staggering US $3 billion (INR 12,000 crore)  by 2010. The major factors in this growth are attributed to higher demand for quality services, increased spending capacity of consumers, better healthcare awareness, closer linkage of healthcare with quality of life, availability of advanced medical treatments and diagnostic methods and greater availbility and access to healthcare insurance for consumers. With nearly 60% of the current Indian population in the age group 15-59 years, expected to grow to 64% by 2025, coupled with a steadily increasing trend in per capita income, there is an immense potential for the healthcare sector and in turn, the IT and peripheral industry to benefit from it.

Spend Trend

While healthcare IT spending in most emerging Asian economies have registered appreciable increase, it is quite intriguing to find that some of the advanced counterparts, namely – Singapore, Korea, Hong Kong and Taiwan have registered much lower investments, and yet they posses much better capacities for delivering high end health services. One reason behind this apparently peculiar trend might be attributed to existance of a sufficiently strong IT infrastructure, leading to lesser need for current investments. However, it may also result out of a relatively stable health system with adequately high doctor-patient ratio, backed up by sufficient infrastructure facilities and lower population pressure – thus allowing service providers to deliver even with basic or existing IT facilities.

Judging by percentage of healthcare IT spending as part of overall national IT spending, Australia tops the chart, followed by China, Malaysia, New Zealand, Philippines and Vitenam. The trend and spending pattern of Australia have been found to be most typical in the region, resulting in sustained growth of the market, at a pace that is even higher than many of the currently emerging economies.

Vendor Benders

A major challenge for IT vendors, as identified in the research is attributed to the highly fragmented and disparate levels of development within industry players and relatively slower rate of market maturity. While this charecteristic is common in many other industry sectors in Asia, healthcare seems to be having the deepest of furrows. Moreover, even within groups of developed and developing nations, there are apparently uneven, and often, contradictory trends and spending patterns, adding to market volatility. Much of this is comprehensible on the premise of local conditions prevailing in each country, in terms of economic, regulatory and even political environment causing markets to surge, slump or flatten within particular political boundaries.

It has been observed, that developed nations which have gone up in healthcare value chain are now showing higher spending in technologies for care management and patient records. While on the other hand, and quite predictably so, emerging markets are putting larger share of their budgets in IT infrastructure, clinical applications and diagnostic equipments.

Investment Insights

Major factors driving IT investments on value-added applications in developed markets are attributed to changing regulatory environment and privacy restrictions in some countries – leading to the need for introducing higher service quality standards, patient records management and even information sharing among service providers. Yet another trigger can be identified as the need of service providers to match up with global standards for higher business prospects, leveraging better returns and attracting the international clientele. Quite in contrast, emerging markets grappling with inefficient public healthcare systems and often dismal rural service delivery are investing heavily in community care, telemedicine and health  information networks.

Competition Cauldron

While market opportunites continue to soar, the vendor space too is getting crowded and competitions are sure to get fierce, sooner than later. While multinational IT and medical technology firms are making a beeline for the Asian healthcare pie, domestic and local ISVs and SIs are also pulling up socks to make a mark.

IT & Software Solutions

The MNC league of IT companies that are offering solutions specific to the healthcare industry includes – Microsoft, IBM, HP, Intel, InterSystems, ibahealth, Oracle, SAP, Accenture and EDS to name a few. However, domestic players with global footprints are fast emerging as strong competitors with quality offerings and often, with a differential local competetive edge over foreign counterparts. Some of the domestic IT players in India include Wipro HealthCare IT, Sobha Renaissance, TCS, HCL, BirlaSoft, Karishma Software, SN Informatics and others.

However, considering the fast changing market landscape, and increasing dependence of business success on both technical expertise and local intelligence – global and domestic players are increasingly finding it beneficial to forge partnerships and leverage each other’s strength for a faster market capitalisation.

Medical Equipments & Devices

In the medical equipments and devices space, the dominance of multinational vendors continues with a strong hold, with nearly 90% of the demand being met through imports. Some of the prominent global vendors includes Cardinal Health, McKesson, Emdeon, GE Healthcare, Siemens Medical Systems, L&T, CareStream (Kodak), Agfa Healthcare, Drager Medical, Sanrad and others. However, there is a slow but steady progress of many domestic companies who have forayed into this segment and are offering quality products at much economical rates. Similar to the trend in IT industry, the medical technology segment is also witnessing JVs, mergers and acquisitions between and amongst global and local players. In India, Trivitron Group (one of the top 10 domestic medical equipment companies) have recently announced a joint venture with Aloka, Japan (leader in ultrasound technology)  for manufacturing of high technology, low cost ultrasound equipments for the emerging markets. With this JV, Trivitron is targeting to capture a sizebale portion of the INR 500 crore (US$ 125 million) ultrasound equipment market in India, growing at an impressive CAGR of 20%. 

About the article
This article is brought to you by eHealth, in technical collaboration with Springboard Research a leading IT market research firm working across the globe. While most of the data and information used in this article have been extracted from the latest report of Springboard Research on ‘IT and Technology in the Healthcare Industry in Asia’ (excluding Japan), certain portions of the text are carrying information, insights and opinions drawn upon through independent research of eHealth Team, and may or may not subscribe to the views of Springboard Research.

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