On August 5, Cerner announced that it would be acquiring Siemens AG’s Healthcare Information Technology business unit. The blogosphere quickly lit up, with various experts weighing in on the long-term impact of the acquisition. More importantly, existing and prospective Cerner and Siemens customers began to wonder what the implications would be for them. We will discuss three scenarios and the impact of each on these customers.
Status Quo and Cohesion
In the first scenario, Cerner follows through with its commitment to both “support and advance the Soarian platform“ for Siemens customers for at least the next decade. Assuming Cerner is able to merge employees of the two organizations into a cohesive unit, existing Siemens customers would feel little to no immediate impact from the acquisition. While they will need to have a 5- to 10-year business plan in place to address the potential sunset of their Siemens products, short-term support of the systems will continue. Prospective customers in the Siemens pipeline would likely need to reevaluate how they should proceed. Cerner customers should see no short-term impact to their support, and in the long term, should benefit from the newfound R&D resources of the expanded organization.
While the first scenario is ideal, very few acquisitions that require the integration of two cultures pan out this way. One need look no further than the struggles Allscripts, GE Healthcare, and McKesson experienced with their various acquisitions to see that integrating staff from multiple organizations often leads to layoffs, culture clashes, product delays, and confused go-to-market strategies. If the Cerner acquisition follows this path, expect both Cerner and Siemens customers to experience at least some issues in the next few years. These issues could include a decline in customer service, ever-changing product roadmaps that affect release quality, and uncertainty about the long-term sustainability of existing products (particularly related to Soarian and even within the aforementioned decade-long commitment time frame).
To the Victors Go the Spoils
Despite public statements of maintaining Soarian products for the next decade, Cerner may be less apt to truly support a client base that doesn’t use its core products. Marc Naughton, Cerner Executive Vice President and CFO, has already signaled that Cerner did not purchase the Soarian product line “for solutions or for their intellectual property relative to their existing platforms“ and that Cerner is still committed to Millennium as its “go-forward platform.” As such, Siemens customers may feel pressure to transition to the Millennium products within a few short years as R&D dollars for Soarian products dry up. Given Cerner’s preoccupation with competing head-to-head with Epic, Siemens customers may also expect discounts to encourage the transition to Millennium and prevent them from jumping to Epic.
The flip side is that Cerner customers should reap the benefits of the acquisition. Siemens brings a large amount of R&D dollars and staff with expertise in device integration. With a strategic global alliance between Cerner and Siemens’ parent company that includes a preliminary 3-year term and $50 million investment from each organization, the integration efforts will initially focus on laboratory automation and cardiology information systems. Similarly, Cerner could build into Millennium some of the superior features found in the Soarian products, particularly finance and revenue cycle functionality.
The reality is that both Cerner and Siemens customers will likely see a bit of all of these scenarios. Both client bases will experience at least a short-term impact on services and product roadmap decisiveness, as Cerner’s attention is initially focused on how to execute the acquisition and allocate newly combined resources. Siemen’s R&D expertise and global client base should help to rejuvenate Cerner’s international presence and create new opportunities. Features from the Soarian products will likely be incorporated into the Millennium products as Cerner begins to move away from supporting Soarian and transitions all customers to its flagship product.