Friday, April 28, 2006


IBM in Healthcare

IBM Overview

IBM is the largest information technology company in the world, housing the most number of patents compared to any other tech company. Computer hardware has always been synonymous with the IBM brand. Traditionally, servers and mainframes have made up the bulk of IBM’s revenues. As competition grew, the hardware business became a commodity market which IBM was fighting a losing battle. This culminated in a $4.7B loss in 1992 - the largest single loss of a corporation at the time, which resulted in the dismissal of the CEO. As Lou Gerstner took over the helm in 1993, he shifted the focus of IBM from hardware and technology to software and services, resulting in one of the greatest turnaround story during the 90s. When Sam Palmisamo took over as CEO in 2002, revenues from services were starting to exceed those of traditional hardware. Services was seen as the way of the future as IBM purchased Pricewaterhouse Consulting to form the new IBM Global Services. After the spin off of its increasingly commoditized PC division, IBM has truly transformed itself from merely a hardware company to service provider. No longer confined to just the technology sector, IBM leverages their expertise in technology to transcend markets and at all industries to improve their business processes.

Electronic Medical Records (EMRs)

The latest trend in healthcare is the push towards the digitization of Medical Records, also known as EMRs. Experts on medical-care costs estimate that 10% or more of the $1.7 trillion spent on health care annually could be saved through the use of transferable, electronic records. The idea behind an EMR is much deeper than simply records in an electronic format. That is just the tip of the iceberg. Currently, medical records are stored and owned by hospitals and insurance providers who control a large portion of the power within the healthcare industry as shown in our healthcare stack. With EMRs, records will no longer be owned by a single hospital or insurer. The customer themselves will own the information and thus shifting the power from the healthcare providers to the consumers themselves. With the world being networked, records such as x-rays and up to date medical information can be instantly transported with EMRs. The same information can be pulled up on a patient regardless of location. Drug allergies, medical x-rays and previous treatments can be viewed instantaneously at any hospital. The revenue and power in the future will be dictated by those who own the information. The only question is who will lead in this transformation. Doctors are adverse to change, and hospitals already have a proprietary system in place. A push is needed to facilitate change in this industry.

IBM's Role in Healthcare

IBM entered the healthcare industry in 1999 when they started the life sciences group. As discussed in class, network effects and the information age makes it very obvious for the need for massive computing power. Huge amounts of data needs to be collected, sorted and stored for EMRs. Today, IBM is in a perfect position to facilitate the push into EMR. With its army of researchers and expertise in technology, their business consulting arm can analyze processes and provide the healthcare industry with the tools they need to move into the future of EMRs. IBM also recently purchased Healthlink, one of the largest IT consultant companies specifically for the healthcare industry. This gives IBM the ability to select, strategize, implement and optimize processes within the healthcare industry. IBM currently is working with hospitals across the country on pilot projects to demonstrate how records can be transferred between locations based on open standards.

IBM's future - Taking advantage of the Network Era

As the need for computing power increases, IBM is in a unique position to provide the tools needed to move into the future. With an extensive background in technology and research, no other company is better positioned to ride this wave. Accenture is the closest competitor, but they lack the technological expertise that IBM has to offer. Laying the infrastructure has always been IBM’s forte and the healthcare industry is no different. As network externalities take place for the increasing use of EMR, the next wave will be the ability to data mine the mountains of information to analyze trends and patterns in genomics as well as diseases. This will lead to preventive medical care and personalized medicine in the future. IBM has the ability to provide the algorithms for data mining and solutions for more computing power if needed. Of course the road is never easy with competition and changing technology. IBM has to watch the landscape for smaller more nimble companies that might encroach its space in the services sector.

IBM website states that “IBM is helping clients manage an explosion of data. Accelerate discovery and development. Reduce costs. Respond to compliance and security mandates. Improve diagnoses and patient care.”

With this in mind, IBM must continue to leverage their technological expertise to push EMRs. There are no standards in place for the use of EMRs. IBM should set open standards which will allow information to flow freely. The future of IBM is services, and therefore they should take advantage of the large healthcare industry by packaging specific healthcare solutions optimized for EMRs. Privacy issues will arise as a result of EMRs and IBM should fully take advantage by offering privacy consultancy and solutions. IBM must also broaden its offerings to not only the hospitals and insurers but every player in the healthcare stack. Creating a single open platform across the stack will allow for efficient transfer of data between each company and will allow for the seamless integration of data for the healthcare industry.

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