IT firms show expanded presence at H&Q gathering
Whither HIT? Horizontal, vertical, or best of both’?
By DON LONG
Healthcare InfoTech Managing Editor
SAN FRANCISCO Though treated by national and local press as a biotechnology gathering, Hambrecht & Quist’s 17th annual Investor Conference, which concluded Thursday, featured every sector of the healthcare industry. And predictably this year’s gathering drew an increased number of healthcare IT firms to banner their new collaborations and preview new product roll-outs for the investment community
Given healthcare’s increasing demand for improved information systems, and fueled by the looming risks of Y2K, these firms had as great a claim on investor interest as did the hottest sectors of genetic engineering or breakthrough medical devices.
But conference attendees may have been puzzled by the variety of conflicting growth strategies those HIT firms presented and which would work better: broad horizontal development, vertical integration or both of the above? Three in particular were presented by Daou Systems (San Diego), Dendrite International (Morristown, NJ), and IDX (Burlington, VT).
Offering a broad horizontal growth strategy essentially attempting to be almost all things to all healthcare companies is Daou Systems, its strategy outlined at H&Q by CEO Georges Daou.
Rejecting any emphasis on either hardware or software, Daou stressed his company’s attempt to offer a broad range in consultancy: network support, services integration, strategic IT consulting and application support, all focused solely on the healthcare industry.
All of these add up to making Daou a "service business," Daou said, completely independent of particular vendors. The company’s role, he noted, is "to help clients determine what they need from a system standpoint," targeting in particular the healthcare organization’s chief information officer.
Using a basic analogy to transportation, Daou said that his company "doesn’t build the cars we build the highways."
And it has done that well, claiming more than 1,300 customers and boldly pursuing an aggressive growth path via acquisition.
Notwithstanding the company’s growth pains, H&Q says Daou "is in a very robust market, has a strong pipeline and backlog, and should be able to produce more than 30% growth for the next few years."
Providing a vertical, "best of breed" approach to growth at the conference was Dendrite, developer of sales management software primarily for pharmaceutical companies. As described by chairman and CEO John Bailye, the company also is attempting to be a services company but one that is "technologically enabled." Traditionally offering software products to high-end, big pharma firms such as Pfizer (New York), Johnson & Johnson (New Brunswick, NJ) and Eli Lilly (indianapolis), Dendrite has recently rolled out its ForceMultiRx, its most sophisticated software offering yet for this level of customer. But Dendrite also is in the process of developing a series of products for multiple tiers of the pharmaceutical industry. These include mid-size firms and companies in emerging international markets requiring less sophisticated products, according to Bailye, with Dendrite thus essentially drilling down into the market to capture business at all levels.
This strategy, according to H&Q, offers "new market opportunities position[ing] Dendrite to achieve above-average growth and expanding margins."
In a third type of developmental strategy, IDX is pursuing horizontal surface offerings through development of integrated delivery networks (IDNs) and then combining these in a best-of-breed approach by putting these systems on the Internet.
The third-largest U.S. player in its sector, IDX’s IDNs combine administrative, financial and clinical information via the company’s IDXTendR systems using a relational database. These systems currently are serving 100,000 physicians primarily in practice management organizations, according to IDX’s CEO, Richard Tarrant. The company’s next step will be to translate these services to the Internet.
Tarrant describes the result as "virtual integration," the connection of a large number of players in a healthcare system "as if they are under one roof."
Set for roll-out early this year, this will be accomplished with a product to be trade-named Zanzibar, says Tracy Moran, an IDX spokeswoman who said the product will give the company’s customers "the best of both worlds."
Backed by IDX’s extensive experience in Internet technology, Zanzibar will integrate information from a healthcare organization’s disparate IT systems. But it won’t be "just a browser," says Moran. "You will not only be able to access data users will be able to actively get into that system and do actual work through the web."
The result, according to Tarrant, is a leadership position in web-based IDNs, one that puts IDX not just on the curve, but ahead of it.
H&Q’s evaluation: 1998 was a great year for IDX; 1999 will be an even more exciting year.
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