The Perfect Storm?

In response to Mark’s post about the recent B.C. Canada Health Infoway vendor information sessions I have been contemplating the potential impact of Infoway’s new funding programs on the EMR vendor landscape.  As Mark and I have some thoughts on this specific matter, I have decided to create a separate discussion thread.

I think that Infoway funding may be the final ingredient in a “perfect storm” that will forever change the EMR vendor landscape.  There are already some powerful forces driving change in the EMR market including:

  • The natural consolidation that occurs in any technology market.  Just look at the PC market of 10 to 15 years ago or the ISP market a decade ago.  Both were characterized by a large number of vendors, many of whom were relatively small.  Over time several dominant vendors emerged while many smaller vendors either perished or were acquired by the larger vendors.  The EMR market today reminds of the ISP market in which I worked in the mid to late 90’s.
  • Provincial funding programs have given a small number of vendors “hunting licenses” that put them at a distinct advantage in those markets.
  • The current economic conditions will put increased pressure on the smaller vendors and may make it difficult for many of them to get the financing or investments they need to fund sales, marketing, and R&D.

Infoway funding for EMRs will exacerbate these conditions.  To start, the infusion of new $’s into the market will drive many vendors to be more aggressive.  Those with $’s or the ability to raise $’s will look at acquisition as a way to enter provincial markets in which they might not have a presence.  Larger vendors, particularly US based vendors, will see Canada as attractive market in which to do business and seek ways to enter the market.  Finally, the speed with which Infoway will have to move to spend the new funds (it appears they have a limited time in which to do so) will put considerable strain on the smaller vendors as they simply may not have sales and implementation resources to meet the demand.

I think that we are about to witness a “perfect storm” that will result in a major shakeout in the EMR market over the next two years.  Further, the key role that EMRs will play as a service delivery platform will drive a level of “standardization” in this market that we have not yet seen to date.  Mark has some interesting thoughts on this last observation that I will let him share.

4 responses to “The Perfect Storm?

  1. Thanks for the interesting post Mike. It reminds me of several conversations that I’ve recently had with some of the traditional big acute vendors in this space trying to figure out their play in the EMR space. I have always thought of EMR software as a kind of operating system or as Mike would say a Facebook platform.

    Most large acute care IT vendors have an aversion to selling directly to the physicians. The big challenge for these vendors is that selling to 65,000 individual docs (whether as individual practices or small clinics) is the exact opposite of their traditional enterprise sales and support model. For most (but not all) of these large vendors my suggestion has been don’t sell direct to the physicians, let the EMR vendors do it for you.

    The issue for many of the vendors is one of not truly understanding the end customer. Physicians measure their free time in seconds and over the long run are likely to want to use one system (their EMR) to interface with other services/products such as Transcription, Document Imaging, Printers, CDM tools, etc. To some extent the play for the non-EMR vendors is figuring out how to sell their products/services via the EMR as the delivery channel. I truly believe that the EMR vendor will own the customer relationship, and as such will be very well positioned to ensure a seamless interaction between their customer and third party software/services/hardware vendors. This indirect sales channel model will take a while to build, but if I’m right about the EMR acting as the operating system or platform this will be the key method for the non-EMR players to sell into this market. It will be interesting to see how many non-EMR vendors “get this” in the short term. They will either try and buy the EMR vendors or partner, I don’t see a third way.

    I’m sure many of the M&A and/or BD guys at the EMR vendors will be getting many more phone calls over the next six months.

    Mark Douglas

  2. The key issue to bear in mind is that the docs will use the EMR as the single application through which they do as much work as possible. It is because of this preferred way of working that the EMR vendors represent such a powerful sales channel.

    Another important issue to consider is the integration that preferred vendors in each province will have with provincial systems. Indeed, one reason cited by many provinces for limiting the number of vendors is to ease the burden of integration with these provincial systems.

    I wonder if one or more of the EMR vendors will borrow a page from Google, Amazon, or Facebook and create application program interfaces (APIs) for their software so that third party vendors can easily develop add-on modules. They could, like Apple, act as the channel to market and take a piece of every sale. This approach would reduce their R&D costs and allow them to more quickly bring new functionality to market. Further, they don’t need to go through the formal partnership “dance” and avoid accusations of monopoly behaviour by the doctors.

  3. Mark, perhaps we can speculate on what the EMR vendor landscape will look like next year and in a few years time? How do you think it might change? Which of the current vendors will remain standing? Care to speculate on which vendors not already in the Canadian market will choose to enter the Canadian market?

    • Mike,

      Something I have thinking a lot about recently. No one vendor ones a dominant part of the market, there are still plenty of greenfields…for now. I believe the CHI money is going to accelerate natural selection. I think their are a number of factors that are going to influence/direct any consolidation in this space, including:

      Number of vendors – There are 35+ EMR vendors in Canada (mostly SME players), and every couple of months I see new ones popping up or entering the market. With so many “dancing partners” to choose from, how is one to choose?

      Vendor segmentation – The 35+ vendors can be broadly broken into two large groups. One group has chased certification and one has not. Some vendors have ambitions to sell in many provinces, while others prefer to stay local. I would not be surprised to see some vendors only selling into a large metropolitan area and ignoring the rest of a province. How does one pick the right EMR dance partners?

      Vendor size – Almost all of the vendors are SME companies (less than 100 employees). At this point there is no 800lb gorilla and many larger vendors are not interested in selling to the chaos that is 65K small business…er I mean doctors. The only two very large organizations backing an EMR play are the CMA and xwave, neither of which owns the market.

      Final thoughts – I think there is an opportunity for a couple of large outside players to make a concerted play and act as a consolidator. The time is perfect for one, two or even three large non-EMR vendors to own this channel to the Canadian docs. As a lover of the free market and innovation I really hope that any consolidation doesn’t kill innovation. Right now I see all kinds of interesting ideas and products coming out of the current vendors. My one big concern is that if a single vendor owns 50%+ of the market that the products begin to stagnate. I guess I can’t have it both ways, but as you know Mike this has never stopped me in the past. 🙂

      Mark

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