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Hospitals Are Buying IT
The healthcare industry will drive software spending growth through 2009.
Posted Jul 28, 2005
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Healthcare will be one of the key industries fueling North America software market growth over the next five years, according to a trio of reports by IDC. The increase in IT adoption in the healthcare vertical market will represent a 9.7 percent CAGR for packaged applications, infrastructure software, and application development and deployment software. These markets, valued at $98.1 billion across 18 verticals in 2004, would total nearly $156 billion by 2009. Split into three segments (packaged applications, infrastructure, and development and deployment software), healthcare will experience CAGRs of 7.2 percent, 12.6 percent, and 9.73 percent, respectively. IDC estimates that the North American healthcare industry spent $5.1 billion on software in 2004. The reason for the spending increase is that the healthcare industry has traditionally ignored information technology in favor of medical technology, according to Noel Stevens, senior research analyst for IDC. "Although at the forefront of technology in terms of diagnostic and treatment equipment, the industry has long been deemed the laggard with regard to information technology," Stevens writes. "However, now faced with an aging population requiring at-home or longterm care, escalating overhead costs, and information privacy regulations such as HIPAA, the industry is under intense pressure to bring its information technology into the 21st century." The studies indicate that increased software adoption in the healthcare industry will improve cost control and patient care, as well as boost employee productivity and overall provider competitiveness. "We're very interested and somewhat surprised by the healthcare industry," says Ruthbea Clarke, director of IDC's U.S. Vertical Views research program. "Providers, from hospitals down to the local dentist, are looking heavily into collaborative care technology, data warehousing, and infrastructure." But there has been a shift in what sort of software they want. "Previously, when we asked healthcare organizations what their pain points were, they said HIPAA compliance. But now they're coming to understand that they were operationally inefficient in a highly competitive and growing industry," Clarke says. "They are turning to software to address this, as well as to reduce medical errors and increase patient satisfaction." Healthcare organizations spend an average of 41 percent of their budgets on technology, she notes.
Healthcare is cited as having high potential in all three software segments in the period covered by the IDC studies, but it was not the highest of any. Other revenue leaders include professional services, banking, financial services, discrete manufacturing, and retail. Discrete manufacturing is expected to lead packaged applications with 12 percent CAGR; infrastructure software will see the most growth among professional services firms at 11 percent, and also with application development and deployment software (11.23 percent). Banking is another industry where there has been some surprising growth, according to Clarke. "There had been a lot of merger and acquisition activity with banks, and they found themselves with lots of excess capital. The banks are now investing that capital in the customer-facing parts of their business, in the form of ATMs, online banking, and other services." Related articles: Vertical Focus: Healthcare Organizations Turn to CRM to Cure Their Ailing Customer Strategies Hospitals Improve Service With Real-Time Patient Interaction It's Not Brain Surgery: How Intuitive Surgical used CRM to streamline operations and increase efficiency
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