Apple’s recent announcement of a new series of iPads, Macs, and the newly “free” operating system and productivity applications reminds me of Microsoft in the 90’s.  Microsoft beat up Netscape and almost anyone with a utility application by including a “good enough” free version within their operating system. Today, Apple has a seamless user experience, including hardware, and is using it to lock Microsoft out of the tablet market.  Do we expect Apple to knock Microsoft Office out of companies everywhere?  Not likely, but Apple’s ecosystem will push Microsoft back in the high-end tablet market, at least for a while.  It’s a relevant lesson for a company in almost any industry.

Digital Health is going through radical shifts in technology and market requirements driven by “Obamacare” and the advent of Cloud Computing.  While the hospital IT market is concentrated in the hands of a few large, software companies, physician’s offices are up for grabs. No vendor has dominant market share and legacy companies are struggling to make the transition to Cloud Services from their current, client-server model.  Healthcare IT companies have scrambled to build Electronic Health Records (EHR) technology, but that’s only a small part of the required solution.  Companies that can provide one-stop shopping for physician’s IT needs will likely be the winners. Delivering these services through the Cloud will allow doctors to avoid having an IT department to support their practices, a recent trend we have seen accelerate in similar markets.

In the fragmented market of providing computing solutions for physicians, athenahealth, Inc. (NasdaqGS: ATHN) is currently the cloud computing leader, offering an integrated suite of products and services. Even athenahealth, however, faces strong challenges from smaller, private vendors with easy-to-use, customer-friendly product suites that promote cloud-based delivery, support multiple user platforms, have Apple-like user interfaces, and greater flexibility in how the customer purchases. Several private equity investors have identified the same market opportunity and are combining legacy technology companies to address the market shift.  The combination of Vitera/Greenway is one such example.  That strategy may build critical mass quickly, but the challenge these companies face will be navigating the path to a cloud-based solution.

It’s our bet that only a handful of players will emerge as winners as the industry consolidates and buyers look to acquire what they can’t build quickly for themselves. Smaller point solutions may make great investments, as long as the exit strategy and timing is closely watched.  Winners will have a seamless and flexible user experience encompassing cloud delivery, a great interface, simple installation/service, and won’t try to force users into a “one-size fits all” package.

Solving as many of a customer’s problems as possible in a convenient, cost-effective manner is always a winning strategy. Technology is important, but simple, customer-friendly solutions drive user adoption and growth.