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Checking IBM's pulse: Healthcare a bright spot amid anemic services performance (+ video)

Apr, 24 2017, 6:30 AM

Editor's note: In reporting a 20th consecutive quarter of a drop in income last week, IBM's healthcare related businesses stand out as a bright spot amid otherwise anemic services performance, says Technology Business Research Analyst John Caucis.

HAMPTON, N.H. - Healthcare IT services, or HITS, top-line growth is sustained [in IBM's latest earnings report] on the back of accelerating global adoption of Watson Health, the centerpiece of IBM’s health strategy.

[VIDEO: Watch a new video overview of Watson Health at https://www.youtube.com/watch?v=kEhUGbOUbY4 ]

Estimated IBM healthcare IT services (HITS) revenue increased for the fifth straight quarter, to $968 million in 1Q17, growth of 2.8% year-to-year. HITS growth owes to the continued enhancements to IBM’s (NYSE: IBM) flagship Watson Health offering through organic, acquired and partner-provided assets, along with the ongoing globalization of Watson Health and a steady stream of new adopters of IBM’s cognitive health platform among providers, public sector health organizations and life sciences companies. IBM’s overall services revenue contracted 2.5% year-to-year in 1Q17 as IBM’s shift from traditional outsourcing and IT services to its stated “strategic imperatives” (cloud, analytics, mobile, security and social) encountered turbulence.

Acquisitions, alliances and the expansion of the Watson Health portfolio deliver growth across public and private sectors

IBM landed new provider contracts with Cleveland Clinic, Jupiter Medical Center and Central New York Care Collaborative in the U.S. as well as Max Healthcare in India, while continuing to ramp up other recent wins stemming from the Merge Healthcare acquisition. Provider organizations are adopting Watson Health modules for oncology, genomics and PHM at a robust pace, and IBM’s traction will accelerate as it expands capabilities across the full breadth of its cognitive platforms in security, blockchain and IoT.

Life sciences growth has stabilized as demand for cloud, analytics and consulting around digital transformation rebounds. New collaborations and projects with pharmaceutical companies Celgene, Pfizer and Teva will support continued expansion in 2017.

IBM and Siemens Healthineers, the healthcare arm of Germany-based industrial giant Siemens, are teaming to embed Watson Health technologies deeper and more extensively in hospital systems across the globe. In this five-year collaboration, Watson Health’s cognitive and AI capabilities will reach a larger ecosystem of healthcare providers and clinicians as Watson technologies are more extensively integrated into Siemens’ extensive suite of healthcare products.

IBM also announced in 1Q17 it will collaborate with the U.S. Food and Drug Administration to develop blockchain technologies for use in oncology-related data sharing.

At the annual Healthcare Information and Management Systems Society conference in Orlando, Fla., in February, IBM’s Watson Health introduced a series of cloud-based solutions for payers, providers and employers that integrate Watson Care Manager with applications gained from IBM’s recent acquisitions of Truven Health Analytics, Phytel and Explorys.