Managed Care is among the first industries in the world where the IT end users are directly dealing with offshore outsourcing vendors. Two factors have led to this phenomenon:

MCOs, including HMOs, PPOs and EPOs, typically run complex systems that involve the active coordination, and arrangement of, the provision of health services and coverage of health benefits. The various functions of MCOs like Quality Management, Utilization Management, Outcomes Management, Demand Management and Disease Management require stable, reliable IT systems in place since they deal directly with the two most important things that customers care about - health and money.

However, the heterogeneity of the various IT systems involved, as also the general lack of off-the-shelf solutions for this industry, has led to a great need for home-grown solutions or, at the least, heavy customization of existing solutions. Add to this, the strict regulatory requirements of the Government, and you have a ready situation for outsourcing - the in-house IT departments concentrate more on maintenance and implementation and, hence, the need to outsource development work to software vendors.

However, the cost-sensitive nature of the competitive Managed Care industry often causes MCOs to hold back on their IT plans due to the high costs involved in hiring a software vendor to do application management. Fortunately, this is adequately addressed by the cost differential arising from offshore development.

The onsite-offshore hybrid model allows MCOs to get experienced resources to work as onsite consultants, who in turn manage the offshore team back in India. Thus, the MCO gets the comfort of working with an onsite team and the benefits of offshoring at the same time.