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 normally? That is nonetheless to be seen, however one factor is for certain: It is a massive deal.

As CNBC famous, the $28.3 billion Oracle paid for the well being IT large is “monumental” – thrice as dear 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 Crimson Hat in 2018 and larger than Microsoft’s $20 billion acquisition of Nuance earlier this 12 months.

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

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

Oracle is clearly very interested by Cerner’s cloud enterprise, given the EHR vendor’s expansive relationship with Amazon Net Providers, CNBC factors out, and its Challenge Apollo initiative, constructed on AWS infrastructure.

“Oracle was a late entrant to the cloud-infrastructure enterprise, and it trails AWS, Microsoft and Google when it comes to 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 purpose to imagine that Ellison sees Oracle’s cloud because the eventual house for a superb chunk of Cerner’s future migration.”

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

As she famous in a press release 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 may have its work minimize 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 giant knowledge analytics to mature scientific resolution assist and personalization,” mentioned Schibell. “The rise of consumerism and value-based care will lead to a surge of information from shopper wearables and distant affected person monitoring units. Digital well being document platforms should assist AI and ML to research exterior scientific knowledge sources, steadiness sources, comprise prices, cut back waste and optimize scientific workflows.

“Oracle might want to equip the digital well being document for better 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 document and exchanged securely.

“Leveraging the facility of information is simply as essential as conserving 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 all 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 combo,” mentioned Paddy Padmanabhan, founder and CEO of Damo Consulting, in a press release.

“The apparent 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 method. Watch it right here, and embedded under.

“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 sources, and bandwidth, and all the pieces else that they are going to should dedicate to that train, ought to that come to go? And can that imply a lack of concentrate on their prospects?

“The opposite factor, after all, is what new services is Oracle going to attempt to promote to sure prospects,” he added. “The press launch was very clear about at the least one factor that Oracle appears to be very eager on, and that’s to attempt to promote their voice recognition software program [Voice Digital Assistant], which Oracle thinks goes to make an enormous distinction in decreasing 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’ll have some selections in entrance of them, particularly in the event that they’re utilizing a unique software program,” he mentioned. 

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

“Are they going to should shift over to some Oracle-owned voice recognition know-how? And the way good is it, actually? As a result of once we speak about voice-recognition know-how, Oracle shouldn’t be the primary identify that involves thoughts,” he mentioned.

“This one’s fairly monumental”

Consider 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 least 13 years, in truth. John Moore, founder and managing companion of Chilmark Analysis penned a weblog publish, manner again in June 2008, titled, “Oracle + Cerner = Alternative?”

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

A lot of what I mentioned again then, holds true at the moment.https://t.co/r4QDa0lc0i

— 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 dying from most cancers in 2017, nonetheless, Moore says the concept of an acquisition turned more likely: “It was only a matter of when, and who would give you 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 sluggish 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 recollects a current earnings name, the place Larry Ellison mentioned “monetary companies and healthcare had been going to be essential industries for his or her public cloud,” he mentioned. “And I feel buying Cerner permits that functionality, to grow to be extra industry-specific with the general public cloud companies that they are going to offer, and so they might do one thing comparable within the monetary realm, to construct out that.”

This deal is “an instance of form 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 form of the go-between. So it is an fascinating market proper now, as all the pieces transitions to cloud environments. That is the subsequent 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 probably disruptive cloud transitions in an already busy data-management setting.

“It depends upon the place I am at with Cerner when it comes to the deployment of their options in a cloud setting versus not,” he mentioned. “If I used to be a Cerner consumer utilizing HealtheIntent, which is dwell on AWS, I might say, ‘Do not mess with that. Simply depart 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 assume they’ve gotten very far on the AWS Millennium transition, so I imagine there will be much less concern amongst the consumer base close to Millennium, however I feel over time it’ll ultimately transition all the pieces over to Oracle. However how does Cerner handle that transition?

“And I feel if I had been a buyer, I would say, it is Oracle. You have acquired lots of expertise within the fintech enviornment. Get this [revenue cycle management] factor fastened 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 certain they’re having very blended emotions about it. I imagine that Judy would in all probability be feeling like, ‘I am glad I put collectively the belief I’ve, to maintain Epic impartial,'” mentioned Moore.

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

“There additionally could also be a bit little bit of a unhappiness, in that it is form of an finish of an period,” he mentioned, when it comes to competitors.

Epic, he mentioned, has “at all times been very customer-focused, however conserving 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 isn’t any robust rivals there,” could also be difficult.

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

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

Twitter: @MikeMiliardHITN

E mail the author: mike.miliard@himssmedia.com

Healthcare IT Information is a HIMSS publication.