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One of the things that I’ve enjoyed most about covering IT management issues for the past 20-plus years has been the evolving relationship between IT organizations and the businesses they support. It wasn’t that long ago when many IT organizations were looked upon as little more than order-takers by business customers while technology spending was generally perceived as an expense, not an investment.
It brings to mind the old saying about buying a pleasure boat: it’s a big hole in the water to throw your money into.
But much has changed over the years as corporate functions have become more automated, businesses have become more efficient and IT spending has gradually been looked upon more as a strategic investment -- particularly when IT investments help make a meaningful impact on a company’s top line or bottom line. Meanwhile, CIOs have become more business-savvy and have positioned themselves as strategic partners with the line-of-business leaders they now work alongside.
To meet these types of changes, long-time technology vendors that have survived industry consolidation, economic downturns and market shifts have also learned to adapt. Lawson Software’s plans to acquire Dallas-based Healthvision Solutions, Inc. is a prime example.
Lawson already has a substantial healthcare customer base, serving more than 500 healthcare organizations representing 4,500-plus facilities. What’s interesting about Lawson’s $160 million cash offer for Healthvision and its parent company, Quodvax Holdings, Inc., is Healthvision’s involvement in two areas: the company’s Cloverleaf integration technology which is used by healthcare organizations to connect their applications within a hospital. Cloverleaf is reportedly used by one-third of North American hospitals and 40% of large integrated delivery networks.
According to a report from The Wall St. Journal, 60% of Healthvision’s revenues are derived from maintenance or subscription fees.
Lawson will also be picking up Healthvision’s Health Information Exchange (HIE) platform. This is potentially the most lucrative part of the deal for Lawson. The platform is used to connect systems used by hospitals, clinics, physician groups, laboratories, pharmacies and other healthcare services providers. Most healthcare information systems have trouble communicating with one another because they’re typically built on different technology platforms. HIE systems make it possible for hospitals, physician groups, clinics and other players to share patient and other information more easily.
In early 2009, the passage of the American Recovery and Reinvestment Act earmarked $19 billion for healthcare information technology spending. Much of this spending is tied to incentives for hospitals, clinics and physician groups to adopt electronic medical records systems. To date, EMR adoption rates have been slow as healthcare providers have struggled with the costs and potential short-term disruptions to operations. But the upside potential for EMR and HIE systems is huge.
Like other enterprise software vendors, Lawson has struggled recently. Its second-quarter profits fell 9% and its non-GAAP EPS estimates for the third quarter ending in February are below Wall Street’s 10 cents per share estimates at 7-to-9 cents per share.
The Healthvision deal is forecast to add $60 million-to-$70 million to Lawson's annual revenues and 6-to-7 cents per share in non-GAAP profits in the first twelve months after closing. If healthcare IT spending continues to grow as forecast, Lawson could be looking at even healthier returns.
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