Sectra Growth: The Super-Trouper of Imaging IT?

Publication Date: 31/05/2018

Written by

Steve Holloway
  • The Swedish firm Sectra reported annual growth of 6.4% for Imaging IT, with fourth quarter growth of 9.4%.
  • Imaging IT revenues grew to 1,032.3 SEK million (117.2m USD) for the total year
  • Strong results follow news of a new deal for the firm in New South Wales Health in Australia and strengthening positions in the USA and European markets
  • Capability in radiology and digital pathology has aided some of Sectra’s largest deals to date

For a relatively small vendor in the global imaging IT market, the continued growth of Sectra’s Imaging IT business over the last two years may have come as a surprise. Add to that a run of new business deals with high profile customers and the Swedish firm is starting to turn heads at its much bigger rivals. So why has Sectra succeeded where others have struggled? And where does the firm go from here?

Below, we look at the strategy behind Sectra’s success in Imaging IT and predict where it will head next.

Gimme! Gimme! Gimme!

An initial glance of Sectra’s portfolio may not be that enlightening when it comes to uncovering the key to its recent performance. Probably most obvious is the breadth of offering, with products spanning breast imaging, cardiology, digital pathology, orthopaedics, medical education, radiology and enterprise platforms, though other firms of a similar size also boast such breadth. It is only when you dig into the offerings of each, does the strategy emerge; a commonality of platform in all applications (e.g. VNA, image exchange, universal viewing), while also offering speciality tools and software in each clinical area.

This combination allows flexibility in addressing varying customer needs. For example, in markets where broader enterprise imaging IT capability is required across clinical departments, using the same central platform elements allows commonality of user interface, storage and administration. This is particularly key in large regional provider deals where data siloes are common. Sectra has also long realised that it does not have the R&D or acquisition firepower to compete with the largest vendors or specialist best-of-breed vendors. Instead, the firm has focused its attention and resources on development of the central platform feature set and the ability to integrate with third party application partners.

While this can limit its ability to compete in some of the most complex tenders, it has not limited growth for the firm. Focusing development resource on evolving its own platform, rather than making multiple acquisitions, has avoided interoperability issues between its own portfolio, something that has plagued much larger vendors with a long history of M&A. This is especially evident in Sectra’s approach to Digital Pathology; rather than make major acquisitions in scanner hardware or analysis software, Sectra instead focused on being the central IT platform that connects the various multi-vendor fragments of the market together – thus enabling interoperability with its more extensive radiology portfolio as well.

Furthermore, by limiting its in-house capability to specific core functionality, it has done well in small and mid-size providers where advanced need is more limited. Over time, the firm has also been able to scale up, rolling out radiology and pathology implementations in regional network deals. By actively targeting niche and emerging segments (e.g. dedicated breast imaging in the USA, digital pathology in Europe) the firm has also been able to build a more diverse customer base. This had led to success in both the outpatient clinic segment (with strong growth in the Breast Imaging IT market in the USA) and national network deals (such as the recently announced digital pathology network in the Netherlands).

Take A Chance On Me

From a market perspective, Sectra’s progression has been tightly controlled, based on essentially three core strategies.

Firstly, it has used its locality and strength in Sweden and other Scandinavian markets, often viewed as vanguards in health IT adoption, to establish reference sites for its platform and solutions with regional networks and large academics. These are then used as examples of its ability to handle more complex clinical environments, or in showcasing enterprise capability at scale.

In doing so, the firm has expanded and scaled up to establish notable presence in regional health systems or hospital clusters in the Netherlands, UK, Portugal, USA and Australia. It has also used its close relationships with customers in Scandinavia as a test bed for products, especially with regards to Digital Pathology and partnership for use of Artificial Intelligence in imaging IT. This local approach also allows Sectra to refine business models and technical specifications before launching to broader geographies.

Secondly, the firm has also been selective in which markets to target, with specific products. In the US, where competition of the largest enterprise imaging IT deals is fierce, it has still managed to carve out growth by actively targeting Breast Imaging IT to the large outpatient centre market. In other geographies such as Europe and Oceania, the combination of radiology and pathology has been more compelling. Yet, by using the same self-evolved platform underpinning all types of clinical solution offered, it has opened the possibility for selling a broader array of solutions to its installed base.

Thirdly, by limiting the focus of its expansion to fewer markets, it has maximised its chances of winning new business. While this does limit its potential for explosive growth, it has also limited the need for major investment in local sales operations and services in markets where it will struggle to compete, or where market volatility is much higher.

The result? Consistent, solid growth, an expanded customer base in new clinical areas, as well as new opportunities to drive growth from existing customers too. So what next?

The Winner Takes It All

While such solid performance in an increasingly consolidated and competitive market should be applauded, Sectra will need to overcome multiple hurdles to continue to grow and compete with the largest vendors in the sector.

Perhaps most challenging is the increasing focus from some health providers to reduce the number of vendors in their supply chain and move towards longer-term, managed service contracts. With decision making often moving increasingly further from the clinical realm into the executive suite, the largest vendors boasting modality imaging, clinical care devices and a much broader portfolio of software and professional services will clearly have an advantage. Moreover, as value-based care models increasingly take hold, price competition will intensify, with the largest vendors in more viable position to swallow shrinking margins.

From a geographic perspective, Sectra’s growth will also be limited by demand in its core markets, almost all of which are maturing and consolidating; none of its biggest markets for core imaging IT (excluding Digital Pathology) in the Nordics, Netherlands, USA, UK and Oceania are predicted to see a 5 year CAGR above 5%; most will be flat. Instead, it has a choice: either try to expand into new geographies, which will take significant investment and time, or continue in its core markets to chip away the installed base of its competitors, while adding new product and services to its existing installed base.

Ultimately though, we are seeing a polarising shift in the market. The strategies of the larger vendors are focused on becoming central clinical IT platform partners to customers – that we call Agnostic Clinical Enterprise (ACE) platforms. They will also then act as contractors, building a network of smaller, best of breed partners to offer specific tools, analytics, AI or services. Consequently, smaller vendors are struggling to compete in bigger deals and over time they will look to develop best of breed capability and partnerships with the leading platform providers.

Sectra, as a relatively small vendor, will find that the more expansive portfolios and resources of the bigger healthtech vendors will increasingly suit the wants of health providers over the coming decade. This threat will probably require a shift in strategy towards a more best-of-breed capability, perhaps around integration and workflow for digital pathology into broader imaging, a market it is making significant progress in and well ahead of the curve. Yet, when all is said done, it’s hard to not be impressed by the recent performance of a Swedish minnow up against some of the largest healthtech vendors on the planet.

Super-trouper? For now, at least.

About Signify Research

Signify Research is an independent supplier of market intelligence and consultancy to the global healthcare technology industry. Our major coverage areas are Healthcare IT, Medical Imaging and Digital Health. Our clients include technology vendors, healthcare providers and payers, management consultants and investors. Signify Research is headquartered in Cranfield, UK.

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