Over the years, offshoring and outsourcing in healthcare has served as an effective strategy to help healthcare IT providers scale cost-effectively. The ability to scale has become increasingly important in the face of changes to the healthcare industry from sources like changing reimbursement models, regulations, declining margins, market disruption through wearables and retail clinics, and patient consumerism. Now, time to market, intellectual property protection and business unit control are equally as, if not more, important than the economics.
Progressive healthcare companies have shifted their measurement of success and outsourcing from a cost-benefit model to a cost-benefit-plus-value model. Long-term value is centered on talent, scale and the knowledge base to support new product development and build market leadership over time.
Because of this, healthcare IT outsourcing will continue to grow:
- TechNavio predicts an 6 percent compound annual growth rate of healthcare IT outsourcing globally through 2019.
- The Everest Group predicts that the market will reach $68 billion by 2020.
Virtual Captive: An Ideal Offshoring Business Model
The virtual captive offshoring model is a promising alternative for healthcare organizations seeking to develop new products and services quickly to support healthcare transformation. Virtual captives, which date back to the mid-2000s, are a cost-effective, value-building strategy designed to leverage global skills for scalability while allowing organizations to retain optimal control of operations and intellectual property.
A virtual captive enables lower operational expenses for managing a software operation without compromising quality objectives. Another significant advantage is that in a virtual captive, there is the option for transfer of ownership after an established period of time.
This model is ideal for midsized organizations that invest heavily in research and development and need to scale quickly to compete, yet don’t have the capital to build an offshore operation from the ground up.