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Co-written by Dr Sanjay Parekh
Each vendor has a unique view of the market. One of the deliverables offered as part of Signify Research’s AI in Medical Imaging Service, the Vendor Sentiment Index (VSI), captures these views and assesses how confident vendors are feeling about the overall imaging AI market outlook, their ability to establish pilot sites and their ability to convert the pilot sites to paying customers or secure new commercial deals over the coming months and years.
With a cocktail of global headwinds, including inflationary pressures and the risk of a global recession, geopolitical tensions, and stretched healthcare systems dealing with a myriad of other priorities, AI vendors could be expected to be nervous about the months ahead. However, with recent success in procuring new (relatively large) funding, and shifts in potential reimbursement (e.g., new CPT codes), there are, for some at least, also reasons to be cheerful.
The Signify View
Data for the latest edition of the survey was collected from vendors during Q2 (April 1st – June 30th) and offers insight into their sentiment towards the following quarter (calendar Q3) and the upcoming 12 months. It includes data from 26 AI vendors, ranging from those with strong global prominence to those which are relatively unknown, alongside engagement from informatics vendors representing more than 58% of radiology global market share, including 6 of the top 10 vendors according to Signify’s vendor market share data.
Some of the findings of the Q2 survey are consistent with the results from the Q1 analysis. AI vendors, for instance remained more confident than their imaging IT counterparts. This makes sense. Imaging IT vendors are, for the most part, longer established, have more historical experience of the market, and frequently interact with a broader array of healthcare providers, companies providing support and tertiary services, and other vendors. Their point of view is likely to be wider than that of a smaller AI vendor, which has a more specialised focus on its market. As such, imaging IT vendors could face a larger number of risks or face greater exposure to them compared to dedicated AI vendors.
In addition, young, hungry AI vendors, developing not only new products but entirely new product categories, using hitherto unutilised technology, and attempting to sell their wares to often sceptical and cash-strapped providers need to be bullish. Why would they take on such a challenging endeavour if they didn’t believe their product promised worthwhile returns?
There are also some more pragmatic reasons AI vendors can be confident in the face of incoming global headwinds. While providers still face barriers such as clinical validation and technical and legal hurdles, which are stymieing the adoption of medical imaging AI tools, progress is being made. In June, for example, Optellum’s solution became eligible for reimbursement, highlighting that AI solutions are making progress towards becoming more cost-effective and a viable value proposition beyond efficiency gains. During the quarter, there were also some significant funding rounds, such as Viz.ai’s $100m haul, highlighting that AI vendors aren’t out on a limb, with investors also confident in the future of the technology. This, in turn, bolsters the confidence of AI vendors’ Q3 and beyond outlook, as reflected in the VSI.
One of the major observations, however, was that the overall results for the second VSI survey (Q3 outlook) were more conservative and less positive compared to the first VSI survey (Q2 outlook). This was especially true for vendors’ outlook on commercial deployments, which is likely to be a significant influence behind the gloomier outlook in the market overall.
Another trend that held over from the Q1 index was that vendors were more confident about the coming 12 months rather than the coming quarter. This is understandable. The Q3 period, July, August and September, is, especially in Europe, often slower for businesses. Staff are taking vacations, and major purchases and installations are often delayed until the autumn. As such for the three metrics assessed (overall market outlook, pilot installs and commercial deployments), it is likely that vendors expect less activity over the summer months, ramping up over Q4 as teams get back from the summer holiday period, and events like RSNA give them a chance to promote their products.
As such, an uplift in confidence should be seen in the next survey, for which data is currently being collected, which assesses vendors’ confidence in Q4 onwards. This will prove to be something of an acid test. If confidence remains low, it could illustrate the severity of the challenges ahead, and weigh on the overall market outlook for the year ahead. Adoption of AI in medical imaging has long been forecast to be a measured process, but a lack of confidence in the ability to find pilot sites and secure new commercial deployments will highlight that the rollout will take longer than expected.
Alternatively, the fall in confidence seen in the Q2 index may instead represent a return to “normality” after the overconfidence observed among some vendors in Q1. At that time some vendors were perhaps overly bullish, with the lingering optimism from the last RSNA show, and the recession of the Omicron wave of Covid-19 offering a cause for confidence. However, it appears vendors may have failed to consider the other global challenges affecting the fortunes of the AI and imaging IT market performance.
How significant the impacts of this tempering of confidence remains to be seen. It could represent nothing but a periodic bump in the road, with the overall trend of the market still overwhelmingly positive. Alternatively, there could be several, relatively swift repercussions. For imaging IT vendors, which are juggling lots of different priorities, a lack of confidence in the near-term commercial potential of AI solutions, including AI platforms, could encourage them to increasingly focus on these other areas. They are, after all, also looking to facilitate transformative changes among providers, with cloud adoption, enterprise imaging strategies, and workflow integrations, among the other burgeoning trends.
This could be particularly true given the reduction in confidence of securing commercial deployments for both AI vendors and in particular imaging IT vendors, whose confidence fell 2.3 points from 7.0 to 4.7 for the quarterly outlook, and 1.9 points for the 12-month outlook from 7.7 to 5.8. AI vendors are focused only on selling their AI solutions, whereas imaging IT vendors must focus on selling a wider portfolio, which often offers greater margins. Customers could expect some AI functionality as part of a broader imaging IT deal, or AI tools could be used as an incentive to make a deal, for example, with these types of negotiations relying on the sacrificing of AI’s potential for broader commercial aims.
Despite these nuances, confidence among both imaging IT and AI vendors is, overall, expected to improve in the next survey, with vendors likely to feel more optimistic about both the outlook in Q4 and the following 12 months, in terms of both commercial deployments and pilot sites. There are several factors, from funding to reimbursement that have emphasised the potential of the market going forward. Beyond that, RSNA presents vendors with an opportunity to demonstrate and promote products. The corollary of this expected optimism will be a shrinking of the gap in confidence levels between AI and Imaging IT vendors. Imaging IT vendors are likely to have new AI products at RSNA, while the AI capabilities added to their existing solutions will also have matured, rendering AI a more important part of their offering.
Conversely, if the optimism of imaging IT vendors continues to lag severely behind that of AI specialists, it could either signal a change in strategy and a de-emphasising of AI, or market traction is far slower than previously anticipated, despite AI vendors’ bullishness. Longer-term, other trends could start to dampen vendor confidence, which may represent difficulty in the overall market. Increased competition, for example, could make it more difficult for individual vendors to secure pilot sites or commercial deployment, hurting their confidence. However, the fact that the market can sustain such competition is indicative of its overall health (and depth of investors’ pockets). Another, similar factor ties into the ongoing product evolution of AI solutions. As tools are becoming increasingly sophisticated and focusing on entire care pathways and downstream outcomes, or evolving into comprehensive solutions, for example, less complex tools risk being commodified. As this happens, some AI capabilities may become ‘just’ another feature of an imaging IT system, rather than a stand-alone product with a robust value proposition. Some vendors would see this opportunity very differently to others, resulting in varying confidence levels.
Such concerns can be left for the future. At present, different vendors are drawing different conclusions about the opportunity the market offers. The coming quarters offer a chance for AI to make significant progress, allowing vendors to close out the year on a high. However, if this fails to happen, and vendors still fail to see the upside, 2023 could instead become a year of reflection and renewal instead of growth and optimism.
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This Insight is part of your subscription to Signify Premium Insights – Medical Imaging. This content is only available to individuals with an active account for this paid-for service and is the copyright of Signify Research. Content cannot be shared or distributed to non-subscribers or other third parties without express written consent from Signify Research. To view other recent Premium Insights that are part of the service please click here