Trade analysts react to Oracle’s big-ticket Cerner purchase

What’s going to the Oracle-Cerner acquisition introduced on Monday imply for the businesses, their shoppers and for healthcare on the whole? That is nonetheless to be seen, however one factor is for positive: It is a massive deal.

As CNBC famous, the $28.3 billion Oracle paid for the well being IT big is “monumental” – 3 times as expensive as the corporate’s next-biggest deal, its 2005 acquisition of PeopleSoft for $10.3 billion.

Certainly, it is “up there with the biggest software program offers ever”: solely barely smaller than IBM’s mammoth $34 billion acquisition of Purple Hat in 2018 and greater than Microsoft’s $20 billion acquisition of Nuance earlier this 12 months.

However there are good causes for that type of sizable funding.

“The way forward for enterprise software program is with the ability to have interaction with {industry} segments,” as IDC analyst Bob Parker instructed The New York Occasions. “And this places Oracle deeply right into a key a part of the healthcare enterprise.”

Oracle is clearly very desirous about Cerner’s cloud enterprise, given the EHR vendor’s expansive relationship with Amazon Internet Companies, CNBC factors out, and its Undertaking Apollo initiative, constructed on AWS infrastructure.

“Oracle was a late entrant to the cloud-infrastructure enterprise, and it trails AWS, Microsoft and Google by way of market share,” writes Ari Levy. “Removed from conceding defeat, [Larry] Ellison makes use of each alternative to tout Oracle’s cloud capabilities, often on the expense of AWS. There’s each motive to consider that Ellison sees Oracle’s cloud because the eventual dwelling for a superb chunk of Cerner’s future migration.”

Forrester senior analyst Natalie Schibell, in the meantime, sees potential for achievement, however will probably be determined by how effectively Oracle is ready to handle this “cloud-first technique for harnessing the facility of knowledge that sits outdoors of the digital well being report.”

As she famous in an announcement despatched to Healthcare IT Information, “an Oracle-Cerner deal would require Oracle to push the throttle on Cerner’s transfer to the cloud to drive a brand new paradigm of data-driven healthcare.”

Oracle could have its work lower out for it because it adjusts to a posh healthcare market with which it has restricted expertise.

“With ONC Closing Rule in impact, 2022 would be the 12 months for large knowledge analytics to mature medical determination assist and personalization,” mentioned Schibell. “The rise of consumerism and value-based care will end in a surge of knowledge from shopper wearables and distant affected person monitoring units. Digital well being report platforms should assist AI and ML to research exterior medical knowledge sources, stability assets, comprise prices, scale back waste and optimize medical workflows.

“Oracle might want to equip the digital well being report for larger utilization of digital care, together with the shift of acute care into the house,” she added. “A forward-thinking cloud technique should underpin data-sharing with interoperable knowledge that’s maintained on a longitudinal care report and exchanged securely.

“Leveraging the facility of knowledge is simply as essential as retaining it safe. As Oracle makes an attempt to make an even bigger footprint within the well being care sector, its funding in cybersecurity should additionally exponentially develop.”

“The actual fact stays that healthcare is one in every of many {industry} sectors that massive tech corporations serve, and it stays to be seen how a lot administration consideration will go into constructing out the EHR footprint that Cerner brings into the combination,” mentioned Paddy Padmanabhan, founder and CEO of Damo Consulting, in an announcement.

“The plain query is whether or not the deal is nearly juicing the cloud computing enterprise for Oracle. It is value noting that Google and Apple had main setbacks not too long ago within the healthcare area, so success is not foretold.”

In a subsequent interview with HIMSS TV Padmanabhan mentioned he is taking a wait-and-see strategy. Watch it right here, and embedded beneath.

“I have been speaking to a few of our shoppers and a few of my connections within the {industry} as effectively, and there are a number of issues to unpack from this,” he mentioned.

“One of many issues is Cerner is in the midst of a migration with AWS. Is that now going to cease, and is that now going to shift over to Oracle? And what does that imply for Cerner as a corporation and the quantity of assets, and bandwidth, and the whole lot else that they are going to need to dedicate to that train, ought to that come to go? And can that imply a lack of concentrate on their prospects?

“The opposite factor, in fact, is what new services is Oracle going to try to promote to sure prospects,” he added. “The press launch was very clear about at the very least one factor that Oracle appears to be very eager on, and that’s to try to promote their voice recognition software program [Voice Digital Assistant], which Oracle thinks goes to make a giant distinction in lowering the burden amongst physicians. And that was in all places, it was talked about greater than as soon as within the press launch.

“So prospects are going to be anticipated to take a look at different conventional Oracle merchandise and take into account them on prime of the Cerner platform. They will have some selections in entrance of them, particularly in the event that they’re utilizing a unique software program,” he mentioned. 

The plain one which involves thoughts, he mentioned, is Nuance.

“Are they going to need to shift over to some Oracle-owned voice recognition know-how? And the way good is it, actually? As a result of after we speak about voice-recognition know-how, Oracle will not be the primary title that involves thoughts,” he mentioned.

“This one’s fairly monumental”

Imagine it or not, nonetheless, the synergies between Oracle and Cerner are obvious sufficient {that a} merger of some kind has been mentioned for years – at the very least 13 years, actually. John Moore, founder and managing companion of Chilmark Analysis penned a weblog publish, means again in June 2008, titled, “Oracle + Cerner = Alternative?”

On the @Oracle @Cerner deal am reminded of a bit I wrote means again in 2008 wanting on the prospects of such a wedding.

A lot of what I mentioned again then, holds true as we speak.

— John Moore (@john_chilmark) December 22, 2021

In fact, in 2008, Cerner’s founding CEO Neal Patterson was nonetheless captain of the ship, and Moore says it is unlikely he would have gone for such a deal. “He was a visionary,” mentioned Moore in an interview with Healthcare IT Information. “And he had a agency hand on the tiller.”

After Patterson’s loss of life from most cancers in 2017, nonetheless, Moore says the thought of an acquisition turned more likely: “It was only a matter of when, and who would provide you with one thing.”

And Oracle was a logical suitor, he mentioned: “They’re attempting to get this public cloud enterprise going. They and IBM have actually been gradual to behave on this, and Microsoft, Amazon, and to a lesser extent, Google have actually capitalized on that as a result of that is the place the pattern is.”

Moore remembers a latest earnings name, the place Larry Ellison mentioned “monetary providers and healthcare had been going to be essential industries for his or her public cloud,” he mentioned. “And I believe buying Cerner permits that functionality, to turn out to be extra industry-specific with the general public cloud providers that they are going to offer, and so they might do one thing related within the monetary realm, to construct out that.”

This deal is “an instance of type of beginning with an current buyer base and a platform, a la Cerner, to construct from,” he defined. “Whereas, for instance, at Amazon/AWS, they have Anthem constructing their AWS platform, Anthem constructed Well being OS. In order that’s labored out fairly effectively. Humana and Epic’s partnership, they’re utilizing AWS in addition to type of the go-between. So it is an fascinating market proper now, as the whole lot transitions to cloud environments. That is the following battleground.”

As for Cerner shoppers, Moore surmises that their response to the deal is essentially consistent with that of different observers: Wait and see. However he says most of them will definitely be hoping to keep away from massive and doubtlessly disruptive cloud transitions in an already busy data-management surroundings.

“It is determined by the place I am at with Cerner by way of the deployment of their options in a cloud surroundings versus not,” he mentioned. “If I used to be a Cerner consumer utilizing HealtheIntent, which is dwell on AWS, I’d say, ‘Do not mess with that. Simply go away it. We’re utilizing these instruments. We’re utilizing HealtheIntent in that capability, and we have loaded our knowledge into AWS. Do not screw round with that.’

“I do not suppose they’ve gotten very far on the AWS Millennium transition, so I consider there will be much less concern amongst the consumer base with reference to Millennium, however I believe over time it’s going to finally transition the whole lot over to Oracle. However how does Cerner handle that transition?

“And I believe if I had been a buyer, I would say, it is Oracle. You have received plenty of expertise within the fintech enviornment. Get this [revenue cycle management] factor mounted as soon as and for all. RevElate is one thing that lots of people have hope for,” Moore mentioned.

And what are Judy Faulkner and her staff at Epic considering proper now?

“I am fairly positive they’re having very combined emotions about it. I consider that Judy would most likely be feeling like, ‘I am glad I put collectively the belief I’ve, to maintain Epic impartial,'” mentioned Moore.

“I believe in one other means, actually, they will be cheering it as a result of it will create a little bit of confusion within the Cerner consumer base and will end in additional decline in Cerner’s market share,” he added. “But when I used to be Epic, I would even be somewhat frightened about, ‘With Oracle’s breadth and depth internationally, are we going to have a tougher time getting accounts abroad?’ As a result of that is the place the expansion market is for EHRs, at the very least.

“There additionally could also be somewhat little bit of a disappointment, in that it is type of an finish of an period,” he mentioned, by way of competitors.

Epic, he mentioned, has “at all times been very customer-focused, however retaining that drive alive, to proceed to out-innovate, past what rivals are doing, or anybody else, to serve their consumer base, as a result of now there is no robust rivals there,” could also be difficult.

One factor is certain – that is nonetheless “very a lot a growing story,” mentioned Moore.

“It is going to be some time earlier than we determine precisely what is going on on right here. However I believe the repercussions to the broader {industry} are fairly important in comparison with plenty of different massive acquisitions we have seen prior to now decade or so. This one’s fairly monumental.”

Twitter: @MikeMiliardHITN

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Healthcare IT Information is a HIMSS publication.

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