KUHN CAPITAL Wednesday, December 13, 2017
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Rising Demand for On-Demand Computing

9/29/05

Starting about five years ago we saw a freshet of failed attempts to deliver application functionality via the Net. The problem wasn’t so much technical as a failure of imagination: customers just didn’t trust a remote source for crucial business processing.

But thanks to the pioneering success of Salesforce.com and to the willingness of their SME client base to experiment, now the on-demand model is clearly established at least for sales productivity and CRM. A recent IDC study claims that this segment generated about $300M in 2004 sales and that revenue growth is “strong”.

Simultaneously, we’re seeing on-demand computing beginning to surface in other industries as well. Perhaps surprisingly, one newcomer is healthcare, where most IT is otherwise antediluvian. But the reasons for healthcare’s interest are different. Instead of offering an ability to serve highly distributed users like salespeople, healthcare on-demand computing piggy-backs on the already highly-connected world of health care providers and payors.

Going back to EDI days, they’ve been linked at the hip by a mutual need for constant, high-volume transaction processing. That processing also requires complicated interactions with insurance coverage and medical procedure coding databases, data best supplied by a third-party’s centralized clearinghouse. So this industry is used to depending on online data and moving application access to the Net is only an incremental step. In addition, healthcare is also under cost pressure as is Salesforce.com’s SME user base. On-demand offers these cost-sensitive users the opportunity to replace fixed software installation costs with variable ones, and yet stay up-to-date.

In sum, we expect great things from the on-demand model, and some of them will come from vendors serving the healthcare market. Contact us if you’d like to chat about how to use M&A to exploit opportunities in this field.


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