A new market report has predicted that rising healthcare costs and the rising complexity of healthcare IT systems will compel European hospitals to outsource their IT needs.

The Frost & Sullivan report also says that increasing public sector support of IT modernisation initiatives across Europe are creating “significant opportunities” for healthcare IT vendors and service providers.

Frost & Sullivan say that the European Healthcare IT outsourcing market generated revenues of £225.8m in 2005, which it projects to reach £397.5m in 2010.

“Globally, the healthcare IT sector is set to witness organic growth due to the interest generated by systems such as patient administration systems,” said Frost and Sullivan research analyst Sumanth Kambhammenttu.

He added that the development of technologies such as web services would support new models of IT service delivery such as Application Service Provider (ASP), which h suggested have the potential to “deliver to the financial bottom lines” of healthcare providers.

The report suggests that in the near future “IT outsourcing and options such as ASP are likely to be the key to the efficient management of healthcare IT and gain appeal in countries such as the United Kingdom, Franc and the Netherlands”.

In addition the report predicts that the health IT outsourcing market will be highly competitive with healthcare solution vendors, modality vendors, pure IT solution vendors and technology/infrastructure consulting companies all “jumping onto the healthcare IT outsourcing bandwagon”.

“With intensifying competition, IT solution vendors and service providers will find it difficult to sustain profitability,” stated Mr Kambhammettu. “Industry participants will have to quickly adapt to changes in technology to create a niche for themselves.”

The Frost & Sullivan report suggests that to sustain their position and profitability, market vendors will need to design appropriate pricing plans for their services and generate more awareness on the advantages of technologies such as ASP. In addition, they will need to forge strategic alliances with other industry partners.