Improve Healthcare Technology Outsourcing Success
Leading practices and considerations for outsourcing IT to managed service providers.
- During the COVID-19 pandemic, many healthcare organizations were faced with an increased demand for healthcare IT solutions with the ability to have accurate, linked patient records and optimized interoperability and cybersecurity.
- Due to the declining financial margins healthcare organizations have been facing since the pandemic, outsourcing IT to manage long-term costs has been the viable option.
- Determining the best IT services to outsource can be a difficult and time-consuming process for healthcare organizations among other competing priorities.
Our Advice
Critical Insight
- Outsourcing requires high upfront costs before realizing the long-term cost savings, which is challenging for healthcare organizations with small financial margins, requiring innovative financial strategies.
- Some healthcare organizations have experienced unsuccessful outsourcing contracts that ended up costing them more than expected.
- Healthcare organizations are struggling to attract highly skilled IT talent and the burnout of the existing resources is at a critical level, so they are rethinking their outsourcing strategy.
Impact and Result
Info-Tech has an IT managed services provider (MSP) outsourcing framework for successful IT outsourcing that focuses on:
- Aligning strategic organizational goals with MSP services to determine the ideal IT services to outsource based on your business needs.
- Using Info-Tech’s IT capabilities map to assess your IT capability gaps and establish your IT outsourcing priorities.
- Establishing outsourcing partnerships by following the MSP outsourcing lifecycle and best practices.
Improve Healthcare Technology Outsourcing Success
Leading practices and considerations for outsourcing IT to managed service providers.
Analyst Perspective
Start from within and look at yourself as a service provider and not just a consumer.
Healthcare IT outsourcing is the process of hiring an external provider to deliver IT services to a hospital or a healthcare organization. It can help the hospital save costs, improve service quality, foster innovation, and scale up its IT capabilities. However, it also requires the hospital to overcome challenges such as setting the project scope and objectives, choosing the best provider, negotiating the contract terms, monitoring the performance and compliance, and managing the stakeholder relationships.
As the healthcare IT market shifts from a focus on cost cutting to a comprehensive approach of operational efficiency, data security, and patient outcomes, outsourcing technology becomes a strategic option for many hospitals. Outsourcing IT services has pros and cons, but when done strategically with a focus on governance of core or noncore services that are low risk to the organization, hospitals can benefit from efficient operations, enhanced capabilities, and optimized patient experience and outcomes.
This report provides an overview of the different healthcare IT outsourcing models, drivers, benefits, considerations, and best practices for outsourcing to a managed service provider (MSP) and offers an outsourcing decision matrix tool to help healthcare organizations decide which IT services to outsource in alignment with their strategic goals, objectives, and IT capabilities.
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Sharon Auma-Ebanyat
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Executive Summary
Your Challenge
- During the COVID-19 pandemic, many healthcare organizations were faced with an increased demand for healthcare IT solutions with the ability to have accurate, linked patient records and optimized interoperability and cybersecurity.
- Due to the declining financial margins healthcare organizations have been facing since the COVID-19 pandemic, outsourcing IT to manage long-term costs has been the viable option.
- Determining the best IT services to outsource can be a difficult and time-consuming process for healthcare organizations among other competing priorities.
Common Obstacle
- Outsourcing requires high upfront costs before realizing the long-term cost savings, which is challenging for healthcare organizations with small financial margins, requiring innovative financial strategies.
- Some healthcare organizations have experienced unsuccessful outsourcing contracts that ended up costing them more than expected.
- Healthcare organizations are struggling to attract highly skilled IT talent and the burnout of the existing resources is at such a critical level that they are rethinking their outsourcing strategy.
Info-Tech’s Approach
- Info-Tech has an IT managed service provider (MSP) outsourcing framework for successful IT outsourcing that focuses on:
- Aligning strategic organizational goals with MSP services to determine the ideal IT services to outsource based on your business needs.
- Using Info-Tech’s IT capabilities map to assess your IT capability gaps and establish your IT outsourcing priorities.
- Establishing outsourcing partnerships by following the MSP outsourcing lifecycle and best practices.
Info-Tech Insight
Before you decide to bring certain IT services back in-house due to unsuccessful outsourcing partnerships, do your due diligence to assess the long-term cost implications of your organization’s capability to provide the same level of service as the outsourcing partners.
Healthcare IT outsourcing models
Outsourcing is a business practice where a business hires out services or a job function for all or part of their IT operations to a third party on either a contract or a long-term basis. IT outsourcing can range from delegating repetitive processes to managing the entire business infrastructure. Business process outsourcing (BPO) is the term for outsourcing specific business services.
In IT, some of the common outsourcing initiatives include front-office operations, applications, and back-office services. These can include discrete and easily defined services such as network services, quality assurance (QA) testing, disaster recovery and management, and software development.
Outsourcing Model Examples |
Definition |
Benefits |
Challenges |
Onshore |
This is the practice of outsourcing to a local company in the same country; also known as domestic outsourcing. |
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Offshore |
This is an outsourcing model where a partner sources talent from teams based outside the country. |
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Nearshore |
This is an outsourcing model where the team is located closer in neighboring countries or on the same continent. This is a more common approach in Europe due to easy transportation and the connectivity of different countries. |
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Healthcare IT outsourcing model trends
Onshore and nearshore outsourcing models are gaining popularity among healthcare organizations compared to the offshore outsourcing model.
OnshoreThis is when healthcare organizations outsource their IT functions to service providers within the same country or region. This can offer benefits such as cultural compatibility, legal compliance, and ease of communication.
| NearshoreThis is when healthcare organizations outsource their IT functions to service providers in neighboring countries or regions, usually with similar time zones and cultural backgrounds. This can offer benefits such as proximity, flexibility, and collaboration.
| OffshoreThis is when healthcare organizations outsource their IT functions to service providers in distant countries, usually with lower labor costs and higher availability of skilled workers.
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COVID-19 was a catalyst for increased healthcare IT outsourcing
Declining hospital margins |
Technological advancements |
Shift in outsourcing market needs |
| According to Kaufman Hall’s recent 2023 National Hospital Flash Report, many hospitals have seen a decline in their margins since 2022, with some hospitals breaking even and others spending more than they earn.
The total costs of hospitals have increased by 17.5% between 2019 and 2022, with half of these costs driven by the heightened reliance on agency labor expenses attributed to staffing shortages resulting from the impact of the COVID-19 pandemic (American Hospital Association, 2023). |
The rapid advancement of technology has posed a challenge for hospitals to meet new standards, as their in-house IT teams lack the expertise to maintain the infrastructure of new technologies.
Conversely, smaller hospitals face resource constraints, making it challenging to attract highly skilled IT personnel. Consequently, numerous hospitals are opting to outsource different facets of their IT departments to address these challenges. |
In the last five years, trends in the healthcare IT outsourcing market have evolved in response to heightened cost pressures on hospitals, shortages in staffing, a growing demand for skilled professionals, and an increased uptake of digital health solutions aimed at enhancing patient outcomes.
This shift in trends has moved the market away from a singular emphasis on hospital cost-cutting strategies toward a more holistic approach centered around operational efficiency, data security, and the enhancement of patient outcomes. |
Info-Tech Insight
Outsource the right IT services for the right reasons: do not focus solely on a cost-driven strategy, but make sure that both outsourcing and your business strategies are aligned.
Healthcare IT outsourcing market has significant benefits
Health IT Outsourcing benefits |
Description |
| 1. Cost savings from reduced IT costs | Hiring IT personnel and managing infrastructure in-house can be costly. Outsourcing enables hospitals to avoid these expenses and rely on third-party companies that already have a trained workforce in place and the resources to train their staff and update software and equipment. Hospitals can then focus on their core healthcare functions. |
| 2. Access to a pool of highly skilled IT professionals | External IT partners bring specialized IT knowledge and expertise that make it easy for hospitals to tap into resources that are trained in the latest technological advancements and best practices, which enhances the quality of the hospital’s IT services and solutions. |
| 3. Scalability of IT resources | The flexibility of outsourcing allows hospitals to scale their IT resources according to service demands. This reduces the risk of IT capabilities impacting patient care and alleviates the burden on internal teams. |
| 4. Enhance data and security measures | Numerous IT outsourcing firms specialize in cybersecurity and data protection. These companies have acquired essential certifications such as HIPAA and NIST to fortify their capabilities. Healthcare organizations are relying on seasoned partners to oversee and improve data security, ensuring the protection of patient information against cyberthreats. |
| 5. Technological complexities | The healthcare industry has experienced rapid technological advancement, which has increased the complexity of IT infrastructure and systems. Healthcare IT outsourcing companies can help navigate the complexities of these systems. |
| 6. Focus on core healthcare capabilities and patient care | Healthcare organizations are prioritizing excellent patient care delivery and improving patient outcomes. Outsourcing their IT capabilities helps them focus on their core competencies. |
| 7. Access to advanced technologies and innovation | IT outsourcing partners have highly skilled talent pools of IT professionals in healthcare IT, with the capacity to monitor current technological trends, regulatory compliance, and best practices. This helps healthcare organizations deploy advanced healthcare solutions to improve their operational efficiency. |
| 8. Risk mitigation and regulatory compliance | IT partners possess an in-depth comprehension of industry regulatory compliance requirements and standards. Their engagement can assist hospitals in adhering to and remaining current with regulatory mandates, ensuring the maintenance of a secure and ethically sound IT environment. |
Global health: IT outsourcing is on the rise
43.9% of hospital IT services in 2023 are outsourced to MSPs.
Global Healthcare IT Outsourcing Market Size |
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| Market Size (2018-2022) | US$41,686 billion to US$50,025 billion |
| CAGR (2018-2022) | 4.7% |
| Market Size (2023-2033) | US$52,877 billion to US$105,753 billion |
| CAGR (2023-2033) | 7.2% |
| Largest Market | North America |
| Fastest Growing Market | Asia Pacific |
Global Healthcare IT Outsourcing Market Size from 2018 to 2033 (In US$ billions)
43.1% of outsourced IT applications are IT infrastructure.
Global Region |
Projected IT outsourcing market share from 2023 to 2033 |
Key drivers |
North America |
67.3% |
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Europe |
21.2% |
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Others |
11.5% |
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Total |
100% |
(Sources: Future Market Insights, 2020; Mordor Intelligence, 2023; Statista, 2023.)
Various methods of outsourcing healthcare IT
Black Book Research surveyed health systems and found 75% with over 300 beds and 81% with less than 300 beds are outsourcing various IT services (Medsphere, 2020).
Outsourcing IT Operations
This approach involves hiring an external partner to handle the IT infrastructure such as servers, networks, databases, security, and cloud services. This can help healthcare organizations reduce and control operating costs, improve company focus, gain access to world-class capabilities, and free up internal resources.Outsourcing IT Development
This approach involves hiring an external partner to design, build, test, and deploy IT solutions such as software applications, websites, mobile apps, or data analytics. This can help healthcare organizations accelerate innovation, improve quality, reduce time-to-market, and leverage the expertise and experience of the partner.Outsourcing IT Support
This approach involves hiring an external partner to provide IT help desk, troubleshooting, maintenance, and training services. This can help healthcare organizations improve customer satisfaction, enhance productivity, reduce downtime, and optimize performance.Outsourcing IT Consulting
This approach involves hiring an external partner to provide IT strategy, planning, assessment, and guidance services. This can help healthcare organizations align their IT goals with their business objectives, identify and mitigate risks, optimize processes, and implement best practices.Outsourcing Managed IT Services (MSPs): Our Focus
This approach involves hiring an external partner(s) to provide a comprehensive and integrated set of IT services such as IT operations, development, support, and consulting. This can help healthcare organizations achieve a higher level of IT efficiency, reliability, scalability, and security.
MSPs: A preferred outsourcing method for IT services
Successfully deploying managed services is expected to reduce IT costs by 25% to 45% and improve operational efficiency by 45% to 65%. Additionally, according to Intelligent Technical Solutions, 25% of organizations reported that downtime costs ranged from US$301,000 to US$400,000 per hour (Mordor Intelligence, 2020). MSPs offer a range of services that benefit hospitals and are often chosen by most hospitals as an outsourcing partner.
- IT Infrastructure Management: Third-party partners can help monitor and manage healthcare infrastructure such as IT networks, hardware, and software to optimize performance.
- Cloud Service Management and Monitoring: Most healthcare organizations are moving to cloud services, and managed IT service providers can help with developing a roadmap and hep with their successful migration and deployment.
- Clinical Information System Management: Managed IT service providers can help manage both cloud-based clinical information systems and on-premises systems for electronic health records (EHR), decision support platforms, and data warehouses to optimize patient outcomes.
- Help Desk Support: Outsourced technical assistance and troubleshooting can be done remotely to help quickly resolve issues. Managed IT service providers can provide 24/7 support, which minimizes disruptions to hospital operations.
- Cybersecurity Services: A managed IT service provider can help healthcare organizations improve their cybersecurity, select the right type of digital network security services, and keep up with regulatory compliance with robust security protocols and regular audits. This helps protect sensitive patient data and prevent costly cybersecurity breaches. A managed IT security service provider (MSSP) caters to cybersecurity services.
- Technology Procurement and Management: Managed IT service providers can help healthcare organizations select, customize, and deploy cost-effective solutions to meet their organizational needs. They also monitor and manage these solutions.
- Data Backup and Disaster Recovery: Managed IT service providers can help healthcare organizations develop, implement, and maintain their recovery plans to be prepared in the event of a disaster.
- IT Consulting: Managed IT service providers can provide IT consulting expertise to help healthcare organizations remain competitive through strategic roadmaps and goals to enhance productivity, collaboration, and profitability to make sure they are utilizing their resources to the fullest.
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