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Big Blue Points SaaS ISVs at Healthcare Market

By D.H. Kass

March 25, 2009

IBM Corp. (NYSE:IBM) is urging its SaaS developers to take advantage of a $19.2 billion provision in the American Recovery and Reinvestment Act of 2009—otherwise known as the federal government’s $780 billion stimulus package—specifically allocated for IT investment and development in the healthcare market.

The Act apportions some $17 billion to incent doctors and hospitals to digitize patient health records and promote the development and use of other healthcare technology, and allots another $2 billion for IT-related grants and loans.

“Even before the economic stimulus, we’ve seen a steady adoption of SaaS within the public sector, but the Act has been a great catalyst,” said Dave Mitchell, IBM director of strategy and emerging business, ISV and developer relations.

To accentuate the healthcare market’s prospects, IBM is pointing to a study conducted in 2008 by the Center for Disease Control that pegged the adoption of digital record keeping by physicians at less than 40 percent. Another survey conducted last year of 2,700 doctors by the American Academy of Family Physicians revealed only 4 percent used digital records in their practice.

Prompting its ISVs to build industry-specific cloud services is relatively new for IBM, but the vendor contends that its strategy is sparked by the maturation of SaaS development in vertical segments and an open market opportunity. While the majority of IBM’s SaaS partners construct solutions across multiple industries, some 20 percent currently aim their solutions at specific segments.

“The absence of ownership of IT systems is increasingly being reduced as an obstacle, and benefits such as speed of access, cost and deferment of capital investment are making customers more accepting of the model,” Mitchell said.

Mitchell, who heads the company’s 250-member ISV SaaS Specialty group, said that despite the trend toward market segmentation, IBM has no plans to divide the unit by vertical orientation. Instead, it offers partners tools and resources that assist with “defining solutions by industry.”

Specifically, to help open doors into certain industries, IBM supplies vertical-market SaaS developers with what it calls industry frameworks, or solution sets that combine IBM products and services with ISV applications geared to address clients’ business issues. The frameworks also are employed by IBM’s direct sales team to approach enterprise customers in healthcare, financial services, telecommunications and retail.

Next page: Showcasing providers of cloud-based services

To make its point about SaaS vertical development, IBM is showcasing providers of cloud-based services in the healthcare market. One such partner, MedTrak Systems, based in North Muskegon, MI, has built a cloud-based solution for American Occupational Network, a $5 million, privately-held organization of five medical clinics in California. The solution provides patient registration, scheduling, patient electronic health records, clinical workflow, billing and collections in one cloud-based system.

“We began talking to AON in 2003 about using our services to move from practice management software to an integrated, clinical management solution,” said Rick Schanhals, MedTrak president.

“Our whole model is SaaS,” he said. “We can handle a sole practitioner seeing 20 patients a day to a multi-clinic operation seeing hundreds of patients a day.” Clinicians work off a patient status screen that records their findings in real time at the point-of-care and also creates billing information.

Larisa West, AON director of administration, said that AON was unable to find an on-premise application that met the organization’s needs and turned to a SaaS solution instead.

“Our field is always changing,” she said. “Software must relate to five different specialties, including primary care, urgent care, occupational medicine, orthopedics and rehab services and that’s not easy to find.”

Schanhals said that MedTrak’s solution was priced on a transaction basis depending on how many patients were seen on a monthly basis. Typical fees range from “2 percent to 3 percent of what a patient pays.”