Editor’s note: This guest post was written by Dave Chase, the CEO of Avado.com, a patient relationship management company. Previously he was a management consultant for Accenture’s health care practice and was the founder of Microsoft’s Health platform business. You can follow him on Twitter @chasedave.
In 2006, Microsoft acquired a health care computing system called Amalga, which aggregates health care data so doctors and hospitals can draw broader conclusions and patients can use it for better care.
Health data are in a jumble of different disconnected systems. Amalga promised to bring the data together in one place and find the signal in the noise. Yet on December 11, Microsoft spun Amalga off into a joint venture with General Electric.
Does this kill hopes that Microsoft would unshackle doctors and hospitals from truly abysmal computer systems?
Not all by itself. This particular exit should come as no surprise to Microsoft-watchers. While Microsoft has been extremely successful selling software platforms, meaning that it sells the basic program everything else runs on, it has periodically flirted with industry-specific “vertical” businesses, including the travel Web site Expedia. It always seems to sell these businesses or spin them out. The news that the tech giant is folding Amalga into the GE JV should be no surprise at all.
One reason Expedia founder Rich Barton was able to successfully spin the site out of Microsoft was that Expedia was irritating important travel customers. Microsoft was selling millions of dollars of software to the likes of American and United Airlines, and Expedia was disturbing that business model. It was cleaner to spin Expedia out. It was eventually sold to IAC and became a stand-alone public company.
Some other examples:
- HomeAdvisor Technologies Inc. This was to be the next business to spin out of Microsoft after Expedia but missed the window before the dot-com bust. It not only had Microsoft’s backing but JP Morgan Chase and GMAC-RFC had put in $100 million. It had a few divisions. One consumer-facing that was a similar to Zillow and Realtor.com and two B2B divisions. The consumer facing part became MSN’s Real Estate channel while the CRM business folded into Microsoft’s CRM business. The mortgage platform business was sold to Freddie Mac.
- Sidewalk: Microsoft’s local play was sold to CitySearch. It seemed a wayward foray outside Microsoft’s software business at the time. “But Sidewalk was really aimed at what we now call local search,” Microsoft Chief Executive Steve Ballmer told the International Herald Tribune later. “Sidewalk is one we should not have gotten out of.”
- Softimage: This was software for the movie industry that powered films such as Jurassic Park and Titanic. It was sold wholesale after a handful of years.
- Transpoint was a bill presentment and payment solution that was a joint venture with First Data and Citibank that was merged into CheckFree in a deal valued at $1B.
Microsoft's biggest success in health care is that it became the underlying software platform for the vast majority of health information technology systems. Its other forays, creating market specific software in health care with Amalga and HealthVault, a personal health record, were always less important.
Amalga has had limited success, even while upsetting Microsoft's partners. As John Moore of Chilmark Research pointed out in his analysis:
While Microsoft tried to quell EHR vendor fears in the US that this HIS solution suite, later rebranded as Amalga HIS, would only be sold overseas and not it the US, most EHR partners chose to put some distance between themselves and Microsoft. Needless to say, this created far more challenges for Microsoft and its still budding healthcare sector initiatives and the company decided to discontinue further investment in Amalga HIS in July 2010, effectively putting it on the market.
Those upset vendors are big problem. The threat to Microsoft’s health care platform business is greater than ever. The last technology shift in health care was from mainframe/minicomputers to client-server. Microsoft was extremely successful in driving that shift toward Windows-based servers. That platform dominance persists 15 years later.
But now there is a new shift from client-server to the cloud, and and mobile operating systems such as those from Apple and Google. Microsoft needs to focus on that shift. By removing any real or perceived threat to the 3rd party independent software vendors that are its partners, Microsoft is in a better position to win on the platform level.
At the same time as this platform shift is happening, there’s tremendous disruption within the health care ecosystem. While there’s lots of consolidation taking place with traditional health care providers, there’s are innovators popping up all over (e.g., MedLion and One Medical Group.) Not a week goes by where I don’t hear from some executive at an insurance company or healthcare provider who is going to launch his or her own start-up -- often becoming a new kind of health care provider. These individuals see health care companies making the same mistakes newspaper companies made 10+ years ago. Until now, Microsoft has paid little attention to these disruptors. Spinning off Amalga makes it easier to pursue this new generation of health entrepreneurs.
The Microsoft team focused on supporting 3rd party software vendors in health IT is probably very happy about this announcement. It removes one of their toughest objections from customers. The remaining vertical-specific product is the personal health record, HealthVault. But HealthVault poses little concern for most software vendors. I suspect it will just go into stasis. For Microsoft shareholders, the exit from doing vertical-specific products in health care is further evidence that Microsoft is focusing on its biggest opportunities.
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