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Signify Premium Insight: Just Because You’re Paranoid… Confidence and Competence in Medical Imaging AI

There is sometimes a fine line between confidence and delusion. Treading this fine line is one of the perpetual considerations of vendors seeking success in medical imaging AI. Confidence is necessary for any vendor trying to make inroads in a young market, after all, if a vendor is not confident about its own prospects, how can potential customers and partners be expected to ever rely on it?

This optimism can, however, sometimes verge into delusion. A vendor may have some modicum of academic triumph and glibly convince itself that it will translate to commercial success, a vendor may likewise fool itself into thinking commercial deployments are in the bag once pilot deployments are secured. Another more basic error is to assume that the extent of a vendors’ efforts, and the technical sophistication of its solution, directly correlate to its utility.

The Signify View

Such considerations are particularly pertinent at present. One of the deliverables in Signify Research’s AI in Medical Imaging Service is its quarterly Vendor Sentiment Index (VSI). This research quantifies the confidence levels of both independent software vendors and imaging IT vendors offering AI solutions over the coming quarter and the coming 12 months. In the latest edition of the survey, which quizzed vendors for their outlook for Q2 (April to June), confidence levels were high.

Signify Premium Insight: Confident Where Competent: Fourth Quarter Vendor Sentiment Analysis

This Insight is part of your subscription to Signify Premium Insights – Medical Imaging. The content is only available to companies that have subscribed to this paid-for service. To view other recent Premium Insights that are part of the service please click here.

As 2022 ends, medical imaging AI vendors are looking ahead to 2023, and planning to implement and execute the next stage of the strategies they carefully constructed throughout the passing year. There are some challenges that these vendors will be pleased to put behind them, with the worst of the Covid-19 pandemic, and the steepest increases in inflation, for example, hopefully in the rear-view mirror.

However, there are still numerous hurdles impacting vendors, and the providers which they supply, alike. While increases in the rate of inflation may be slowing in many markets, the rate of inflation itself is still high. Providers may not be as impacted by Covid itself, but its fallout, the backlog of elective procedures, the fatigue and exhaustion of staff, and the budgetary considerations are as difficult to manage as ever. For AI vendors, consolidation in the market is coming and funding, especially early-stage, is becoming ever harder to come by.

The Signify View

Against this backdrop, it would be understandable for vendors serving the medical imaging market to be feeling bearish. However, as illustrated in Signify Research’s Q4 Vendor Sentiment Index – one of the deliverables of the AI in Medical Imaging Market Intelligence Service – both independent software vendors and imaging IT vendors are relatively upbeat about their prospects for both the coming quarter and the coming year measured by the index.

For this Q4 edition, which saw vendors surveyed between October to December 2022, about their confidence in Q1 2023 and the coming 12 months (January 1st – December 31st, 2023), some findings were consistent with previous surveys – independent software vendors remained more bullish compared to their imaging IT peers, over both the coming three and 12 months. This is understandable. However, there was some convergence between their confidence levels over the quarter.

There are several reasons for this convergence. One of the reasons independent software vendors have typically been more confident than their imaging IT counterparts is likely down to a mix of necessary optimism as well as a touch of naivety. These vendors, often young start-ups trying to commercialise a technological development, in a new market burdened with considerable hyperbole, inflated expectations, scepticism and suspicion in equal measure, needed absolute belief in their solutions, and confidence that their solutions offered a product would ultimately be valued by providers.

However, there are more tangible barriers too. Factors that are necessary for any medical device to be sold such as regulation, budgetary allocation and reimbursement are still very real hurdles for these vendors to tackle. The scale of these challenges, already well-known to long-established imaging IT vendors which have fought to establish share in other markets, may only now becoming truly known and appreciated by the AI vendors. This comes as radiologists and key provider stakeholders are becoming more discerning. Amidst such scrutiny, ISVs are realising that their technology alone is not enough without, for example, more sophisticated workflow capabilities and clinical and economic validation studies. As the ISVs are more deeply ingrained in the market, these challenges are becoming more apparent. This shifting sentiment is illustrated by the changes in results of the VSI survey over time. Throughout 2022 AI vendors’ market outlook for the next quarter has held steady at between 6.9 and 7.1 (out of 10), IT vendors’ confidence levels have fluctuated more, seeing a low of 5.2 in Q2 amidst macroeconomic headwinds and other factors, before climbing to a year-high of 7.2 in Q4, overtaking AI ISVs for the first time.

Successful is as Successful Does

IT vendors are also more confident than they were in previous quarters. This confidence will have no doubt been bolstered by the emergence of market leaders in AI which are making considerable commercial inroads into the market. This will be particularly true for imaging IT vendors with AI orchestration platforms, an increasingly attractive capability as vendors look to solve the last-mile challenges of algorithm deployment and integration. Further, the increasing success of AI’s market leaders will also improve the confidence of imaging IT vendors with a considered enterprise imaging strategy. Most of these vendors consider AI an important component of those strategies, so seeing AI succeed elsewhere will be heartening.

Another major factor, which will have improved the confidence of ISVs and imaging IT vendors, is RSNA. The show is a chance to see how rapidly the AI market is growing, how it is becoming an ever more important technology across medical imaging, rather than being constrained to one small niche area. What’s more, again bolstering the confidence of IT vendors and AI vendors offering their own platforms, are the vendors announcing new and expanded solutions that will be available to other platforms, therefore also inadvertently bolstering other vendors’ AI offerings.

This optimism, however, may be short-lived. While RSNA saw an increase in the number of medical imaging AI vendors in attendance, with new logos in the mix, the trend to consolidation has already started to accelerate. In 2022 there were six acquisitions and two exits from the market, with a greater number expected next year. For a few market leaders, this market consolidation could be a source of confidence, for many more, however, it is likely to lead to growing pessimism across 2023.

Pilots Landing Deals

Another notable trend to emerge out of the latest VSI survey was falling confidence in the deployment of pilot sites for both AI vendors over the coming year, with confidence dropping slightly from 7.1 to 7.0 in the coming quarter, versus the coming 12-months. This could outwardly be read as a bad omen, with providers more focused on workforce shortages, staff burnout, and clinical challenges, rather than expending effort on experimental deployments of new technology. However, this is a one-dimensional interpretation. While it may be a factor for some providers, another, more positive reason is that in some cases, AI vendors have progressed beyond the stage in their development where pilot sites are required. Instead, these vendors are now directly targeting commercial contracts. These vendors have enjoyed commercial traction, so can demonstrate a return on investment from using their tools and have a growing portfolio of positive feedback.

Another reason for this diminishing importance of pilot sites is that vendors are “locking-in” commercial deals quicker. They have growing confidence in their tools and trial periods are increasingly reliant on some level of commercial commitment from providers.

The overall market outlook is expected to stabilise, global economic risks are now built into both AI and IT vendors’ expectations for the coming year, and with RSNA over, opportunities for new disruptive partnerships and products are reduced for at least a quarter or two. There is predicted to be a slight downturn in confidence as some of the broader macroeconomic conditions bite, but also as industry-specific challenges come to the fore. For example, for vendors looking to trade in Europe, the transition to the new MDR approval system, and the delays for approval already being experienced by some, could significantly hurt the confidence of several vendors.

Ultimately, every challenge overcome is another reason to be confident for both AI and IT vendors. Each type of vendor will have to fight its own unique battles over the coming 12 months. For some AI vendors, it will be the first time they are truly tested, and, depending on their aptitude (or naivety) could result in significant swings in confidence. For IT vendors meanwhile, such travails are less of a novelty, and the knowledge that they have overcome in the past will give them quiet assurance they can overcome again. With this resolve, watching the market deliver more success stories will merely be a succulent addition. Vendors will be embattled over the coming year, but those that legitimately have reasons to be confident, such as successful pilot sites, good commercial traction, huge funding rounds and reimbursement, can be. The vendors with none of those attributes meanwhile, should similarly be far less brazen.

About Signify Premium Insights

This Insight is part of your subscription to Signify Premium Insights – Medical Imaging. The content is only available to companies that have subscribed to this paid-for service. To view other recent Premium Insights that are part of the service please click here

Signify Premium Insight: The Power of Perspective: AI Vendor Sentiment Index Q2

This Insight is part of your subscription to Signify Premium Insights – Medical ImagingThis 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 ResearchTo view other recent Premium Insights that are part of the service please click here.

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.

Summer Slowdown

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.

Cooling Confidence

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.

Year-End Celebrations

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.

About Signify Premium Insights

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 ResearchTo view other recent Premium Insights that are part of the service please click here