The COVID-19 pandemic has drastically changed the competitive landscape of the telehealth sector as big cloud companies (like Microsoft, Amazon, and Google) quickly moved into the attractive market.
In my previous post, “The Boom and Bust of Telehealth,” I predicted that an acquisition from one of these giant companies was on the precipice. I might be a genius, or psychic, or maybe reading dozens of Stream transcripts weekly is functionally equivalent to both, because Amazon announced a major acquisition yesterday on the same day that I was supposed to publish this post. I really need to toss out my Alexa so Amazon can stop listening to me.
Now before we discuss the acquisition, let’s analyze how Amazon got to this point and what set them in the lead in telehealth. I have been following this trend for a while and have seen that Microsoft, Amazon, and Google are struggling to differentiate their products in the telehealth market. Three expert call transcripts here on Stream by AlphaSense provide further insight on this market, which you can access for free for 14 days here.
Amazon Crushed it in the Healthcare Cloud
Currently, there are more companies in the cloud of AWS than Microsoft. A former Healthcare Director at Microsoft gives us detailed insight to the competitive landscape in this expert call.
Microsoft had bigger fish to fry while Amazon scaled up faster with smaller companies
“Microsoft is strong in AI services and everything which is around their offering from 365…AWS actually went much faster into the cloud because they offered their services at a lower charge. They offered more support to all the midsize and small companies, so start-ups immediately went to AWS. Microsoft always [required] that the company should be bigger. Any kind of support was related to some fees, Microsoft asked for more payments than AWS.”
This bit Microsoft in the nimbus after Amazon won nearly half the cloud healthcare market
“The big hyperscalers are actually very well positioned to work in healthcare and that’s what they do right now. Still, AWS has about 40% or 45% market share here in the cloud compared to Microsoft at 20%, and compared to Google at 5%…
In this situation [Microsoft had] very strong customers, but AWS had more so they could scale faster. That was actually my impression when I was with Microsoft. Now, I see that GE Healthcare, Philips, [MedTech, Daedalus], the big companies are mainly on AWS. Siemens is a stronger one on Microsoft. That’s a healthcare player which is on Microsoft because Microsoft always focused on Siemens.”
Microsoft’s acquisition of Nuance didn’t give them the Edge they needed (pun intended).
“Certainly, that was a very good decision for Microsoft to acquire Nuance Communications. Actually, Google Translate as well as a lot of the other systems, other hyperscalers have very good systems now in place. The advantage for Nuance currently is actually, they have specialties in the vertical. Nuance has some specialties in healthcare, but even if you don’t have this healthcare know-how other speech engines are almost as good as Nuance so far…
Nuance is mainly used in the hospital segment, but life science is a special segment and then you have the payor industry. All three elements have to come together. If you currently look into life science, then AWS is even much stronger than Microsoft.”
Amazon is Making Inroads in Telehealth
Amazon is taking telehealth by storm as a disruptor, per the former Senior Director of Enterprise Client Success at MDLIVE:
“Amazon specifically is certainly seen as a potential disruptor because that’s their nature. They’ve so far been able to do pretty much everything faster and better. I think it could give the Teladocs and the MDLIVEs a run for their money and certainly challenge the Teladocs and MDLIVEs from a technology standpoint and a road map standpoint. I know that companies are certainly nervous about what’s on the horizon for the Amazon telehealth platform… I think it’s the fear of what Amazon’s platform and service could be in the future.”
Amazon’s rise is attributed to brand value but not its product
“There are lots of navigation, telemedicine, virtual primary care solutions in the market, and they might have built a great business case, but they just get lost in the noise like everyone else. I think Amazon has risen to the surface because it’s Amazon…I think it’s fully their brand value versus the product at the moment.”
Amazon may lack differentiation, but not innovation
“Amazon is known to be an innovator. If they’re able to take the model that they built for logistics and delivery and somehow implement something similar within the healthcare sector, it would be a disruptor.”
Amazon’s Strategic Acquisition of One Medical Group
Yesterday, July 21, 2022, Amazon stated that it has entered an agreement to acquire primary healthcare company One Medical Group (ONEM) in an all-cash deal valued at approximately $3.9 billion. One Medical is a membership-based primary care service that promises customers “24/7 access to virtual care.”1
We covered the ONEM acquisition in another post yesterday, but I want to resurface one key quote here because it helps explain the logic of the deal from the customer’s perspective. According to the former Assistant Vice President of Global Benefits at AT&T, buyers are specifically looking for better primary care support in telemedicine.
“I don’t think that solution [Amazon] is selling, whether they’re pitching it or not, is some big change for health care delivery at the front-end yet. I think the buyers on the employer’s side are just trying to buy a better primary care decision support telemedicine experience at this point. They’re not trying to say buy a health plan alternative.”
Future acquisition opportunities for hyperscalers
It’s safe to say that we can expect mergers and acquisitions to be an ongoing trend in the telehealth market. Databricks and Snowflake could be potential acquisition opportunities for hyperscalers.
“What I currently see with Databricks and Snowflake is that they’re currently bundling the data from Google, Microsoft, and Amazon and starting their own algorithm…
They’re just linking the data lakes of the big hyperscalers into a huge data lake. They have their own FHIR services and healthcare services. This is something where Google, Microsoft, and AWS might think about making acquisitions on those companies to not become dependent on those companies and vendors.”
Now maybe I’m trying my luck by predicting the future again with these potential acquisitions, but so far my research with Stream expert calls hasn’t failed me. Although if my blog posts lead to you making billions of dollars then I’m a size small in Louis Vuitton’s entire catalog. You’re welcome!
Amazon has taken the lead in telehealth among the big three hyperscalers, though all three are looming threats for established telehealth companies like Teladoc and MDLIVE. The ONEM acquisition is very telling that more acquisitions are on the horizon from these big three companies.
Keep checking the pulse with Stream in future blog posts about the healthcare sector.
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