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Epic Systems Corp. plans massive cloud data center

After decades of ignoring the cloud, Epic Systems Corp. reverses course by announcing the release of a massive cloud data center. Analysts and competitors weigh in.

Epic Systems Corp. unveiled at its annual user meeting a huge step toward cloud EHR hosting. While it's an about-face for a company that has long repudiated the cloud as a business model, outsiders see it as a smart, if somewhat belated, move for the Verona, Wis.-based industry leader.

Competitors, of course, will be scrambling to cope with the prospect of Epic dominance in yet another market segment.

"Epic's foray into cloud EHR is a welcome move," Shruthi Parakkal, connected health analyst for San Francisco-based consultancy Frost & Sullivan, said in an email to SearchHealthIT. "It will help the company expand to not only small to mid-size hospitals in the U.S. but to international markets such as in Europe, where it's yet to become a market leader."

Epic Systems Corp. looks to new markets in cloud

Parakkal notes that the privately held company leads both the hospital and ambulatory enterprise-only EHR sectors with 15% to 20% market share. Epic's EHR applications are expensive, so the market for Epic's main customers -- large hospital systems, and academic and research groups -- is by now largely saturated despite what looks like a small piece of the market by percentages.

"This particular end-user market is highly penetrated, and the need of the hour is to focus on small-to medium-sized hospitals with [fewer] than 200 beds," Parakkal said. "The availability of budgets and IT resources of these hospitals are fairly low, and most of them are keen to have cloud-based or SaaS [software-as-a-service] EHR applications. Apart from this, a few large hospitals also want a hybrid model -- partly on-premises and partly cloud."

Rival athenahealth skeptical

Meanwhile, some of Epic's main rivals, including EHR industry No. 2 Cerner Corp., Allscripts Healthcare Solutions Inc., and athenahealth Inc., already have cloud-based offerings and are ahead of Epic in the hospital market outside of Epic's blue-chip customer base.

Athenahealth, which is entirely cloud-focused, is known for its executives' public targeting of Epic for allegedly resisting the trend toward open standards and interoperability associated with cloud computing as well as Epic's refusal to join the CommonWell Health Alliance, a multi-vendor interoperability group. Cerner executives have also castigated Epic for similar reasons.

New advances in computing power, virtualization, and high-speed connectivity have combined to make possible a hosted option that meets our customers' high performance standards.
Stirling MartinEpic Systems Corp. SVP

In a statement provided to SearchHealthIT, Dan Haley, athenahealth vice president of government and regulatory affairs, criticized Epic's planned new approach.

"There will never be true interoperation in healthcare until a critical mass of health IT vendors abandon the deficiencies of the enterprise software model and embrace the true power of the cloud," Haley said. "While remote data hosting may reduce capital expense for clients, it does nothing to rectify the systemic impediments to information exchange created by traditional [multi-instance, closed, point-to-point] health IT infrastructures."

Epic executive speaks optimistically about cloud

Epic, breaking with its traditional practice of refraining from public utterances about business developments, released comments at the request of SearchHealthIT attributed to Senior Vice President Stirling Martin. Parts of the statement were also used by VentureBeat when it first published the story about Epic eyeing cloud hosting, along with an aerial photo of the new data center complex the company is building in Verona.

Martin's statement said that, "Epic actually has its roots as a database and hosting company, even before it was called ASP, SaaS, or cloud. Since then, we've worked with some of the best IT shops in the industry to support their systems. New advances in computing power, virtualization, and high-speed connectivity have combined to make possible a hosted option that meets our customers' high performance standards. 

"While our 'cloud' actually lives in a state of the art underground data center, it provides the same benefits -- allowing a flexible future for our customers who may seek a cost-effective alternative to internal investments in infrastructure and technology."

Strategy could work

For Parakkal, this strategy looks to work for Epic, even as "their product line expansion is coming late in the game compared to its competitors."

"However, this expansion will help Epic in the long run by maintaining its leadership in the EHR market," she said. "It will also benefit Epic's strategy of targeting the community hospitals market as the next step in growth opportunity."

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