Open letter to Google

Recently, the CEO of Monster indicated that Monster was looking at every opportunity to realize stock holder value. The quick translation is that they are exploring the possibility of being sold.

The current market cap for Monster is around 1B with the stock trading at 9.33.  We have seen up ticks in the job market without any significant impact on the stock price of Monster.

Monster, Execunet, Careerbuilder and Dice are the odd men out.  Each has its own problems and they all missed the boat. The reality is that Linkedin, Facebook and Twitter are the current market places for connection to your next job or recruiter for the next job.

 Job search is ideally suited for the social media platform.   A candidate needs to brand him/herself; the recruiter or hiring manager needs to be in the market to ‘buy’ that particular brand.  These social media platforms are ideal venues for the creation and definition of our brand.   If we are looking for a job, search for the recruiter or hiring manager who will relate to your brand.

All is not lost for investors in Monsters, however.  If Larry Paige of Google wants to become a serious competitor to Facebook with Google+ and at the same time take on Linkedin, Larry has the perfect opportunity through the acquisition of Monster, at a reasonable premium, which is nothing more than petty cash for Google.

What does Google get for their money?  They get millions of users who can extend their brand beyond their dry resume; they get an application that they can adopt into their existing framework; they also get a list of companies that can be invited to post jobs at no cost.  Revenue will come from advertising and other promotional activities.  

Google+ in one move can outflank both Facebook and Linkedin. 

Larry, just something to think about…

Time for Google to acquire Web MD

The time has come for Google to take a serious look at purchasing WebMD. I thought WebMD was a great buy a couple of years ago when the stock was in the low 20’s.

In the last 12 months the shares have reached a high close to 60. Over the last few months the stock has been languishing in the low 30’s and the sharks are circling the waters (Soros and Icahn). A Private Equity firm has acquired nearly 6M shares or 11% of the stock.

Fundamentally, it is very sound firm. Over the last 9 months it has generated nearly half a billion in revenues and close to 44M in profits (eps)

In the hands of the right company, WebMD can have a very bright future.

Google is the company that needs to acquire WebMD.  They are essentially in the same market – that is, providing information.

Both Google and Microsoft have struggled with their personal health care product.

The WebMD imprimatur/brand along with the nearly limitless resources from Google makes the concept of Electronic Health Record (EHR) – defined here as, a collection of Electronic Medical Records very reachable.

The centralized availability of health information along with medical information would place Google or someone like Microsoft as a critical player in the upcoming changes in the health care delivery process and continuum.

A premium on the current price of $31 and 58M shares leads to a purchasing price around 3B which is a reasonable entree into the health care IT field which is project to exceed 40B by 2014.

My vote is for Google to take over WebMD.

Time to leave

I just read that Hamid Karsai the president of Afghanistan stated in a interview for a local TV station that Afghanistan would back Pakistan if the US were to start a war with Pakistan.


It is clear, or at least I hope, that our government is not even close to considering such an action.


I do understand the need of Hamid to play up to his constituency but not at our expense specially if you understand that brave American gave their lives to get the bastard safely to Kabul. ("The only thing dying for" by Eric Blehm).


President Obama needs to take the same stance as he took with Iraq.  Negotiations with cretins such as Hamid are destined to yield unwanted results.


I repeat the refrain from Bruce Springsteen song - Last to die:

Who'll be the last to die for a mistake
The last to die for a mistake
Whose blood will spill, whose heart will break
Who'll be the last to die for a mistake

The time has come to re-build America.

A note to Meg Whitman

As a board member you do bear responsibility for the current debacle at HP. 

Over the last decade, the selection of CEO and board members at HP has left a lot to be desired. Each of the last 3 CEOs have besmirched the HP brand making fundamental business or ethical blunders. Don’t become another name on that list.

You do not have much time to turn the HP ship around.

As long as the stock price remains so depressed, HP will be a target of take over.  It wont  be by a friendly party. Rumors or speculation that Oracle may make a play will give rise to others. The others may be from overseas.

Here is an unsolicited tactical plan for you which will give you some breathing room to find the “HP way”.

1. It will be less costly for you in the long run to walk away from the Autonomy acquisition than to wring out ROI from this outlandish purchase. The cost of walking away is far less than the years and organizational energies required to integrate Autonomy. Aurasma may be a neat a product but a company that does not have a tablet or smart phone will find it difficult to extract revenues from it…
2. Write off the Palm purchase and embrace Android. Re-enter the tablet market using Andoid while pushing your development team to create some new functionality which will make people re-consider your tablet.
3. Re-state your commitment to the PC and hardware platform – so that the core of HP remains intact.
4. Cut cost and price on both laptops and printers to be a good source of income this Christmas season and be able to end the year on a positive note.
5. Aggressively focus the sales force to sell services to the major corporate organizations – specifically, address the healthcare vertical.

Remember Lou Gerstner’s admonition when he took over IBM. You do not need to spend time developing a strategy. You need to get your team and the organization to execute and deliver results.

If you can stabilize the stock price over the next few months, and re-focus the organization on the ‘HP way’, you will have gained the time to build a vision and long term strategy for HP while also building a ‘can do’ culture.

YAHOO - NOT

I was amazed to read that Microsoft is again considering purchasing Yahoo… They were rejected once before. Instead of considering themselves lucky in 2008 when MS offered Yahoo $33 a share. Today, Yahoo is selling at less than $16 a share.  A fifty percent loss in value is not a great selling point at stockholder’s meeting.

We do hear that they there two camps within Microsoft: One that supports the purchase; and a second who opposes it. I hope that both Mr. Ballmer and any prospective Private Equity firm pass on the Kool Aid and begin to look at more promising acquisitions.

There have been recent rumblings in the press suggesting that Mr. Ballmer needs to go. It would behoove Steve to take to heart lessons from a recent series of event at another storied Silicon Valley company (HP)…. Mr. Apotheker did not survive the mistake of buying Autonomy for 10B. In the process of committing that mistake the value of HP dropped 40%.

If Mr. Ballmer wants acquire something BIG, Mr. Ballmer should beat Oracle to the punch and purchase HP. It is clear that this purchase will be costly and will require a great deal of careful integration of HP into Microsoft.

There quite a number of synergies to be derived from such a merger. The service and software side of HP should be a relative easy integration. The hardware side may not be as difficult as one would think. From the PC side, they may be able to optimize the operating system in ways that they did not consider before.

Let Jack Ma and the Alibaba Group acquire the rest of Yahoo. The killing of AOL does not merit a HP like 40% plunge in the stock price.

If Mr. Ballmer can avoid making the Yahoo mistake and wants to acquire some valuable and more modest in size, let me point him to a more sensible acquisition - WebMD… It certainly allows them to extend their health care presence and enhances their existing products such as Vault.

Mr. Ballmer take a pass on the Kool Aid (Yahoo). 

Born in The USA - Barack's election anthem

With all due respect to the BOSS (Bruce Springsteen)

Born down in surfer man's town
The first kick I took was when I hit the ground
You end up like a dog that's been beat too much
'Til you spend half your first term passing affordable care such

[chorus:]
Born in the U.S.A.
Born in the U.S.A.
Born in the U.S.A.
Born in the U.S.A.

I got in a little  jam
And so they put a pen in my hands
Sent me off to Washington
To go and kill Ryan budget plan

[chorus]

Come back home to the refinery
Hiring man says "Son if it was up to me"
I go down to see the V.A. man
He said "Son don't you understand"

[chorus]

I had a buddies  in the House
Fighting off the Republican scums
They're still there, Ensign is all gone
He had his aide’s  girl in Washington
I got a picture of him in her arms

Down in the shadow of the penitentiary
Out by the gas fires of the refinery
I'm ten years down the road
Nowhere to run, ain't got nowhere to go

I'm a long gone Daddy in the U.S.A.
Born in the U.S.A.
I'm a cool rocking Daddy in the U.S.A.
Born in the U.S.A.

The need for reasoned voices

At this critical moment in our country history, when we need leadership most– we seem to be lacking leadership at the federal, state and local levels. The voices we hear are from: ideologues, toadies for special interest groups of all persuasions, or the misinformed public shouting at the top of their voices.

It seems to be that some governors (NY, NJ, CA) have taken the bull by the horn and are staking their reputation and futures on bringing creative solutions to their problems and equally spreading the sacrifice. We, Americans, are not afraid to sacrifice for the greater good. Others like in WI are bent on taking us back to an age of darkness and inequality by ascribing our ills to unions -- Wake up governor; have you heard of Goldman Sachs? Wall Street melt down?  They are equally culpable for your deficit.

We cannot ascribe the word leadership to the Republican membership in the House of Representatives; or the White House – the managers of our fiscal health.

We just had a report of from a joint commission which detailed the need for cuts in the entitlement and defense areas to get our house in order. The questions which need to be asked from this President are:  When will you lead? When will you be true to your motto – ‘Yes we can’?

We need to cut the uncontrolled growth of our government and paradoxically, invest in our future… ‘Yes, we can’ has given way to ‘You go first’.

Expecting anything from the divided House of Representatives is wasting our time and hoping for Obama to become a leader may be a vain hope.

I know little of Chris Littleton of Ohio, but he does seem to have a reasoned demeanor about him and he is an influential, voice in the Tea Party... Mr. President how about inviting him for a frank dialog? Maybe, we begin the process of coalescing this country to speak with a focused voice on how to solve our problems and in the process, leave a legacy of hope to our grandchildren.

Will the Dude Abide

The first paragraph in Maureen Dowd’s column this past Sunday, October 31^st, titled “Can the Dude Abide?”summarizes, as only she can, the state of the current Obama presidency.

“Barack Obama became president by brilliantly telling his own story. To stay president, he will need to show he can understand our story.”

The black woman in the recent town hall gave a face to the angst and disappointment that we as Americans feel about the current state of affairs. In that brilliant opening paragraph, Maureen succinctly outlines the strategy for the remaining time that Obama has; to lead us out the current morass that we find ourselves.

If Obama does what Maureen suggests, he will assuage our angst. In the process, Obama will take the momentum out of the fringe right and perhaps earn a second term and a place in the annals of history – one not beside Jimmy Carter.

Social Media and the disintermediation of job boards

Not too long ago, the Internet, monster.com, and careerbuilder.com created a significant amount of displacement amongst the contingency based employment companies. To survive and in some case to thrive, the contingency firms moved into the contract, consulting, or temporary placement market place. They were pushed into that business on two accounts: One, the new on-line job boards made it very attractive to gain candidates without having to having to pay heavy commissions. The other factor is that companies have began to heed Charles Handy advice in his book  “The Age of Reason” in which he proposes that companies would be moving towards a variable work force model – ramp up for a project; outsource non-core skills – keep fixed cost low and only keep the core skills in-house.

What goes around comes around.

Monster.com, careeerbuilder.com et al are seeing their best days behind them. With the explosion of social media – specifically, linkedin.com which is close to going IPO; Twitter and Facebook, the cost of posting new jobs on these sites is nominal and in some cases zero; as recruiters will broadcast their needs to their network; or initiate discussions around a job description in one of the many groups.

It would be interesting to get some feed back from the recruiters as to the quality of the candidates that they receive as opposed to the volume.

From personal experience, I have made some significant contacts within my network in the recruiting front; but at the end of the day, one always asks the question: Does he or she really understand my brand and value? And can they market me properly?  These questions are borne out the fact we have multiple channel of communication and most of the information, although intuitive in nature, comes from non-verbal channels.

The dye is cast. Unless, the job boards sites re-invent themselves - My advice to investors is to divest of any pure job board stock and look at social media stock as an alternative investment.

Game; Set; Match

This Sunday the New York Times had a picture on the front page that was heart breaking. It was a picture of a soldier in camouflage uniform, sitting on the floor in a lit, antiseptic corridor. The soldier had his baby cradled in his lap; his wife next to him. He was being deployed to Afghan.

The anguish in that young family tugged at the heart strings of most red blooded Americans.  I say most Americans because I am not sure about neo-cons; as they have assiduously sought deferment from any conflicts that would put them in harm’s way; yet, the same neo-cons have no compunction of putting our precious youth in the same position they cower from.

Associated stories about Afghanistan in the first section of the NY Times clearly harkened back to Vietnam; the corruption of the government and the lack of a clear exit strategy are all reminiscent of Vietnam.

The temerity of Karzai to suggest that he is willing to negotiate with the Taliban, while we send our young men into their line of fire is beyond belief and words.

Our government cannot allow this arrogance to stand!

We are asking that young man and his family to endure uncertainty; possibly ask him to make the ultimate sacrifice – give his life – For what?  I for one do not want that young child being raised without her father.  To quote the refrain from Bruce Springsteen’s song Last to die –

 
Who'll be the last to die for a mistake
The last to die for a mistake
Whose blood will spill, whose heart will break
Who'll be the last to die for a mistake

The time has come for President Obama to grow big ones; tell General Petreaus and the other Generals in the Pentagon that it is over – get us out of Afghanistan and Iraq as quickly as possible. The issue is not up for debate. It is an executive order to be carried out with all deliberate speed.

In the immortal works of George Aiken, the old curmudgeon former senator from Vermont: “Declare a victory and get out”.

Save our youth and our treasury to right our economy and set us on a road to a bright future.

We have a vast array of unmanned weapons. We can forewarn Karzai and his Taliban buddies that while they can run; they can’t hide.

We should amend the George Aiken’s quote: Declare a victory; get out and tell the Taliban and those who wish us harm; to look up into the blue sky – they may see a surprise package coming.

Studybynet.com* Part Deux

About 10 years ago, the NY Times Sunday magazine had an article that heralded a new electronic container for books; the printed page was passé.  Timing is everything in life.  The author, like us, was right on target, but way ahead of his time.

Today, Amazon, Barnes and Nobles and Sony have book readers; the first two seem to be market leaders in this space.  Most recently, the 800 lbs gorilla has entered the fray – Apple – with the iPad.  I think that Apple places the concept of electronic containers for books in a new league. The issue is no longer will it succeed, but who will be number two.

There is an ancillary benefit from the acceptance of the new electronic container for the printed word – magazines and newspapers.

Most recently, the NY Times indicated that Conde Naste would be re-introducing Gourmet Magazine in an electronic format.  The NY Times now has the “Timesreader 2.0” that delivers the newspaper in an electronic format to your PC.  I am sure that an iPad version is not too far behind.

I own the Nook (B&N) and I subscribe, or buy issues of, magazines of interest downloaded directly into the Nook.

As a matter of fact, there has been an extensive decline in readership and advertising in magazines.  If you look at the number of pages for Times or Newsweek today and compare the number of pages printed in 1999, it is 30% to 40% less printed (advertising) pages.  This has certainly eroded the profitability and viability of many magazines.

My predictions:

1. Magazines that have an acerbic, unapologetic point of view, great writing such as the Economist or Rolling Stone will find resurgence in readership and subscription… Maybe, Conde Naste’s Gourmet magazine will be on that list. The others will lumber along and slowly fade away.
2. Alan, John – what will be the next electronic media phase?  The market for textbooks that we foresaw 10 years ago is still there.  The access and the plan to gain that market share have changed. but the market still remains untapped and it is measured in the billions.  Someone will get it.

If my predictions don’t come true, I can always blame the stars.

 * Back in late 1999, I and two partners envisioned the e-book business becoming a viable business.  We built a business plan targeted at college students; textbooks and a PC reader – a bit early and a few dollars short in raising funds; we now find ourselves looking wistfully into the rear view mirror.

A postscript

This is the moment in history in which our president can make his mark…

As I stated in an earlier blog and Joe Scarborough repeated it this morning – We need a generational call to get us beyond our addiction to oil and achieve energy independence within this decade.

In JFK’s landmark speech, he called for us to place men in the moon and bring then back safely. One of my brother’s in law reminded me of a portion of the text which is very applicable now.  JFK said – “No single space project in this period will be more impressive to mankind or more important for the long-range exploration of space; and none will be so difficult or expensive to accomplish." These words ring true today as they did 40 plus years ago as we attempt to wean ourselves from the foreign oil dependency.

Much of the economic benefits of the space race were in the form of derivatives and connection between jobs, economic benefits were demonstrable but tenuous at best.

The connection of jobs by the unleashing; the prodding of the national will; innovative spirit to search for the most efficient use carbon based fuels; renewable energy and overall independence from foreign oil is far more direct.

We need jobs. The most optimistic economic forecasts call for around 8 percent unemployment by the end of 2011. I don’t think that 8 percent unemployment is a statistics that any one wants to run on for re-election.

We hear a lot about the calm, academic demeanor of the president.

It is true that his presidency has had a very short honeymoon.

The president has faced one crisis after the other. Yet, each of these crises has provided him an opportunity to define his legacy and path for this country.  President Obama should take to heart the last stanza of Robert Frost –“The road not taken”:

I shall be telling this with a sigh
Somewhere ages and ages hence:
Two roads diverged in a wood, and I--
I took the one less traveled by,
And that has made all the difference.

Mr. President – lead us down that road to a brighter future.…

What next

For some time, I have believed, however erroneous, that you could classify economic ideology into two main camps: One based on John Maynard Keynes which suggests that government spending is the cure for deep recessions or depressions to make up for the lack of consumer spending and confidence. The other camp, most recently popularized by Arthur Laffer, suggests that you cut taxes to stimulate spending and thus pull yourself from the depths of recession or economic depression.

As we look at Europe and our predicament, we may come to the conclusion that neither of the above solutions is viable or sustainable over any length of time without creating major social and economic stress to your society and the way of live that we have come to enjoy.

It has been recently suggested by an analyst at Pimco, that the US national debt will top 13 trillion dollar dollars within the next few months and that the Keynesian theory of spending ourselves out of economic doldrums will not work. The same can be said for the Laffer curve ‘trickle down economics’.

At 13 trillion dollar debt, we are at parity with our GDP… The question I have is, are we not becoming the next Bernard Madoff running an even bigger Ponzi scheme, selling treasury bills to pay the interest on the debt without adding to our national economy.

If any of the above resembles the true state of our economy, we are in deep trouble. The chickens are coming home to roost.

I am interested in your comments.

An open letter to Obama

Dear Mr. President

It is clear that you have inherited a huge mess. After eight years of neglect; and twenty plus years of excesses, the “chickens have come home to roost” in the first months of your presidency.  Much like Lincoln, you have not been afforded a honeymoon, or a congress consisting of great minds.  Instead, you have a House and Senate filled with demagogues.

Circumstance may deem you to be a one term president, but, circumstances cannot prevent you from becoming a great president - one for the ages.

Most recently, or at least within my life time, JFK left a legacy that is to be envied.  Much of that legacy fulfilled after his death; nevertheless, he set the direction for others to follow and his vision was fulfilled.  The Civil Rights bill did not pass during his tenure; nor did he see man walk on the moon, but he set those paths for these great goals to be accomplished.  His words are remembered by many – “Ask not what your country can do for you….”; ‘Ich bin ein Berliner”.  Words and speeches that evoked the emotions of the crowds and nation; but in the end, proved to be ephemeral.  In my opinion, his most memorable speech was the one in which he galvanized the nation to place men on the moon and safely return them to earth. Every young kid wanted to be an engineer. The derivative innovations from the moon program propelled an era of commercial prosperity; innovation unrivaled in the world and outlasted the moon program. Every time, we use an electronic device today, we can trace some genealogy to moon program.

It is now your turn to galvanize us.  You cannot galvanize the American populous by talking about health care; Afghanistan, Iraq or regulating Wall Street. These are things we hired you to do.   You need give us a grander vision; goals that are within our grasp, but will require our collective will to achieve – An alternative, renewable energy source – The greening of America - No more oil spills; No more acid rain; No more miners dying in mines or from black lung disease.

My best wishes for your continued success.

Your supporter,

Bob DaSilva

Trizetto - The health Insurers ERP

A couple of weeks ago, I blogged about the need for health care insurers to look at current convergence of events (Health care reform and ICD-10 EDI5010), as an opportunity to re-evaluate their entire portfolio of disjointed applications/systems and adopt a strategically integrated solution.

I am bullish on Trizetto. I believe that Trizetto has the opportunity to become that first tier ERP system for the health insurance vertical, much like SAP, Peoplesoft and JDE are for most other verticals. Trizetto has the product set and the backing of some of the BCBS companies - some of the pieces of the puzzle.

The next step for Trizetto is to expand their footprint in a significant way before the market overtakes them. One possibility is to be acquired and, as I previously suggested, Microsoft would be a great suitor, as would DELL.  DELL has acquired Perot systems who is deeply entrenched in the health insurance vertical and would be a great asset in expanding Trizetto's reach.

The health insurance group is like the sleeping manufacturing organizations of the 80's.  In the 90's, they woke up to learn that their lunch had been eaten by the Japanese.  Some, like the U.S. automotive industry, continued in their slumber until recently.  The words for success are efficiency (cost reduction) and quality. Those who can achieve both, like Harley Davidson, will see their stock and market share soar.

The health insurers have yet to learn about the concept of 'discontinuous innovation' - doing something new; as opposed to doing the same thing under different guises.

Heath insurers, much like manufacturers; can get leg up on efficiency and quality by embracing the demands of the marketplace to change in a fundamental way.

Barnes and Noble -- Nook Lessons not yet learned.

Last fall, prior to the commercial availability of Nook, I went on-line and put in my order.  I was happy to learn that it had a strong technology underpinning and I was appreciative of the fact that it was software based and not hardware dependant; making upgrades and adding functionality easier.

I was also pleased to know that Adobe was the major force behind the operating system and that a vast array of PDF files would be at my disposal.   My library would reflect my needs and tastes and I imagined the experience would be like entering a virtual giant bookstore.

Sadly, my experience, thus far, with the B&N Nook has been less than stellar.

Mr. William Lynch, CEO of B&N, should read up on the Beta – VHS duel of the 80’s - just a reminder of the bottom line.   It was not technology that decided the winner; it was the availability of content.  CONTENT rules.  I understand that my tastes should not drive the content acquisition strategy of B&N, but their acquisitions should be broad enough to include my tastes.

Two months ago, after listening to a Charles Rose program, I asked B&N about the possibility of getting a book from Jim Collins “How the Mighty Fail”.   I was told by their crack customer service person that I should to contact, and hound, the publisher of that book for the digital rights.  I did and a few weeks later I was told by a member of Jim Collins’ staff, that he just signed the contract for the digital rights for this book… I am still waiting…

Michael Lewis’  “The Big Short”, currently on the NYT best seller list, cannot be downloaded to the Nook (I checked and it is available for the Kindle).   My intellectual quest is to better understand the process by which companies and the market fail to meet their goals.  In the process, build a framework that I can use in my professional life.

Mr. Lynch better understand that his competition (Jeff Bezos and Steve Jobs) are icons and are not likely to give up easily. The iPad and Jobs’ marketing genius make it is obvious that Mr.  Lynch’s lunch is in serious jeopardy.  I am sure that Jeff Bezos understands that Amazon has far greater competition from in his core business (from the iPad – not the Nook) and will aggressively move to adjust and compete.

Mr. Lynch, here are some unsolicited bits of advice: One-aggressively advertise in a wider range of venues – Take a page from Amazon and the NYT book section.  Two-have a tighter correlation of your bonus structure to the acquisition of content.  

Here’s my 2 cents – people who buy electronic readers are people who enjoy future technology, get energized by new and exciting things and people who are going forward.  They want to read the new and exciting offerings like those listed on the NYT best seller list.  Get on board B&N!

The Clarion Call for Health Care IT

The Perfect Storm

Introduction

The dire Y2K prognostications failed to materialize.  Yet the Y2K fire drill was not without its positive impact.  Enterprises were forced to make decisions between remediation of their current software stack or re-architecting their application infrastructure from ground up to meet SEC compliance.

A retrospective analysis supports the thesis that enterprises that chose to spend their budget re-architecting have had greater success in the intervening years, applying technology to optimize their existing processes.  While the enterprises that chose to spend their budget on the remediation of their existing, and many cases antiquated, application stacks, have over the last 10 years, struggled to adopt or integrate the new technologies into their processes.

I have been on both sides of the equation.

Over the last seven years, I have been working within the health insurance vertical and have witnessed first hand their attempts to adapt and integrate new technology into their rather old software stack from claims processing, eligibility and benefits, with, at best, a small modicum of success.

The costs have been extraordinary.  In many cases marked by half completed and abandoned transformative initiatives.  Any derivative of the word transform is in many cases viewed as a mark of the devil.

Growth in many cases has not been organic; it has been by acquisition.  The ensuing problem of integrating the new systems into the existing framework has been less than exemplar.  In many cases, the half completed integration initiatives litter the landscape.

Complementary to lack of will and clearly focused strategic direction, until recently there has not been any real SAP like ERP software that could handle the spectrum of basic activities and transactions required by a health insurer.

The Coming Storm

There are a number of forces at play that over the next couple of years (2013) will create the ‘perfect storm’ which will mandate – not impose drastic change to the way health insurers are organized; their profit margins; and the possible paths to success.  It is very likely that these forces will produce a significant amount of consolidation (M &A) before the dust is really settled.

The conflating forces: One is the economy.  The idea that the company will absorb most of the cost increases and leave the employee is not a likely scenario. The strongest unions are being forced by global competition to give concessions when it comes to the sharing of health care costs. More and more is being absorbed by the employee. The employee’s ability to absorb the cost is, or has evaporated.

The teachers union is being asked for concessions in NJ. The 30+ percent hike asked by BCBS of CA is not likely to take affect. Those companies operating on the simple principle of passing the cost down the line will soon find their margins squeezed and forced into real internal optimization of resources and infrastructure.

The second conflating force is the mandated health care reform that has become the law of the land. Over the next couple of years, they exert a significant downward draft in the profitability of the insure carriers.  In the first place, their ability to cherry pick their population by screening out pre-existing conditions will not be available to them.  Additionally, they will be mandated to spend 80-85 percent of their revenue in claim payments. Their profit margins will no longer be in the obscene (Goldman Sachs range, a gratuitous but timely slam). The health care insurers will have to learn to find every last bit of efficiency from their operations as do supermarkets which operate at single digit margins.

The third conflating force is the imposition of ICD 10 and EDI 5010 format. Again, these new information structures are due to be in full implementation by 2013.  These are the fundamental information structures that drive the core of the business: Actuarial/underwriting; claims processing and benefits/eligibility.

The three forces come together into a physics singularity by 2013.  This does not leave the industry with a lot of time to come to grip with the new realities and move decisively to become the winners in this new environment.

A proposed solution

There is a softball being tossed to Microsoft and Steve Ballmer.  Will he hit it out of the ballpark and essentially become the ERP of choice for the health care industry or will that opportunity flow to Oracle with its penchant to buy everything in sight or overseas to SAP?

There is a single company that I believe stands well above its competitors and is in the best position to take a commanding market share and leadership in providing an ERP like solution to the health care carrier vertical… The company I am referring to is: Trizetto.

Here is the logic for the above statement.

1. Trizetto product set is based on Dot Net technology. Their existing products address the core functionalities of the health care insurance business. As a matter of fact, some the Blue Cross companies are not only users of their products; they liked it so much, that they have invested in the company.
2. It is a private company. It was taken private by APAX LLC for about 1.7 Billion. For every fund an exit strategy is their means of realizing their return on their investment. Given the cost and a premium; it would be relatively small investment for Microsoft.
3. Microsoft already has a relationship with Trizetto for exchange of information related to MS Personal Health Record (PHR) product (VAULT) which is heavily dependent on ICD and EDI infrastructure.
4. Microsoft does want to be a player in the application stack of major enterprises besides owning the desktop.
5. Based on their sheer size, Jeff Margolis (CEO of Trizetto) should welcome the leverage and resources that Microsoft can bring to bear in terms of making their Facets and QNXT products fully compliant and leverage their marketing pull to integrate the new application into an enterprise’s stack.

In conclusion, I believe that there a lot of cost saving opportunities for the health care carriers to normalize and rationalize their application stack. That can only be done through an ERP type of software. During the 90’s we saw the tremendous group of ERP and SAP in particular. Although the implementation costs and associated horror stories by large manufacturing enterprises cannot be overlooked; the lessons learned and their reduction in operating IT costs at least dampening the growth of the cost cannot be easily dismissed.

The argument that all would be the same and innovation and productivity does not hold water. As manufacturing learned is not the software stack but the efficient management of the stack and innovative processes which are the truly differentiating factors.

I think there is an opportunity here and I welcome your comments.

Welcome to my blog

This will be my means to express my thoughts, concerns about technology, current events and a bit of venting about daily frustrations.