There is no doubt that 2016 has brought some significant and unpredicted changes in the political landscape both at home and overseas. However, as the UK works through the implications of its Brexit decision in June this year, there is already evidence that this is having an impact on healthcare IT budgets due to market dynamics and changes in the exchange rate, which are likely to be influenced again following the recent US election results.
From talking to CIOs and reviewing publicly available information, there have been several sharp rises in both hardware and software product and service costs since June, predominantly by US and EU based organisations. However, for UK based services, this has been much more in line with the Retail Price Index (RPI). Some examples include:
- A US based major provider of networking infrastructure to the NHS raising its prices by 6% in August with a warning that a further rise may follow
- An EU based major provider of PCs to the health service increased its prices by 10% on certain product ranges, while a US based hardware provider increased its prices on the new model of their laptop by 20% on launch, and by 3% on existing models (bucking the trend for older generation technology usually decreasing in price once new models become available)
- A US based major software provider increased its software prices by 13% and cloud services by 22%, based on the need to ensure that current EU pricing is consistent following the GBP-EUR devaluation
- Another US based software provider that has products used extensively across the NHS has recently announced that its prices will rise 15% in January 2017.
Coming at a time when health service budgets are under great strain (especially on capital expenditure), such sudden increases in costs are having a real and significant impact on NHS IT services. However, there are several things that IT managers and Chief Information Officers (CIOs) can do to reduce the impact of these changes:
- Only pay for what you need - Review your software licence and hardware support contracts and ensure that you are not over paying for both the capacity and capability to support the operation of your organisation
- Don't pay the list price - although fairly obvious, increasing competition in both the hardware and software markets, both in terms of the range of suppliers and the location of their company base means that incumbent providers are willing to discount their list prices if you are prepared to negotiate hard when existing contracts come to an end (or at pre-agreed contractual breakpoints)
- Use procurement frameworks - Although the old Enterprise Wide Agreements with Microsoft and Oracle no longer exist, there are several procurement frameworks available from the likes of G-Cloud, NHS Shared Business Services and local procurement collaboratives that have already been through competitive tender process to obtain significant discounts on commonly used products and services, including those from IT service providers
- Collaborate to reduce costs - where a procurement framework isn't available for your particular requirement, many hardware and software contracts are volume based, and therefore undertaking a collaborative procurement with one or more NHS organisations can reduce the unit cost significantly for all parties involved
- Consider moving to Software as a Service (SaaS) and/or Managed Equipment Contracts - With the reduction in available capital monies, there is an increased move towards cloud based services for software (such as Microsoft Office 365) which can be purchased on a subscription basis (which is usually cheaper than the traditional licencing model), and managed service contracts for hardware, which include hardware refresh, maintenance and management. Contract costs can be managed over a longer period and the effects of currency exchange built into the contract to reduce the risk of major fluctuations in price impacting on the overall contract costs
- Consider using Open Source or 'free' software - several Trusts have recently chosen to use Open Source or General Public Licence (GPL) software to reduce their direct licencing costs. This has ranged from background operating systems and platforms through to end user business support software (including Electronic Patient Record solutions). Although there are risks around choosing this route (such as the support available to manage and maintain business critical solutions based on Open Source software), this is becoming an increasingly viable alternative for NHS organisations to consider. However, there is currently a lack of evidence as to whether the Open Source route reduces the overall Total Cost of Ownership (TCO) of the solution (despite it being less impacted by currency fluctuations)
- Tightly manage your hardware and software estate - consider the use of agile working platforms to reduce the use of poorly utilised desktop hardware (and their associated software costs). The use of Virtual Desktop Infrastructure (VDI) to deliver streamed applications that the user requires in a particular setting can also reduce the costs associated with more traditional licencing models, which operate by paying for a licence per device that the software could potentially be used.
In summary, the challenges on NHS hardware and software budgets are not new as organisations continue to seek to make unavoidable costs savings across all its services. However, many countries in the EU have seen much higher rates of inflation than the UK (which have impacted on the costs of healthcare IT in places such as Greece and Spain particularly hard). With IT costs only expected to rise further as the full impact of Brexit and the US Election becomes known, now is a good time to review your infrastructure requirements and their associated costs, and make sure you are getting great value for money for the products and services you need to support your organisation deliver great patient care.
With particular thanks to Andrew Izon, Associate Director of Health Informatics at County Durham and Darlington NHS Foundation Trust for his input into this article.