Oracle + Cerner = Opportunity?
[Reposted from 2008] For years, Oracle has been on an acquisition quest, and now, looking back more than a dozen years, Cerner seemed like a target.
Editor’s note: John Moore wrote this column in 2008, foreseeing the potential combination of Oracle and Cerner 14 years before the companies combined. In this column, he provides some historical context to this merger.
A prediction in 2008: John Moore, Founder of Chilmark Research espoused the idea of Oracle's purchase of Cerner.
In case you didn’t see it, Bloomberg had an article last week [2008] that assessed the possibility of the ever-acquisitive Oracle (which has made some 40 acquisitions in last four-plus years) making a move on healthcare by acquiring Cerner.
While I normally focus on consumer-facing apps, I can’t help but comment on this story, as I know Oracle quite well (and many of the companies it acquired) from my days as an IT analyst leading the enterprise group for the manufacturing centric analyst firm, ARC Advisory Group.
So is this possible/probable? Well, yes and no, for the following reasons:
Yes
Oracle is very savvy at making acquisitions work; no one does it better in the enterprise software market than Oracle.
Oracle, unlike major competitor SAP, likes making acquisitions, because it is core to its growth strategy.
They need new markets to achieve target growth projections – their existing markets, while still having opportunities, are mostly at the mid-tier and lower levels and will not be enough.
The healthcare sector is increasing spending on IT, faster than most other large market sectors. It is also a very large market.
Oracle has an existing presence in healthcare, as most large healthcare enterprises are already running on top of Oracle databases.
No
Healthcare is a difficult, fragmented market with few large entities (target customers) among providers. There are no GMs or Fords or Dow Chemicals to conquer, therefore cost of sales will likely be high.
Healthcare is full of regulatory requirements and lots of customization of software. Oracle is not a fan of customized solutions and for years has aggressively promoted an out-of-the-box solution approach.
This sector has not seen much consolidation – there are far too many EMR solutions today. Maybe a big play by Oracle will help to rationalize the market, but right now it appears too early for them, unless of course they acquire a couple of leading players serving different tiers of the market – for example, buying both Cerner and athenahealth.
This market has yet to demonstrate that it is truly a global market, which limits growth to North America for the time being. Granted, that is still a big market, but it’s not like manufacturing, where distributed product development and manufacturing has occurred for years, and systems, process and software has been developed to support such activities.
My opinion
Oracle will make a play in the healthcare market, because it is one of the few markets remaining that does not have a large, true enterprise software vendor of the likes of Oracle or SAP (SAP has seen some success in the native German healthcare sector, but little here).
A company like Cerner is an obvious choice, but to be successful, Oracle will need to make more than one acquisition to develop a significant presence. Oracle also may come at it from the health plan side, although Trizetto, the dominant player here was recently acquired and unlikely to be available, unless of course Oracle pays a princely sum.
Oracle will make a play, but it won’t just be Cerner, or similar large EMR vendor – it will be several.
John Moore is founder and managing partner of Chilmark Research. See John's recent insights on the future of Oracle Cerner - The repercussions of Oracle’s acquisition of Cerner
This HDMvideo is part of a special report series exploring Oracle's acquisition of Cerner.
What will Oracle learn with its acquisition of Cerner? Can Oracle’s acquisition of Cerner finally answer decades of questions, achieve more than its predecessors’ mixed bag of successes...and avoid massive failure? What do these tech giants not understand about healthcare, and what can healthcare embrace from big tech as healthcare consumerism draws more outsiders in?
Throughout this series, our HIT consultant panel offers perspective and their answers to the myriad of questions encompassing big tech’s desire – and ability – to conquer healthcare.
View the full Special Report including panel discussions, articles and KLAS Research insights