In case you didn’t see it, Bloomberg had an article last week that assessed the possibility of the ever acquisitive Oracle (some 40 acquisitions in last 4+ years) making a move on healthcare by acquiring Cerner.

While I normally focus on consumer-facing apps, can’t help but comment on this story as I know Oracle quite well (and many of the companies it acquired) from my days as an IT analyst leading the Enterprise Group for the manufacturing centric analyst firm, ARC Advisory Group.

So is this possible/probable?

Well, yes and no for the following reasons:

Yes

• Oracle is very savvy at making acquisitions work, no one does it better in the enterprise software market than Oracle.
• Oracle, unlike major competitor SAP likes making acquisitions, its core to their growth strategy.
• They need new markets to achieve target growth projections as their existing markets, while still having opportunities, are mostly at the mid-tier and lower levels and will not be enough.
• Healthcare sector is increasing spending on IT, faster than most other large market sectors.  It is also a very large market.
• They have existing presence in healthcare as most large healthcare enterprises are already running on top of Oracle databases.

No

• Healthcare is a difficult, fragmented market with few large entities (target customers) among providers.  There are no GMs or Fords or Dow Chemicals to conquer, therefore cost of sales will likely be high.
• Healthcare is full of regulatory requirements and lots of customization of software.  Oracle is not a fan of customized solutions and for years has aggressively promoted an out of box solution approach.
• This sector has not seen much consolidation – there are far too many EMR solutions today.  Maybe a big play by Oracle will help to rationalize the market, but right now it appears too early for them, unless of course they acquire a couple of leading players serving different tiers of the market e.g., buy both Cerner and athenahealth.
• This market has yet to demonstrate that it is truly a global market, which limits growth to North America for the time being.  Granted, that is still a big market, but its not like manufacturing where distributed product development and manufacturing has occurred for years and systems, process and software has been developed to support such activities.

Opinion:

Oracle will make a play in the healthcare market as it is one of the few markets remaining that does not have a large, true enterprise software vendor of the likes of Oracle or SAP (Note: SAP has seen some success in the native German healthcare sector but little here).  A company like Cerner is an obvious choice, but to be successful, they’ll need to make more than one acquisition to develop a significant presence.  Oracle may also come at it from the health plan side, though Trizetto, the dominant player here was recently acquired and unlikely to be available, unless of course Oracle pays a princely sum.

Oracle will make a play, but it won’t just be Cerner, or similar large EMR vendor, it will be several.