INDUSTRY ANALYSIS

As the IT Pendulum Swings

Digital dashboards for the corporate world usually employ the typical “green light, yellow light, red light” motif, giving you an at-a-glance view of the company’s bottom line (except, of course, for the color-blind — like myself).

However, the Holy Grail for metric gazers is not where the business is but rather where the market is headed.

Changes Are Afoot

Almost every business is clamoring to stay a step ahead of the market trends. Healthcare is no exception. Recent announcements from large health insurance firms make it abundantly clear that changes are afoot. Just a few examples:

  • UnitedHealth Group recently announced patient identification cards that will not only permit access to electronic health information but also act as a debit card.
  • Wellpoint indicated it will expand its offering of low-premium, high deductible insurance to most if not all of its members.
  • Other Blue Cross Blue Shield companies plan to offer 360 degree health programs designed to help members “navigate” the complex nature of the health care system.
  • Still other insurance firms are separating their senior, state and private care options to drive optimization and offer customized plans for their respective arenas.

In addition to this news, other new entrants are taking the opportunity of customer dissatisfaction to rock the boat and create change. Wal-Mart, for instance, will soon begin selling nearly 300 generic prescription drugs for about US$4 each.

The huge cost savings that Wal-Mart pioneered for the retail market could have a dramatic effect on the healthcare industry. On the heels of the Wal-Mart announcement, Wellpoint unveiled a deal with CVS to distribute Medicare Part D information and services.

Lastly, noticeable and disruptive merger and acquisition activity is on the rise.

Of course, not everyone is excited about these innovative and optimizing trends. The biggest target for criticism seems to be M&A activity. In September, the Senate Judiciary Committee convened a hearing to investigate whether the health insurance market is running up against antitrust barriers. Doctors are concerned that a monopoly of local health insurance giants will force their hand and artificially drive down the cost of services. However, health insurance agencies indicate that combining forces reduces administrative overhead, passing savings on to the subscriber.

These issues are not new, but they highlight the tensions involved in an economy increasingly saturated by change. The pendulum swings back and forth — and knocks down a few pegs every now and then. One natural point of momentum is commoditization.

The Commoditization Factor

One of the contributing factors to the late 20th Century Internet bubble was commoditization, which occurs when you take a traditionally difficult, costly or specialized task and turn it into something simple, inexpensive and generalized.

For example, some healthcare innovators are opening offices in malls to treat common and simple ailments such as strep throat and sinus infections. Resident nurses provide parents an alternative to the sometimes inefficient and always expensive M.D. offices.

Most every parent knows that diagnosing strep throat involves a quick swab and almost always results in the same prescription (usually Amoxicillin). In the near future, a home kit for strep throat is a real possibility. As in the case of the home pregnancy test, when technology advances, specialization decreases and automation increases. That leads to outsourcing — and fewer rabbit deaths.

Commoditized Consulting

Another example of change is related to my field of expertise, consulting. In the late 1990s, average billable rates — the amount a consultant charges a client — rose to astronomical heights. In some cases, the average bill rate was over $300 per hour. Was it justified?

As traditional industries discovered the Internet and increased IT investments, there was a deep desire to get things done and get them done quickly. The relative immaturity of the Internet demanded a certain specialization that companies were willing to pay for.

Today, billing rates for the average consultant hover well below $150 per hour. Why? The technology has matured and become easier to execute. What took a programmer three hours to code in previous years now takes less than an hour. The need for rigorous course training and intensive IT investments has been significantly reduced. Simplified, inexpensive and commonly available skills drive prices downward. However, in some areas of optimization, there has been considerable backlash.

Customer Service: Swinging Back

Paul English, the wily blogger who gives away company voice mail tips and tricks, can attest to the widespread frustration over customer service. While investors and employees appreciate the relief from staffing burdens that VRU (voice response unit) and IVR (interactive voice response) systems offer, the complex nature of some transactions requires human intervention.

As David Barrow says in arecent CRM Buyer article, “the era of cost deflection … has passed.” There has been a recent trend of overseas customer service centers failing to clear the language and communication bar. Firms that fail to balance optimization and customer service may suffer from wearing bottom-dollar blinders in the business world.

Even prominent and strong investment trends in the IT world are vulnerable to sudden changes in direction. For example, SOA (service-oriented architecture) is nearly universally regarded as a positive technology for firms to adopt. But, as Judith Hurwitz notes: “Service-oriented architectures will force a dramatic change in the balance of power. … From a customer perspective, SOA puts the power in the hands of the business user.”

Looking Forward

Still, the threat of a backlash should be no excuse for avoiding risk-taking innovations to address change. Companies might just find the silver bullet pursuing models perfected outside their own industries.

Writer Thorton May, for example, points to aerospace manufacturing: “[Boeing] has managed to digitize and network-enable global collaboration, drive paper out of its manufacturing processes, and manage a global web of world-class suppliers to Six Sigma precision. The IT folks at Boeing who have been working on these initiatives probably have some good lessons for the folks in heathcare IT.”

Other trends in certain marketplaces are obvious. In the telecom industry, the threat of wireless broadband poses real disruption — not only for telecom networks, but also for device manufacturers.

So, how do existing companies fare today recognizing and coping with the swing of the pendulum? Not well. In a recent survey, nearly 90 percent of executives admitted that their companies do not even know the average annual value of their customers. So, with all of our new executive dashboards in place, someone isn’t watching the bottom line — let alone the horizon.

Today, businesses are clamoring to track the elusive “pendulum” of the IT and business worlds. Of course, a pendulum is more than a weather vane — or a wet finger, for that matter. A pendulum encompasses multiple factors, such as speed, distance, time, weight, height, momentum, inertia, trajectory, length, gravity, pivot, acceleration and orbit. In the dynamic world of business change, companies can’t afford to lose site of where the pendulum is.


Justin Hart is a senior consultant withComsys IT Services.


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