Big Tech & Healthcare
Google Health
We have seen consistent stories over the last several years about how “Big Tech” is going to take over healthcare.

Those software folks are going to show the neanderthals how to do it, is the underlying theme.

The latest salvo has been the Amazon acquisition of One Medical. They almost simultaneously shut down their own direct care effort, which we will discuss in the coming weeks. All of this activity was preceded by events like Oracle acquiring Cerner and a host of other moves by Big Tech.

While there is no doubt that Google, Microsoft, Oracle, Facebook and Apple are juggernauts, and they all have interest in healthcare, there is a lot more going on with their individual strategies. First off, lets be clear. None of these companies is getting into healthcare for altruistic reasons. Quite simply, they see inefficiency and therefore, opportunity. They see a sector of the economy that touches every person and accounts for almost 20% of the US GDP and growing. They see $3T+ in annual spend. While all of that is fairly obvious, we want to make sure to set the stage for why they are here.

Next, it merits mentioning that the aforementioned “Big Tech” players are not all created equal. When we observe them getting into healthcare with deep pockets and momentum, it serves to understand exactly what that means. They will have impact. They will steal market share from select incumbents. But all of the hyperbole about “reinventing”, “taking over” and the like is far-fetched.

Lets take a quick high level look at each of the actors to better understand what their entrance means:

Google: Of all the Big Tech players, Google may be best positioned to have the most impact. They are an elite technology machine in both hardware and software. They have begun to apply this skill to genetics…which is where healthcare will get revolutionized. If you haven’t read materials by Peter Diamondis, MD – you should check some out. You’ll get an insightful window into healthcare advancement. Since Google’s business model is centered around advertising, we know they aren’t going to try and build a services business. They are likely going to apply the power of data better than any organization in existence. They are doing what IBM had dreams of doing. IBM’s effort ended in the disengagement of Watson after billions of dollars invested. None of this is trivial or guarantees a win.

Microsoft: While there is a long history of healthcare DNA in Redmond, WA, very little has been meaningful. They saw the power of data early on, but efforts on the consumer front, and enterprise front, were both spun out or shut down. They have since reinvented their healthcare team, but it’s not clear if there is true disruption in mind. Rather, it generally appears as if the healthcare strategy is to sell more software licenses into the healthcare enterprise and expand use of their cloud offering. Nothing wrong with either, but not a lot to see here for the moment.

Amazon: Of all the Big Tech players, Amazon consistently grabs our attention better than any other. They are smart, fast and they have reach. By reach we mean they specialize in supply chain. Yes they have consumer data. Yes they have cloud computing on steroids. But what really differentiates them is selling/delivering crap really efficiently. Most notably, this now includes drugs. Walgreens and CVS knew the minute Amazon entered the market, their dominance was over. WalMart has tried to compete on the front lines primary care, eye care etc front because they have the real estate. it has been met with moderate success, but new care delivery models (aka – remote care, home care etc) are making the bricks and mortar footprint less relevant that it was even 5 years ago. Will Amazon have an impact beyond a competitive primary care delivery organization and drug dispensary offering? Hard to say. New product development in therapeutics, medical device etc is not in their DNA. Service delivery is also not in their historical DNA. So, interesting, but maybe not as “disruptive” or widely expanding in its potential as some stories have led us to believe.

Facebook: Of all Big Tech, this organization is furthest behind. In fact, they have really done nothing to date. This is perplexing given their reach. Billions of us interact across their platforms every day. Like Google, their underpinning is advertisement. Its certainly not product development, service delivery, supply chain etc. Their data set is incredible, but also limited in its view. Meanwhile, they are clearly doubling down on the virtual world and there are few places where this has more potential impact that healthcare. Where does this all lead? Of all these firms its less clear what the next 5 years brings, but beyond that it seems very virtual.

Oracle: Many of you know little of Oracle. Unlike the others mentioned, this is a B2B player. They are worth a fortune because they figured out how to take spreadsheets to the enterprise at the right time. We call this Oracle Financials and the sister products. Right product at the right time in history. Nothing revolutionary, but it turns out corporations like tracking their sales, supply chain etc with powerful software and will pay a fortune for it. (As a footnote, SalesForce was born out of an Oracle employee and its essentially Oracle 2.0…they would never describe it that way, but its basically Oracle in the cloud. Like Oracle, there is a strong healthcare tie here…but we’re not going to include them with the major players for this article.) So, Oracle buys Cerner to go head to head with Epic. Good bet. Like Oracle’s foundation, this is all about the enterprise. They know embedded software systems and they are smarter than Epic on that front by light years. How does this bode for other expansion into healthcare? Likely very little. Oracle has no consumer reach. They don’t develop software or hardware that would be relevant and they have no retail or supply chain to speak of. They see the dollars in the hospital and government market software space and they intend to dominate that category.

Apple: We saved one of the most intriguing players for last. Apple has long played the roll of quasi underdog, if you could possibly frame them in that way. For years they were a joke compared to PC based computers. They were relegated to students and designers. Then came the iPod, iPhone and the rest. Now none of this seems like its places them in a position to impact healthcare, except this little entrant called the iWatch. While still a very niche product, it has steadily becomes a legit diagnostic and monitoring tool. While the Internet of Things continues to explode, the iWatch is consistently the product to take seriously. Does this mean Apple is going to be a big player in some fashion? Not likely. It means the iWatch will probably grow in market share, and it may become more and more mainstream as a tool for primary care physicians. Certainly this all has merit, but it likely doesn’t position Apple as anything more than a clever hardware provider with a helluva network of app developers. This doesn’t diminish the value of this product in any way, but acknowledges is a small piece of a very large and complex tapestry.

we provided that breakdown knowing that many of you havent spent much time thinking about what these companies do at their core and how it applies to healthcare. This framework gives us some insight into what we might expect. Will these companies make an impact in the space? For sure. Will it be “revolutionary”? When we look back in 5 years, or even 10 years, the answer is likely “no.” They will carve out their niche, they’ll push other players to bring their “A” game and all of that will have impact. But, as for transformation of the industry, we are more likely to see the impact at the margins. Most of the advancements and innovations will continue to come from the engine we call “Startups.”

Recent Posts

Inflation is All About Monetary Policy – And Other Stuff Too

Inflation Is All About Monetary Policy – And Other Stuff Too by Michael SchmanskeChief Investment…

Value V Growth

Let’s talk about one of the most abused Stock classifications in public markets. Value vs.…

Professional Blues

We don’t always make rational decisions in the moment, but over time people tend to…