IBM and Merge: Here We Go Again!

Aug. 6, 2015
IBM's acquisition of Merge could be a game changer, assuming the company and the healthcare industry have evolved past previous IBM initiatives.

Today’s announcement of IBM’s acquisition of Merge Healthcare might be called a deal changer.  In today’s rapidly changing healthcare environment, it would seem that merging IBM’s deep pockets and technological talent with Merge’s clinical technology and applications capabilities would be a good thing.  And, it may prove to be given the current environment. 

On the other hand, this is déjà vu, as I have personally seen IBM try to play in the healthcare space several times before.  Years ago, IBM developed a product and attempted to be a player in the Radiology Information System (RIS) business.  Eventually it was sold off.  IBM teamed with GE in the early 80’s to integrate RIS and PACS (Picture Archive and Communication System), only to exit amidst the company’s financial woes in the early days of Lou Gerstner’s chairmanship. 

There were also several failed attempts in the dictation/transcription business.  There was the IBM Executary line.  Then came the IBM VoiceType system.  And finally, there was IBM MedSpeak/Radiology, the first product to exploit IBM’s speech recognition technology.  Each time, IBM realized that the total medical market for such products could be measured in the thousands, not the hundreds of thousands of potential users.  In the end, IBM sold off these products on the basis of market dynamics versus disproportionate development and support costs.  It was unfortunate, as IBM had some of the best technology in the business!  Another part of the argument always was that IBM sold product to other healthcare vendors, and competing with them would jeopardize that business.

So, will the past repeat itself?  Or, have IBM and the market changed enough to make this a winning proposition for IBM?  I would have to say, only time will tell.  But, today, IBM is a different company than it was thirty years ago, as is the healthcare industry.  Much of the “big iron” emphasis is gone, and the company has much more of a services focus these days.  Cloud computing was never a factor in the past, and today, coupled with Watson, it offers much more potential for delivery of storage and analytics solutions.

In the age of past efforts, there were much larger barriers between Information Technology (IT) and clinical departments.  That is why IBM chose to partner with GE to address RIS-PACS previously, as the two complemented one another in terms of hospital administration emphasis.  Today, there is much more IT emphasis on clinical systems and their integration across the enterprise.  And, the healthcare environment today is radically different than in the age of past efforts, given increased regulation and greater provider consolidation.  An IBM-Merge combination should have much broader appeal to integrated delivery networks (IDN’s) who might benefit from greater interoperability and better business analytics.

Both IBM and Merge have sufficient technical expertise to make it work.  But, the glass is only half full.  Imaging informatics is a growing market, but it pales in comparison to the general healthcare IT market such as for EMR’s (Electronic Medical Record).  How well the market is willing to play with an IBM-Merge entity will be interesting to see.  Or, does IBM have more companies in its sights?  It’s ironic that an IBM spinoff (Lexmark) has positioned itself to be a formidable competitor in this space as well.  What will be the reaction of others such as HP and Dell that have had evolving healthcare strategies over the years?  IBM’s forays into the consumer market (remember the PC Junior or OS/2?) have not proven all that successful either. 

Here’s hoping that IBM has evolved and learned from its past, and will find ways to make this one work!  As always your comments and perspective are welcome.

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