Healthcare IT budgets continue to flatline (page 1 of 2)

A sharp increase in healthcare needs across the Middle East, due to rising populations and a higher prevalence of lifestyle diseases, is driving major investment in the sector. However, not all areas of the industry are seeing vast sums of money, like IT spending which remains a small part of healthcare providers' budgets. Yet the implementation of new technology systems can improve patient care and help reduce running costs.

IT budgets of Middle Eastern healthcare providers are forecast to remain flat during the next 12 months as the focus remains on building new hospitals, revamping run-down or inadequate facilities and buying new equipment.

According to a recent report by Kuwait Finance House Research Limited, the GCC healthcare sector is forecast to triple in worth over the next decade from $18bn currently to $55bn by 2020. An estimated $10bn worth of healthcare projects are planned or underway in the GCC. More than 200 new hospitals have been announced or are under construction, with a cumulative capacity of up to 27,009 beds most of which are due to be delivered in 2015.

IT budget allocation declines

Typically, EHL Management Services, formerly Welcare World, the healthcare management company of the Emirates Healthcare Group, allocates under 3% of its total budget to IT. This year the company, which operates seven facilities across Dubai, said it will spend just 1.8% on IT, while next year this will rise to 2.4%.

"Our IT strategy is directly linked and aligned with our business strategy, and based on three to five year plans. Because of this the recent economic crisis did not affect our major IT expenditure. As with other businesses, we always look at the best value for money and create an environment where a healthy competitive pricing market exists," says Cules Schoeman, group IT manager.

Spending in the sector appears to be seeing slight improvements this year compared to last. Data from Ovum, the IT and telecommunication arm of Data Monitor International, shows that twice as many healthcare providers in the Middle East are planning to spend up to 6% more on IT budgets this year. However, in the main, spending is set to remain flat says Kevin White, Ovum research and consulting director.

"About 16% of organisations in healthcare will be spending an increase of up to 6% over the last year. This is opposed to 8% which are going to reduce their IT spending by about the same amount. So you can say there are two times as many companies planning to spend up to 6% more on IT budgets," he says.

Patterns to be found across IT and healthcare spending

According to Ovum data, during the first half of 2010, of the IT budget allocation 29% was spent on software, 27% on hardware, 17% on services, 12% on communications and 9% on consulting. The only difference in next year's spending will be hardware, with 32% of the budget spent on it, and software which will see 27%.

"Typically we're finding that in the recession the one thing that IT budget holders stopped doing was to spend on hardware, like for example new projects or new equipment," White says. "There's some suggestion in these figures that some of these budget items have been liquidated, probably because they didn't spend much last year."

Software applications to see IT spend in future

The main area of IT spending is on internal development and maintenance work, like software applications.