The WITCH Report: 2018 Annual Review

The HLS business of all companies covered in this report contains a mixture of offerings, from infrastructure and applications services to business process services and in a couple of cases, IP and platform-based services. In terms of segment-wise performance, we estimate that most of the business for the WITCH companies comes from the payer and pharma segments. The provider segment has long been a challenge for global IT consulting firms for a variety of reasons. We believe there are emerging opportunities in the provider space from digital transformation  initiatives and cost reduction pressures leading to IT operations outsourcing.

There was significant M&A in 2018. Large transactions include Atos’ acquisition of Syntel for $3.2 billion, HCL’s acquisition of a portfolio of IBM’s IP assets for $1.8 billion, and DXC’s acquisition of Luxoft for $2 billion. DXC made a string of acquisitions over the year including Molina’s Medicaid Solutions (MMS) for $220 million earlier in the year. Cognizant continued to be active, acquiring Bolder Healthcare and Softvision LLC during the year.

In the past couple of years, many India-heritage firms have set up operations centers and innovation hubs across the U.S. The drivers for this trend include the need to be closer to customers with local talent, the need to tap into scarce skills such as design thinking which are important for digital transformation programs, and building the next level of scale which is increasingly difficult in the highly saturated overseas talent market. We have included an interactive map in this report indicating the build-out of innovation hubs and centers across the U.S. by firms covered in this report.

A couple of firms covered in this report had a challenging year. Cognizant had a significant ramp down in a major contract, and IBM struggled with negative media coverage for its Watson Health platform and business.

There were leadership changes in several companies, including Cognizant, Wipro, Infosys, and IBM Watson Health.

Our view is that the demand outlook for healthcare remains strong and broadbased. Digital transformation programs are taking hold in the larger enterprises in each sub-segment of healthcare. Most firms in this report are deriving their revenues currently from the payer and pharma segments, leaving a huge untapped opportunity in the provider space. As providers start to embrace outsourcing and invest more in digital transformation, global IT consulting firms will see a significant growth opportunity.

As many of you know, we have been publishing the WITCH report since 2015, and till now we have based the report entirely on publicly available information. This year, we received briefings from companies covered in the report which enabled us to refine our commentary and address the emerging trends for technology services in healthcare. We believe the content in our report has been significantly enriched by our interactions and would like to thank the firms for their time and effort.

This year, the report also contains a bonus section. You can find download details at the end of this report.