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- Companies have signed a 5-year “strategic alliance” focused on provision of population health management (PHM) services
- Deal will allow Siemens access to bundle Watson Health PHM products and services with Siemens capital equipment and service deals
- In addition, Siemens will offer value-based care consulting services
- Intent of both firms to jointly develop PHM products and services in the future
The Signify View
Siemens Healthineers is the latest major health technology firm to announce an involvement with IBM Watson Health, following AGFA Healthcare being part of the IBM Watson “Medical Imaging Collaborative”, while Medtronic and Johnson & Johnson have partnerships for PHM.
The deal focuses on the growing and increasingly broad PHM market, in which legislators, health providers and healthtech vendors are seeking to shift the focus of healthcare from reactionary to preventative care. While the exact nature and details of the deal have not been publicised, it is a significant move for both companies.
Here are our key takeaways:
Win-win for Siemens Healthineers?
For Siemens Healthineers, the deal offers a number of benefits.
1. The addition of IBM Watson Care Manager product will allow Siemens to offer greater analytics and performance data capabilities to work with Siemens imaging hardware and service, especially premium and high-end segment customers. Differentiation and value-add will be key in the $25 billion global imaging market which has seen intensified competition and price pressure from suppliers in China and Korea.
2. The deal means Siemens doesn’t need to develop its own cognitive allowing a faster time to market for products and services based on cognitive platforms.
3. The alliance will allow Siemens Healthineers to capitalise on the biggest demand from its large customer base today, “value-based care”. Legislators and healthcare providers in North America and Western Europe are pushing to improve healthcare provision by focusing on preventative, personalised healthcare. By using cognitive PHM solutions from IBM Watson, Siemens Healthineers can collect, measure and identify high-risk and chronic patients and offer consulting services on how best to manage care to improve patient outcomes while managing healthcare costs.
4. It will also allow Siemens to continue to adapt its business model towards managed services for imaging equipment (as seen in their recent $154M 10-year deal with William Osler Health System in Canada), a growing market trend being pushed hard by major competitor Philips Healthcare.
Above all, the deal also signals a marked shift for the recently spun-out, newly named Siemens Healthineers. In the past, a strategic alliance would have been unlikely to have occurred when embedded within the industrial conglomerate. However, now it appears the healthcare unit is more progressive and adaptive to market changes.
IBM Watson Continues Surge into Healthcare
For IBM Watson, the alliance with an established global leader in medical technology also has strategic importance for its push into healthcare.
1. Partnership with Siemens Healthineers will add further credibility to the IBM Watson surge into healthcare. Siemens is one of the largest and most respected imaging providers globally, well renowned for technological advancement and high-end medical imaging capability. For IBM Watson, a relatively new market entrant, the deal will open-up an array of opportunities to get Watson Health Care Manager into leading healthcare provider institutions, building installed base far quicker than would have been possible working alone.
2. Increased roll-out of the Watson Health product to Siemens’ customer base also means more data to “feed” the Watson cognitive platform, a vital commodity as competition intensifies and more cognitive computing firms enter the healthcare market.
3. The deal also has significant revenue generating potential for IBM Watson Health. By continuing down the alliance and partnership route, IBM has far greater reach into the healthcare customer base than by going it alone. This is vital for the Watson Health platform “fee-per-use” business model, as building usage volume is directly linked to profitability. In the short to mid-term, IBM gets significant exposure and access to a larger pool of potential customers willing to pay for cognitive computing capability, creating some return on investment for its significant investment in healthcare so far.