“Survey: How Healthcare Deploys Software as a Service (SaaS) Apps” (https://hitconsultant.net/2019/07/05/survey-how-healthcare-d…)
I came across this article last night and it got me thinking. The combination of me having worked in the healthcare industry my entire career plus the great discussions happening on this board.
First, several key points from the article with some of my thoughts in () next to them:
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The global healthcare cloud computing market was recently valued at approximately $18 billion and is expected to generate around $61 billion USD by 2025, at a CAGR of around 18.7% between 2019 and 2025.
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Everyone (100%) of respondents say their organization is using SaaS - (This is great news…healthcare is usually late to the game in terms of implementing “new” technology. This tells me that, in general, healthcare organizations are willing to implement SaaS applications and will probably adopt more as time goes by…which supports the first bullet about growth)
– The majority (63%) use six or more SaaS applications
– The top three SaaS solutions are used for these applications: 1) patient portal, 2) telemedicine, 3) mobile communication
– Nearly 3 in 4 respondents said ‘reducing IT costs’ is the top driver for using SaaS (This is another data point that confirms Saul’s argument - in a recession, these SaaS applications should see less of an impact as they are helping organizations reduce overall costs)
– Hands down, the top SaaS-related concern is a data breach or hack (70%) (This bodes well for a company like Okta…more on this in a second).
If you also look at the infographic within the article, it asks the question “Why use SaaS?” and then lists the top 5 drivers and some additional “less likely reasons”. Here they are:
Top 5:
- Reduce IT costs (71%)
- Easier upgrades (62%)
- Improve accessibility (59%)
- Predictable costs (50%)
- Better disaster recovery (48%)
Less likely reasons:
6. More storage (32%)
7. Better analytics (20%)
8. Better data exchange (14%)
So with the above in mind, it got me thinking - which of the current Saul stocks benefit the most from higher adoption and growth of SaaS within the healthcare space? Below is my list in order of most benefit to least benefit…of course, this is based on my PoV of the healthcare industry.
AYX - today more than ever, there is a need for data analytics whether it is on the clinical or commercial side of the business. Note that I have personally seen the AYX solution and find it more useful and effective than DATA (Tableau) for heavy analytics use. Many people confuse DATA as an analytics tool when in reality it is more of a visualization tool with some “basic” analytics capabilities.
MDB - from MDB’s website “Siloed data and rigid analytical systems plague healthcare innovators”. I couldn’t agree more. As companies like ILMN and GH grow, so should MDB.
OKTA - just read above…what’s the top concern of these organizations?
ZS - ditto
TTD - I see some potential (and significant) growth here…pharma companies spend $$$ with a “B” (as in billions) in marketing/advertising campaigns. And many of them have yet to make the shift to true programmatic buying. Advertising agencies that cater to the healthcare industry will have to eventually adapt this model. Also, if you think of hospital/health systems, they have razor-thin margins, and more and more, they are competing for the same “customers” (patients). I see a future where health systems will be advertising more directly to consumers, and this in turn, will require very cost-effective marketing and advertising campaigns.
TWLO - I can see a world where every patient has some sort of interaction with TWLO: prescription status updates; real time updates to family members waiting outside an OR; updates/tracking to your latest DNA-gene/saliva test ordered online. The applications are endless!
ZM - general reduction of expenses will help drive adoption of ZM. I’ve worked for several large players within healthcare and they all used Webex (Cisco). My guess is that if ZM sales team is able to convince them that their solution is better, some of these companies will switch. Also, ZM could be a player in the telehealth/telemedicine space.
SQ - depending on how this plays out, SQ can position themselves to take a piece of every (many) transaction in the consumer initiated tests space. To date, I have not seen SQ at a doctors office, but they could very well start selling into that segment. After all, health systems are all looking to improve the “patient experience”.
SMAR - I’ve never used SMAR, so to me this one is less clear. Companies I’ve worked for have used MSFT applications (Project, etc), Google solutions, etc. Based on their website (https://www.smartsheet.com/industries/healthcare), they have some interesting solutions for the healthcare space. I just can’t see how they come together and displace current players. I’m not saying it can’t be done…I just need to learn more about it.
Some other companies/stocks that are not currently Saul’s stocks but I think would benefit from SaaS growth in healthcare:
VEEV - this has been one of my favorite companies to own for the last 3+ yrs. Here is another article that plays into the VEEV and SaaS story (https://finance.yahoo.com/news/growing-adoption-saas-encoura…).
One area that I’m not sure how it will play out in the future - as companies like GH grow and more and more physicians use LDTs (lab developed tests), will these practices use a company like VEEV to run investigator-led studies? If the answer is yes, that would expand TAM and provide another huge tailwind (but I don’t know how big that space is/would be)
TDOC - early stages of what could become a huge push into telehealth/telemedicine as part of reducing healthcare costs, but more importantly, increasing engagement, compliance and adherence by patients. And I like their business model…although they need to work on increasing usage/utilization of the system by members (engagements) once they’ve contracted with their customers.
TWOU - to a lesser degree and definitely not immediately as this company currently focuses on higher education (partnering with universities and colleges). However, I see a world where TWOU is partnering with a company like Intuitive Surgical (ISRG) and helping them develop a certification curriculum online for physicians and their staff.
So there you have it - in my opinion, all nine currently held stocks within Saul’s portfolio will benefit from the growth of SaaS in the healthcare space (some more than others). And several other stocks not currently in the portfolio would also see some benefits from this growth.
Please chime in with other companies that you think might also benefit from this healthcare tailwind. Or if you agree/disagree with my take on which of these companies will benefit the most (or at all).
Happy investing!
Best regards,
Luis
@brandstudere
(I own long positions in all stocks mentioned above except GH)