Epic and Cerner, like Apple's iOS and Google's Android, hold the largest market shares in their industry. The Apple iOS and Google Android and their products, branding and ease of use have become so successful that they have few, if any, viable competitors among smartphone manufacturers. Other organizations largely believe they can't compete in the phone operating system business. Epic and Cerner are attempting to put themselves in a similar position for large health system EHRs. See also "Epic v. Cerner – 9 Key Comparisons."
Here are seven thoughts on the positions, similarities and differences between Apple and Android in the smartphone industry and Epic and Cerner in healthcare.
1. Developing a Dominant Market Position. Apple and Android have grown to be so dominant in the phone operating system business that none of their competitors currently stand much chance of gaining a significant foothold in the core market. Nearly 95 percent of mobile phones in the U.S. use Apple's iOS or Google's Android operating systems. Apple and Android were persistent in doubling down on improvements to make their technology so user-friendly that buying phones that don't run on their systems became unattractive for most buyers.
2. Creating a High Barrier for Entry and Edging Out Competition. As Apple and Android became more attuned to what consumers wanted and made products to match those demands, their growth and market share results skyrocketed. This enabled them to continually refine their operating systems. This cycle cemented the companies' positions and created a higher barrier for entry than had ever existed previously in the mobile phone market. Competitors like Blackberry resolved to build phones for the Android operating system rather than continuing to solely rely on its own operating system. Additionally, as Apple's iOS and the Google-developed Android system became the standard, more developers introduced applications and programs built to work on these systems. This has created a market space where niche industries have grown alongside Apple and Android and are invested in the success of Apple and Android. This serves to further solidify the position of Apple and Android.
3. Similar Strategies at Play in Healthcare's EHR Market. As Epic and Cerner gain more ground in the large-size hospital and health system market, the better equipped they become to serve those systems. As their reach expands, it becomes harder and less attractive for the largest and most influential health systems to not use Epic or Cerner's EHR. See also, "50 Things to Know about Epic and Judy Faulkner." Further, the switching costs in EHR are generally huge. As we talk with the largest systems making changes in their choice of EHR, it becomes increasingly clear that they are narrowing their choices. In the past few years, the two health IT titans have begun to cement certain economies of scale, and their financial success grants them the opportunity to reinvest capital into their own technologies. Cerner's reported revenues for 2014 were $3.4 billion. Epic's reported revenues for the same year were $1.8 billion. However, the lead in size and adoption is not yet anywhere near comparable to that of Apple and Android.
4. Substantial EHR Market Segments are Still Open and Offer Opportunity for Others. Epic and Cerner are moving to have the lion's share of the EHR market for large systems. However, there are still gaps and niches in the market that are not saturated with these two companies. There are also several large systems that choose not to use Epic or Cerner. This leaves a great deal of room for other systems to grow. We are seeing growth from companies such as athenahealth and Allscripts, among others, whose focus is also on constant improvement, creating lasting and close customer relationships, and on industry collaboration. Allscripts reported revenues of $1.378 billion for 2014 (and substantial improved EBIDTA) and athenahealth reported revenues of $752.6 million in that same year (a 26% growth rate for athenahealth). Both companies and their peers have made significant market share and profit advances in recent years. Paul Black of Allscripts is often highly commended for his leadership as CEO. Zachs Investment Research, commends athenahealth's growing physician base, growing product portfolio and investment in research and development.
These other companies have arguably worked to offer more flexibility when it comes to implementation and development than Epic and Cerner. See "25 Quotes That Show How Fed Up Physicians Are With EHRs." The companies that trail not far behind Epic and Cerner in total revenue also seem to thrive by focusing on specific areas of the market. For example, companies target the physician group market, some large systems as well as smaller health systems and hospitals and niche areas for whom Epic and Cerner's pricing is too steep or whose systems don't prefer Epic or Center. They can also in some places offer those systems more flexibility. Thus, some of the other companies are experiencing very significant growth.
5. A Core Difference Between Apple and Android and Epic and Cerner. Apple and Android very aggressively created a semi-open ecosystem and encouraged companies to build apps for their platform and interact with them. This led to an infrastructure that used their operating systems as a backbone while fostering collaboration and companies to invest with Apple and Android. In many ways, this is quite a different strategy from Epic and Cerner, whose approach is more closed-off for both their platforms and businesses. The impact this will have on their success remains to be seen. Are the companies missing a great opportunity to further cement their market share by encouraging other vendors and developers to design technologies capable of using their existing infrastructures, or will they ultimately edge out all competition by refusing to collaborate?
6. All Four Companies are Helmed by Driven, Visible CEOs. Judy Faulkner, founder and CEO of Epic, has proven to be just as headline-grabbing as the company she steers. Ms. Faulkner is a self-made billionaire and one of the richest women on the planet — she designed the original software that Epic is built on and has guided the company in its steady growth since 1979. Neal Patterson, CEO of Cerner, also co-founded his company in 1979. He is known for his direct, hands-on leadership style. These two powerful figures, in many ways, mirror the big personalities leading their cross-industry counterparts. Steve Jobs is one of the most well-known CEOs ever. He was a public figure and represented the ideas that Apple set forth as much as he did the company itself. Larry Page, CEO of Google before becoming CEO of Alphabet in July, helped build a company credited with one of the most unique management styles and cultures.
7. Core Business Lessons. Reinvest and Double Down on Market Position. There are important business lessons learned by comparing the rise of these companies in their respective markets. First, as one develops a great or dominant market position, they must make a serious commitment to reinvesting to improve their products and performance. Here, Epic particularly prides itself on its spending on research and development. Second, Apple and Android opened up the platforms they built for third parties to use as a jumping-off point. This helped further strengthen their dominant market positions. Third, Apple and Android kept pricing for their services and products reasonably high, which allowed them to make substantial profits and also have money to reinvest. However, the pricing is not so high as to suppress demand. Here, it is not clear if Epic or Cerner will be able to match this pricing concept. See "8 Epic Implementations With the Biggest Price Tags in 2015."