Digital Health Companies Are Aware of Service Provider Costs But Find Them Too Expensive

Digital health companies have a good understanding of the outsourcing budgets for third-party digital health services. Still, high prices are the main reason why digital health companies don’t work with third-party providers. New pricing models are needed.

For both startups and established larger corporations in digital health, the primary difficulty in scaling up their businesses stems from the small team sizes which often lack the breadth of expertise. In this case, external service providers serve as dependable allies, filling the gap in knowledge and workforce capacity by aiding in various support areas for digital health solution providers.

Insights from Research2Guidance’s latest survey, “Digital Health Startups: Outsourcing Needs” (n=293), offer a comprehensive view into the demand for outsourcing projects across technical, business, legal, and service delivery domains in the global digital health market, and also examines the planned budgets for these areas by the digital health decision-makers, along with the barriers to closing outsourcing deals with external service providers.

Digital health stakeholders from pharmaceuticals, medtech, startups and others seem to be already aware of the costs of outsourcing. On average, the survey participants plan to allocate $230 thousand USD for outsourced technical and business support projects. Budget range for these is also very large, spanning from $70 thousand USD to over $500 thousand USD, depending on the complexity of the projects.

Navigating the legal and regulatory landscape presents its own set of challenges in different geographies, with an average budget of $176 thousand USD planned to be allocated for services such as ISO certification, GDPR/HIPAA compliance, and IP protection by the digital health companies. The budgets for these services range from $54 thousand USD to $420 thousand USD.

As service delivery needs are paramount to expand the footprint of the solutions, the digital health companies foresee an average cost of $158 thousand USD in outsourcing projects that would bring such as access to healthcare professionals (HCPs), or streamline their marketing, content management and patient engagement activities. The budget range for service delivery support falls between $60 and $389 thousand USD, to ensure effective delivery and increasing adoption of digital health solutions.

What are the barriers to closing deals with external service providers in digital health?

There are 6 main challenges mentioned by the survey participants in closing outsourcing deals with the third-party service providers in the global digital health market.

High costs of the outsourced projects:

While the digital health solution providers are aware of the costs associated with different types of outsourcing activities, by 53% of survey participants, excessive costs emerge as the primary barrier in finalizing outsourcing agreements. This shows that the service providers must articulate their value propositions clearly and provide transparent pricing to demonstrate value added services for their clients in digital health market.

Long timelines to deliver the projects:

Among the challenges, respondents also highlight the long-term commitment required for the outsourced projects as one of the leading barriers (26%) in working with external service providers, which indicates the need for setting realistic time estimates for each project phase and defining the goals, scope, milestones clearly from the start.

Difficulty in finding the right service provider:

Overcoming the challenge of identifying the most suitable service provider is another hurdle faced by digital health companies (21%), emphasizing the importance of tailored offerings and the time spent to find the one.

Lack of time to manage the outsourced projects:

Limited time for managing outsourced projects also pose a challenge according to 21% of the digital health decision-makers, indicating a need for streamlined collaborative approach in project management processes.

Insufficient granularity in service provider offerings:

21% of the survey participants also express the need for more detailed and specific service offerings for digital health projects from service providers to better align with their digital health clients’ requirements.

Language barriers:

Language barriers are identified as another challenge, yet much less prominent, suggesting a need for improved communication channels and language support to facilitate the project management between digital health companies and service providers.

As the digital health market continues to evolve, outsourcing deals between digital health companies and external service providers will be crucial in overcoming challenges and driving innovation in the global digital health market.

Alternative pricing/partnership models like pay as you grow, pay by equity, barter deals or discounts for referrals are needed to allow digital health startups to make more use of third-party outsourcing provider services.

Direct requests for help between startups are another way for startups to help each other without major costs. R2GConnect has created the option of “Help Requests” for this purpose. Now the 8,000+ digital health companies on R2GConnect can help each other with their experiences and assets.

To learn more about R2GConnect’s new service offerings “Help Requests”, please book a demo session here: