Why BMC is less involved in healthcare in Germany than elsewhere
In July 2019, software supplier BMC invited analysts to an event in Munich to learn about the company’s activities in Germany. Here we look at the company’s efforts to power digital transformation in the healthcare industry.
Over the past year or so, BMC has transformed and grown its operation in Germany — in particular, it has rebuilt the sales team. In its financial year ending 31 March 2019, BMC’s renewal business picked up 44% and new business accounted for more than 35%, with some of it generated from new customers, but also from cross- and upselling to existing clients. A significant portion of the revenue is contributed by partners. Its top-20 customers in Germany are mostly global enterprises, with half headquartered in Germany, including large IT organizations in the finance and health insurance sector.
BMC’s German arm aspires to become the single largest contributor within the company’s European organization. Olf Jännsch, managing director of the German operation, wants innovation to be at the heart of that expansion.
More Acquisitions on the Horizon?
On 2 October 2018, BMC announced that KKR, a leading global investor, had completed its acquisition of BMC from a private equity consortium that included Bain Capital and Golden Gate Capital, which bought BMC in 2013 for $6.9 billion. The size of the recent deal wasn’t disclosed, but some industry sources put its worth at about $8.5 billion, including debt. Mr Jännsch expects that the focus on growth will be partially met by organic expansion, but said that expanding its portfolio through acquisitions is always on the cards. Shortly after being acquired by KKR, BMC bought CorreLog, a provider of security management solutions in the mainframe area.
At the Core: Optimizing Enterprise Infrastructure
In a nutshell, BMC’s portfolio is dedicated to optimizing enterprises’ IT infrastructure to improve business processes, no matter the mix of cloud (multicloud or hybrid cloud), on-premises, mobile and mainframe environments. This reflects a change in the industry from a “pure” IT provision to “business technology”, that is, the broader notion of IT as an enabler that improves business processes and allows the creation of new engagement models — part of what’s widely known as digital transformation.
In its more recent product developments, BMC caters to the needs of enterprises to migrate technology to the cloud and to bring transparency to the management of cloud computing costs. This is a competence that the company sees as its core strength. In fact, some analysts believe that BMC’s capability sheds light on the costs associated with different migration simulations, and that this sets it apart from rivals.
Addressing Growing Complexity
As digital transformation gains momentum, the task of enhancing IT infrastructure has become increasingly complex and critical to businesses. BMC’s product portfolio addresses the need to run a cost-efficient operation in a secure, reliable and performant way, while at the same time allowing for innovation.
When talking about its customers, Mr Jännsch describes a strong reach within the large Fortune 500 companies. The size and complexity of these businesses’ operations make them particularly prone to benefit from BMC’s solutions. However, he’s also quick to point out that BMC also made progress in the mid-size business market and has a significant presence within governmental organizations.
BMC in Healthcare
BMC’s breadth of capabilities also ticks the relevant boxes when it comes to the requirements of the healthcare sector, addressing its need for security, generating more insights from the deluge of digital data and optimizing the IT infrastructure underlying a healthcare operation.
In the field of security, the company supports healthcare establishments especially with its expertise in cloud computing and cybersecurity. Its analytics services span capabilities in cognitive computing, including intelligent chat bots and predictive analytics.
BMC’s comprehensive portfolio for optimizing IT involves competencies in life cycle management; the predictive monitoring of workflows, infrastructure and service levels; and the management of configurations to ensure their compliance with existing regulations. It also includes incident, problem and change management, as well as platform scheduling and the ability to proactively determine the impact of failures or delays in batch processes.
In healthcare, BMC globally serves a multitude of customers, ranging from health insurers, hospitals and other healthcare service providers, to medical device manufacturers and providers of electronic medical records. They all tend to be larger, highly complex organizations and most of them are based in BMC’s US home market; the list of its European healthcare customers is much less extensive.
Digital Maturity of German Hospitals Lags Behind
Mr Jännsch makes it clear that the German healthcare terrain is difficult to navigate on the grounds of a highly regulated industry. Although this is certainly true, it also applies to other countries. CCS Insight believes this has more to do with the limited digital maturation of the German healthcare landscape, and this explains a lack of sufficiently large deals in the sector.
According to the latest report on the digital maturity of German hospitals, German hospitals score on average 2.3 out of seven when it comes to the digital maturity of their operations. This compares with a European average of 3.6. Furthermore, the gap between the German and the European average has widened in recent years, for example, in 2011 the score was 0.2.
The 2019 report is based on 2017 data from 167 German hospitals that were certified according to the Electronic Medical Record Adoption Model. The model measures adoption and use of electronic medical record functions needed to create a paperless environment that taps technology to support optimized patient care.
Although it might be more difficult for BMC to get a foot in the door of cash-strapped hospitals in Germany, the markets for life sciences and healthcare insurance should be more promising targets. Healthcare overall might be an area where BMC’s distribution partners, which tend to look at medium to smaller accounts, are better geared to win business. They’ve already started to make inroads into this market.
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