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Signify Premium Insight: Clock already ticking for Oracle Cerner on i.s.h.med

This Insight is part of the Signify Premium Insights (SPI)-Digital Health service, which will launch on 9 January 2023. From that date, this and all SPI-Digital Health Insights will be available only by paid subscription. Click here for a free one month trial of this service. 

Software multinational SAP’s recent announcement that it would cease supporting Oracle Cerner’s i.s.h.med EHR solution by 2030 requires a swift and decisive response from Oracle Cerner. Even the company’s most loyal customers – and there are many – will need clarity on its plans for i.s.h.med. They will need to know whether Oracle Cerner will invest further in a solution which has served it well for several years, and which continues to secure big hospital contracts in Europe. Or they will need to know if Oracle Cerner plans to let i.s.h.med go quietly. 

Oracle’s recent acquisition of Cerner adds a new, potentially uncomfortable, dynamic to the equation. Oracle and SAP are fierce rivals in enterprise resource planning (ERP).  

The Signify View 

SAP’s decision to step away from i.s.h.med comes as Oracle Cerner grapples with several other challenges in its business. In EHR, chief among them is how to arrest a steady loss of US market share to Epic. More pressingly is how to fix problems with its flagship Millennium EHR solution on a multi-billion dollar contract for the US Veterans Association (VA). We have written recently about the challenges facing Oracle Cerner (see this Insight) around these key areas, and the reputational and revenue risks they pose. 

On a broader level, the Oracle Cerner relationship is still bedding down and integrating following the acquisition earlier this year. And strategically, the company must address its wider plans for cross-selling, and how to position itself in ERP (where it is a direct competitor with SAP). 

But i.s.h.med is a successful and highly regarded product for Oracle Cerner with a strong, substantial and loyal international customer base. It is a bright spot in a challenging environment. The company will not want to relinquish that hard-won position.  

Positivity and Defiance  

That said, Oracle Cerner is in defiant mode, and the mood music around i.s.h.med remains overwhelmingly upbeat. Executives insist the company is committed to a solution that it has spent so much time and money developing over the years. It may sit behind Millennium in Oracle Cerner’s EHR solution pecking order, but i.s.h.med has established a solid international niche – portable and easily integrated into local hospital environments as a key selling point. 

Oracle Cerner recently completed a new i.s.h.med installation for Swiss hospital group AMEOS, one of its long-standing customers, in a hospital in Germany. The European country is fertile territory for i.s.h.med, which has an installed base of around 250 hospitals there, by far its biggest market. Cerner insists the last year has been strong for the product in Germany. 

German Hospital Information System requirements, particularly in relation to the core EHR, are typically less demanding than in other European countries, and an administration-focused solution like i.s.h.med aligns more closely these requirements in Germany compared to Millennium. 

There is still a lot of upside potential in Germany for i.s.h.med (as well as, to a lesser degree, in other countries in Europe and even the Middle East). We wrote in a recent Insight (see here) about the country’s 4.3B hospital digitisation initiative, in which EHR vendors must meet specific criteria on product development and functionality in order to address the needs of each of the 11 pillars of the initiative. Cerner has invested in developing i.s.h.med so that it meets the funding criteria for some of the 11 pillars, and the results of this will be felt over the next couple of years. 

Given the positive prognosis for i.s.h.med, is there any reason why Oracle Cerner would not see a future, and continue investing, in the product? 

Elephant in the Room 

Well, maybe. Oracle’s acquisition of Cerner in 2022 has brought the company into direct working contact with its ERP rival SAP. This will be uncomfortable and possibly untenable, for both multinationals. It is hard to envisage a situation where Oracle Cerner and SAP could harmoniously co-exist around i.s.h.med for the next seven-plus years.  

In that sense, Oracle Cerner is likely to already have planned to remove SAP from the i.s.h.med equation at some point well in advance of the SAP 2030 end-of-support date, even if the specifics of how this would be done were some way from being established. And, although Cerner people have not said as much, it might anyway see a future where i.s.h.med leverages Oracle, rather than SAP, technology. Seen through that lens, SAP’s decision to walk was likely just slightly ahead of Oracle Cerner itself announcing an i.s.h.med future without SAP. 

Waiting to Pounce 

For every day that Oracle Cerner mulls over what to do with i.s.h.med, and for every time an EHR request for proposal (RFP) now comes from a hospital in territories where the technology is used, Oracle Cerner’s position will weaken slightly. It will slowly cede the initiative to its EHR competitors.  

For all Cerner’s bullish (and largely justified) proclamations on i.s.h.med, its competitors are framing their counter arguments. EHR rival CompuGroup Medical (CGM) – to whom Cerner recently sold its Medico EHR line with the loss of 250 German hospitals – detects a nervousness among i.s.h.med’s existing German customers. There are rumours that some of them have explored the possibility of using Hospital Futures Act (KHZG) funding to purchase a replacement for i.s.h.med, although their efforts to date have been unsuccessful. If true, it does, however, send a strong message that loyalty to i.s.h.med will count for little unless Oracle Cerner can provide a clear road map for the product soon, and fend off the competitive arguments. 

CGM will be one of several EHR vendors waiting to swoop should Oracle Cerner blink on i.s.h.med, and is already forging close ties with SAP. It signed an agreement with SAP shortly after SAP said it would be exiting i.s.h.med, and CGM has its own ambitions to secure a greater slice of the German hospital EHR pie, especially through KHZG. Rival vendors are already lining up counter arguments to try to persuade some of Cerner’s customers to make the switch from i.s.h.med. It is not hard to imagine both CGM, Dedalus and others rubbing their hands at the idea of any uncertainty around i.s.h.med. 

Challenge, but no Crisis 

SAP technology will stop supporting i.s.h.med in seven or so years. Oracle Cerner does not, however, have the luxury of time to decide which direction it wishes to take its tier-2 solution. 

Its customers are already asking what next for i.s.h.med, and its competitors are waiting to take advantage of the uncertainty. As it tries to address the immediate difficulties around Millennium on big US public contracts (which is a huge drain) and as it searches for ways to wrestle back some EHR market share from Epic, Oracle Cerner will be strongly advised not to drop the ball on i.s.h.med. 

For a company of Oracle Cerner’s resources and reach, the current situation is certainly a challenge, but it is not a crisis.