Monday, December 14, 2009

Ash's Healthcare Observations

Fellow blogger Ash Motiwala blogged about the Microsoft/Sentillion acquisition over the weekend. He has some great insights into the healthcare angle as to why this was important to Microsoft:
1. The healthcare IT market is pretty unique, and healthcare specific software tends to take precedence over the larger generic software providers. This has caused 100's (if not 1000's) of applications within a typical healthcare IT environment. Healthcare IT shops want to buy software from companies who understand them (with doctors in the exec board), and they'll pay top dollar for the special attention. For example, McKesson brought in over $100b in 2008 vs. Microsoft's $60b in all verticals.

2. Until about the mid 2000's, Microsoft's healthcare strategy was pretty bad. They might disagree with me, but anecdotal evidence suggests that they were trying to sell generic technology (like BizTalk, SharePoint, etc.) with a healthcare twist. In my opinion, that approach caused them to lag in healthcare, and was a major cause of complaint for Microsoft's healthcare account reps that I had dealt with in the past.

3. In 2005, Microsoft hired Peter Neupert as VP of their Health Solutions Group. Prior to that, Peter was the CEO of, and co-chair'd the healthcare IT committee for the President's IT Advisory Committee. In 2006, Microsoft acquired Azyxxi, a healthcare app that pulls and displays patient info from disparate sources, and competes with the Cerners and McKessons of the world. Good move. (They also brought over a doc with the acquisition to lead the software team!) They followed that up with the acquisition of Hospital 2000 by GCS, then Rosetta Biosoftware and the launching of HealthVault. At HIMMS 2008 in Orlando, Microsoft renamed their healthcare line 'Amalga'.

4. In line with their seemingly new strategy of going more vertical, this past June - Microsoft signed a licensing agreement with Sentillion to supply Sentillion's SSO and Context Management technology as part of Amalga. A few days ago, Microsoft announced its plan to acquire Sentillion.

The one thing I will add is I do know that the healthcare vertical in Microsoft is an important one. They have their own dedicated teams and there is clearly a lot of room for revenue growth for Microsoft - which is exactly why they purchased Sentillion. Ash's commentary certainly helps me understand Microsoft's actions better.

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