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Xerox Follows Lead of Others, Purchases Computer Services Company

Posted Oct 05 2009 10:02pm

In recent notes, I have begun to explore questions pertaining to whether lab software vendors will begin  to provide professional services (i.e., consulting services) to hospital-based clinical labs in addition to software and hardware (see: Professional Services Divisions as Potential New Profit Centers for Pathology Vendors; Who Will Function as System Integrators for Mini-LIS-Networks? ). Increasing emphasis on IT services is not unique in the lab world but occurring across the entire business sector. A recent article in the New York Times discussed the purchase by Xerox of a service outsourcing company and the larger implications of this trend (see: Xerox Buys Affiliated, Fueling Shift to Services ). Below is an excerpt from it:

Ursula M. Burns, the chief executive of Xerox, declared on Monday that the company’s plan to buy Affiliated Computer Services, an outsourcing services company, for $6.4 billion would be “a game-changer” for Xerox....And technology companies, like Xerox, are often buying services companies to accelerate the transition. Only last week, for example, Dell announced that it would buy Perot Systems for $3.9 billion. Last year, Hewlett-Packard bought another large technology services company, Electronic Data Systems, for $13.9 billion. The shift to services is being fueled by financial and strategic considerations and by the evolution of technology itself. Services businesses tend to be steadier sources of revenue and profit than product businesses, which are more susceptible to peaks and valleys of economic cycles. Services businesses also foster closer relations with corporate customers and often yield higher profit margins.... Technology advances are making it easier for suppliers to provide computing as a service, delivered over the Internet from remote data centers in the so-called cloud computing model. Software can move off desktop personal computers to become a Web-based service, like Google’s e-mail, word processing and spreadsheets, and the online customer-relationship management software of Salesforce.com.

I have discussed grater utilization of remote data centers and the cloud computing model in a number of previous notes (see: Finally, A Clear Definition for Cloud Computing; Cloud Computing in Healthcare: Key Questions to Ask; A Different Definition for Cloud Computing Emerges; Amazon's Cloud Computing Now Comes with a Service Level Agreement ). I fully understand that many of the technical issues supporting use of "the cloud" as a computing platform have yet to be fully worked out. However, there is no question is my mind that the lion's chare of business computing will eventually move to the cloud. Such services will be priced as a commodity, issues such as backup and disaster recovery largely disappear. and storage space can expand almost infinitely. Among major industries, however, healthcare will certainly be the very last to make such a move. The stated reasons for this will be security, confidentiality, and HIPAA considerations. The real reason is that healthcare IT personnel are deeply conservative and never take the national lead in any IT ventures. They are also reluctant to put their own jobs in jeopardy.

Although healthcare will be a laggard in adopting the cloud computing model, I suspect that lab computing will lead the way over other hospital computing units. The reason for this will be primarily the rapid adoption of digital pathology that I foresee occurring starting about now (see: Major Drivers for the Conversion to Digital Pathology in Teaching Program s). For a large pathology department, the storage requirements for deploying digital pathology services supported by a pathology PACS are enormous. It's only a matter of time before pathology departments, and the digital pathology companies supplying the scanners and software for whole slide imaging (WSL), come to recognize that that most cost-effective means to store digital images files will be in remote data centers under the cloud computing model.

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