Spiralling healthcare costs and the increasing complexity of health care IT systems are compelling hospitals to selectively source their IT needs. This, together with heightened public sector interest in IT modernisation initiatives across Europe, is creating tremendous opportunities for health care IT vendors and managed service providers.

Frost & Sullivan (http://www.healthcare.frost.com) finds that the European Health Care IT Market earned revenues of $383.4 million in 2005, with services accounting for approximately 30.0 per cent of the overall market. This market is estimated to reach $634.3 million in 2010, with the contribution of services likely to increase further.

"The IT departments of most hospitals in Europe do not have the requisite infrastructure or human resources to handle the rapidly increasing applications of IT in various facets of health care," opines Frost & Sullivan Research Analyst Sumanth Kambhammettu. "It has, therefore, become important for solution vendors to add value to their products by establishing long-term contracts that involve not only developing and supplying a solution, but leveraging on their business expertise and managing it efficiently."

Government-backed IT modernization initiatives introduced in some European countries are likely to pave the way for expanded adaptation of managed services. Such initiatives are seen as being key to reducing health care expenditures, which currently account for the single largest component of public spending in countries such as the United Kingdom, France and the Netherlands. Selective sourcing and managed services are identified as being crucial to the efficient management of healthcare IT in the near future.

The health care IT industry is a combination of a varied set of participants such as software vendors, hardware manufacturers, consultants, systems integrators, value-added resellers, component distributors and network service providers, each providing different kinds of solutions and/or services. With the rising complexity of healthcare information systems and intensifying competition, providers are looking at their services as a differentiator.

A new partnership-based approach, with an emphasis on long-term relationships and strategic win-win situations, will define competitive trends in the future. Risk sharing is another strategy that could result in the consolidation of managed service relationships.

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