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 purchasers and for healthcare basically? That is nonetheless to be seen, however one factor is for certain: It is a huge deal.

As CNBC famous, the $28.3 billion Oracle paid for the well being IT large is “monumental” – 3 times 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 yr.

However there are good causes for that form 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 Occasions. “And this places Oracle deeply right into a key a part of the healthcare enterprise.”

Oracle is clearly very all for Cerner’s cloud enterprise, given the EHR vendor’s expansive relationship with Amazon Net 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 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, sometimes on the expense of AWS. There’s each motive to consider that Ellison sees Oracle’s cloud because the eventual dwelling for a very good chunk of Cerner’s future migration.”

Forrester senior analyst Natalie Schibell, in the meantime, sees potential for fulfillment, however it is going to be determined by how nicely Oracle is ready to handle this “cloud-first technique for harnessing the facility of information 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 can have its work reduce out for it because it adjusts to a posh healthcare market with which it has restricted expertise.

“With ONC Last Rule in impact, 2022 would be the yr for giant knowledge analytics to mature scientific resolution assist and personalization,” stated Schibell. “The rise of consumerism and value-based care will lead to a surge of information from client wearables and distant affected person monitoring units. Digital well being report platforms should assist AI and ML to investigate exterior scientific knowledge sources, steadiness sources, comprise prices, cut back waste and optimize scientific workflows.

“Oracle might want to equip the digital well being report 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 report and exchanged securely.

“Leveraging the facility of information is simply as vital as holding it safe. As Oracle makes an attempt to make a much bigger footprint within the well being care sector, its funding in cybersecurity should additionally exponentially develop.”

“The very fact stays that healthcare is considered one of many {industry} sectors that huge tech companies 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,” stated 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 lately within the healthcare area, so success is not foretold.”

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

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

“One of many issues is Cerner is in the course 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 company and the quantity of sources, and bandwidth, and the whole lot else that they’ll should commit to that train, ought to that come to go? And can that imply a lack of give attention to their prospects?

“The opposite factor, in fact, is what new services is Oracle going to attempt to promote to sure prospects,” he added. “The press launch was very clear about not less than 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 a giant distinction in decreasing the burden amongst physicians. And that was in every single place, 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 contemplate them on high 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 stated. 

The plain one which involves thoughts, he stated, 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 discuss voice-recognition know-how, Oracle just isn’t the primary title that involves thoughts,” he stated.

“This one’s fairly monumental”

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

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

A lot of what I stated again then, holds true right this moment.https://t.co/r4QDa0lc0i

— John Moore (@john_chilmark) December 22, 2021

After all, 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,” stated Moore in an interview with Healthcare IT Information. “And he had a agency hand on the tiller.”

After Patterson’s demise 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 stated: “They’re making an attempt 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 development is.”

Moore remembers a current earnings name, the place Larry Ellison stated “monetary providers and healthcare had been going to be vital industries for his or her public cloud,” he stated. “And I feel buying Cerner permits that functionality, to change into extra industry-specific with the general public cloud providers that they’ll offer, they usually might do one thing comparable within the monetary realm, to construct out that.”

This deal is “an instance of sort 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 nicely. Humana and Epic’s partnership, they’re utilizing AWS in addition to sort of the go-between. So it is an fascinating market proper now, as the whole lot transitions to cloud environments. That is the subsequent battleground.”

As for Cerner purchasers, Moore surmises that their response to the deal is basically in step with that of different observers: Wait and see. However he says most of them will definitely be hoping to keep away from huge and probably disruptive cloud transitions in an already busy data-management setting.

“It is determined by the place I am at with Cerner when it comes to the deployment of their options in a cloud setting versus not,” he stated. “If I used to be a Cerner shopper utilizing HealtheIntent, which is stay 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 shopper base on the subject of Millennium, however I feel over time it should ultimately transition the whole lot 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 obtained quite a lot 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 stated.

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

“I am fairly certain they’re having very blended emotions about it. I consider that Judy would in all probability be feeling like, ‘I am glad I put collectively the belief I’ve, to maintain Epic impartial,'” stated Moore.

“I feel in one other approach, definitely, they’re going to be cheering it as a result of it is going to create a little bit of confusion within the Cerner shopper base and should lead to additional decline in Cerner’s market share,” he added. “But when I used to be Epic, I would even be a bit of frightened 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, not less than.

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

Epic, he stated, has “all the time been very customer-focused, however holding that drive alive, to proceed to out-innovate, past what opponents are doing, or anybody else, to serve their shopper base, as a result of now there is not any sturdy opponents there,” could also be difficult.

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

“It will 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 important in comparison with quite a lot of different huge acquisitions we have seen up to now decade or so. This one’s fairly monumental.”

Twitter: @MikeMiliardHITN

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

Healthcare IT Information is a HIMSS publication.