Despite a tight economy, the market for IT products and services in the healthcare industry is booming -- so much so that vendors and resellers alike are scrambling to seize opportunities there. In short, there is money and margin to be made in the healthcare vertical.
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Look at Logicalis. Headquartered in the United Kingdom, Logicalis is an international provider of integrated information and communications technology solutions, operating in Europe and North and South America.
With more than 1,500 employees worldwide, Logicalis reaped more than $1 billion in revenue in fiscal 2007. Its primary partners are Cisco Systems, Hewlett-Packard (HP), IBM and Avnet. And although it offers specialized solutions for a variety of industries -- including financial services, government and education -- healthcare is a growing and important source of revenue for the company, according to Jeff Teeter, general manager and executive vice president of Logicalis. Teeter leads the U.S. sales force with approximately 260 employees reporting to him.
"Vendors themselves are investing heavily in the healthcare market, and are giving us the resources to expand our presence there," Teeter said, adding that healthcare currently accounts for 10% of Logicalis' business. "With help from partners Avnet, Cisco, HP and IBM -- which are offering education, training, marketing support, special pricing bundles and more -- we're changing from being a traditional reseller of hardware to a valued consultant to this industry."
Indeed, despite the economic downturn that is hurting other sectors, the IT healthcare vertical market is growing, Teeter said. "We're finding healthcare to be more recession-resistant than other industries," he said. "We're not seeing the slowdown in spending that we are in manufacturing and banking, for example."
Regulations drive IT spending in healthcare vertical
Strict compliance regulations in the healthcare vertical are one reason this market is still going strong.
"You've got regulatory mandates like HIPAA to comply with, the move toward electronic health records (EHRs) to reduce paperwork and clinical errors, the need to build robust patient portals, and implementation of other emerging technologies that can benefit healthcare companies in particular," Teeter said. "We see such organizations taking a much longer-term view of technology investing than other types of businesses."
There are two business areas in particular within IT healthcare that Logicalis is pursuing. The first is data center upgrades: A significant percentage of the data centers at healthcare organizations and their infrastructure providers are outdated.
"In many cases, it's not just a question of installing 100 new blade servers for more processing capability -- there's simply not enough power coming into the room. You have cooling, record retention and other requirements that must be addressed," Teeter said. He said his firm is finding tremendous business opportunities revamping healthcare organizations' data centers so they meet the rigorous processing and capacity needs of this increasingly technology-dependent industry.
The second opportunity arises from the need for healthcare organizations to "go green." "Because of high fuel costs as well as public sensitivity to environmental issues, healthcare companies are taking a more long-term strategic view on becoming more energy-efficient," he said.
Pursuing the healthcare vertical: Logicalis gets a little help from its friends
One important thing that Avnet, IBM, HP and Cisco are helping Logicalis do is transform from a hardware reseller into an IT solution provider, Teeter said. "A typical reseller is brought in at the very end of the sales cycle, when the application provider or customer decides if they want an HP or IBM box," he said. "We want to be involved at the very beginning of that process. Not only can we help ensure the success of the project, but we can get more money out of it at the same time."
Logicalis partners are collaborating to provide customers with solutions that take advantage of the company's existing strengths. "We're taking our experience and knowledge of infrastructure, storage, high availability, virtualization and records-retention technologies and applying to them to the healthcare arena," Teeter said.
Teeter's advice to other solution providers wanting to get into the healthcare vertical? "Have a long-term strategic plan, and have the stomach to invest in your people accordingly," he said. "Some of this education and training will take a while." It's natural to want your smartest people out in the field at client sites racking up billable hours, he said, "but the healthcare IT landscape is changing so fast that it's imperative to take advantage of your partner resources to educate and train them. We're finding that the financial payoff is definitely worth it."