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Healthcare IT services mid-year review: revenue growth slows down, margins compression

Blog Post created by paddy.padmanabhan on Sep 23, 2016

QoQ growth at the end of calendar Q2 indicates a slowdown at all major firms, except Wipro, which saw the impact of the first full quarter of earnings from its Health Plan Services (HPS) acquisition. Infosys has seen two consecutive quarters of negative growth. All the firms (except Tata Consultancy Services (TCS), which does not provide guidance) have reduced their revenue guidance going into the second quarter and beyond.

 

Revenue snapshot: Company revenue vs. HLS revenue, June 30, 2016

 

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Healthcare revenue as a percentage of total revenue remains steady across all firms. For Wipro, the impact of HPS has increased the share of healthcare revenue from 11% to 15%.

 

Cognizant (CTS) continues to be the dominant player with healthcare revenues at nearly 30% of company’s total revenues. At a time when other players saw negative growth, CTS managed the highest growth (except for Wipro and the HPS impact) among all other firms.

 

Infosys continued to restructure the organisation in the wake of a difficult quarter amid rumours of high-profile new hires in the offing.

 

In light of the ongoing thrust on automation, almost all the firms have renewed their focus on training. TCS states that they trained 120,000 employees with 349,000 competencies (average of three new competencies). Wipro plans to retrain more than 10,000 engineers on new programming skills involving cloud, digital technologies, and mobility. TCS is also investing in the blockchain technology with over 100 dedicated consultants. TCS believes this technology can be used in financial services, as well as healthcare. Internet of Things (IoT) is making progress in the healthcare sector. The winner of a recent hackathon, conducted by TCS, was for cognitive healthcare network by connecting medical devices.

 

According to a research report published by Market Research Engine, the value of healthcare outsourcing will be $50 billion by 2020 growing at a CAGR of 10% in the forecast period 2015-2024.

 

You can download the detailed complimentary report here

 

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