When information systems companies acquire other companies, as HBO & Co. has done with Ibax Healthcare Systems, the focus of analysis usually centers on how the principals will mesh the products they're marketing today.
But although the importance of fitting together can't be downplayed, there's another focus that can be just as important: how the acquiring companies will sell the products they market tomorrow.
Providers are familiar with the high cost of buying an information system, especially in an era of network-building with its enhanced requirements for data integration. But part of that cost can be traced to the vendor's high expense of selling the sophisticated systems.
From initial contact to site visits to detailed proposals and customized demonstrations, the dollar cost of selling can run into "the low hundred thousands" for information system vendors bidding on business, said Steven Rushing, an Atlanta-based partner with Andersen Consulting.
That's a high cost for persuasion, but even higher for the half-dozen other companies that also may have bid but didn't persuade, Mr. Rushing said.
And the costs of selling are only the immediate consequences of the wooing exercise. If a vendor loses too many of these contests to competitors, it won't thrive, or maybe even survive.
But a vendor with a large client base can gain a measure of built-in attentiveness that decreases the costs of getting an "in" with customers looking for added computerization, said Michael McCarty, executive vice president for sales and service at HBO.
"The addition of an Ibax gives us a substantial increase in customers and provides an additional customer set," Mr. McCarty said. Although the new customers aren't locked in by any means, "they have a higher degree of interest in the strategic direction of HBOC" as the new proprietor of their multimillion-dollar investment in Ibax systems, he said.
The acquisition of Ibax was completed June 1, a spokeswoman said (May 9, p. 10). It adds 475 clients to the HBO base of about 700, company spokesmen said.
The next wave of computerization will include integrating installed patient-accounting and financial systems by means of a new breed of network connections such as scheduling and resource-management programs, message-routing loops and data-base hubs.
When that happens, HBO hopes Ibax clients and others in its base of customers will "take a first look at us" instead of launching a review of a dozen vendor prospects, Mr. McCarty said.
Networking software such as HBO's Pathways line and First Data Corp.'s First Empower data repository is being sold as "add-on" computer capacity that works with a range of installed systems. If the technology works as advertised, barriers of vendor-specific linkage would tumble, and the potential of such products would be limited only by the size of their client base.
That base can be cultivated in any number of ways, as HBO showed through the "business alliance" it formed with Unisys Corp. to assume operation of Unisys' PRN mainframe-based software. The alliance was finalized June 1.
The Unisys product was in need of upgrading-at substantial development expense-to remain sophisticated enough for the industry's greater information demands, said Andersen's Mr. Rushing.
Turning the future of that product over to HBO will put its 60 clients in the hands of a company interested in supporting their Unisys systems investments. Clients include such large institutions as the University of Chicago Hospitals; Methodist Hospitals in Memphis, Tenn.; and Erlanger Medical Center in Chattanooga, Tenn.
For HBO, the move gives it "an opportunity to sell at a lower cost into an existing group," said Mr. Rushing. HBO's Mr. McCarty said the company's aim is to upgrade the PRN system to the level where clients can make use of the HBO Pathways line.
Size of client base also will come into play in the next big round of decisionmaking after providers form network alliances and take inventory of their information investments, said Mr. McCarty.
It's likely that the member institutions will have different vendors, and a decision will have to be made on a common vendor for networking software, he said. That could raise the stakes higher for vendors that stand to lose a foothold, increasing the cost of selling even further.
"You're looking at expending a lot of resources before you know if you have a reasonable chance to win," he said.
But if one vendor already has a majority of the business, or even a plurality, the network may be predisposed in that vendor's favor-or at least more aware of its products. That would reduce the expense of selling in a charged atmosphere, Mr. McCarty said.