Disrupting the Outsourcing Model
Steve Maylish and Shannon White, Fusion Biotec – 01.31.19
Contributors to MPO Columns
The rise and relative success of companies dealing in cloud-based systems has revolutionized how we handle data. This is prompting a shift away from traditional software, hardware, and legacy systems, and enabling companies in new and unexpected ways. As cloud-based data systems rise to meet the needs of the modern world, will legacy systems eventually become obsolete? How will this change outsourcing?
In last June’s MPO 15-year anniversary issue, we looked at medical device outsourcing changes over the last 15 years. The industry changes cited were mostly based on OEM attitudes, improved quality and standards, increased competencies, and a growing willingness to outsource. Now we are in the midst of a new paradigm shift. Examples of this are everywhere: Netflix versus Blockbuster, Amazon versus retail, AirBnB versus hotels, and Uber versus taxis—just to name a few. Since the advent of cloud computing, disruption has accelerated. As traditional business models change, will medical device outsourcing experience disruption?
There are great advantages and disadvantages associated with cloud computing and software as a service (SaaS)—some of them more real than others. SaaS delivered via the cloud often doesn’t require users to load, maintain, update, migrate, partition, archive, audit, backup, or license software. It often costs less, reduces the need for IT services and hardware, and is easier to use. But what about the downside? Security, always-on availability, performance at scale, enterprise compliance, and data integrity are important for cloud services. These features are essential for the cloud business model.
First let me share a success story: Salesforce, which launched in 1999. It initially offered a simple, low-cost, cloud-based system to service small and medium-sized companies, but now have disrupted the customer relationship management (CRM) industry. Eventually, Saleforce’s CRM software outsold IBM, Oracle, SAP, and Microsoft. By building a cloud-based system and offering SaaS, users can collect, categorize, analyze, and distribute information on product sales, customer purchases, and sales staff performance. The information can be shared across sales departments, supply chain, management, and executive teams. It can be used on smartphones, tablets, laptops, and desktops. Cloud computing provides shared infrastructure and instant scalability. Salesforce provides continuous improvement for their services.
According to “disruptive innovation” theorist Clayton Christensen, “Disruption describes a process whereby a smaller company with fewer resources is able to successfully challenge established incumbent businesses.” This is certainly true of companies like Netflix or Uber. In fact, a number of industries have been disrupted by SaaS and cloud computing: HR services, payroll services, booking systems, project management, IT, accounting, CRM, software, and eventually medical product outsourcing.
For a healthcare provider like Kaiser Permanente, big data can be complicated and an impediment to change. Sam Gambarin, director of the Cloud Services group at Kaiser Permanente, said, “We wanted to provide our [software] developers with a standardized central platform and shorter time to market. Also, we wanted to optimize our existing systems of records.” To achieve this, Kaiser uses a hybrid cloud solution: an internal data center and external cloud provider with IBM Cloud, plus multiple SaaS providers.
Providence St. Joseph’s Health system uses the cloud-based electronic health record from Epic because its interoperability enables them to practice better medicine, receive appropriate reimbursements, and improve patient experience. For decades, there were failed startups in the healthcare interoperability space. Migrating electronic medical record management to the cloud now provides a viable solution.
While cloud migration is happening at large healthcare providers, disruption is more likely to come from startup companies like Bright Health, Devoted Health, Clover Health, and Oscar Health—Alphabet’s $1B+ investment. These “payvidors” offer patient-centric care designed to support and monitor patients by using data science to cut costs and promote preventative care. Some work with prescription services. Others use genomic data, machine learning, and artificial intelligence to promote health. Some offer in-home primary care programs and house calls.
On the medical product outsourcing side, consider contract engineering. Before the cloud, engineers and hobbyists with small budgets couldn’t afford most professional engineering design software like SolidWorks or Cadence. Now, a number of SaaS companies like Onshape or CircuitMaker offer inexpensive or free software that allows designers to share their work and build on others’ work, decreasing time and reducing risk. The continuously growing database eliminates the need for footprint design for common parts. This open-source approach has helped the maker community flourish in recent years, building on the efforts of companies like Raspberry Pi and Arduino to make powerful hardware building blocks widely available.
For mechanical design, Onshape is a SaaS model created by former designers of Solidworks, a legacy software package. Unlike Solidworks though, Onshape updates itself silently every two weeks and is billed per engineer at a low monthly fee. It holds major advantages over its predecessor with its ability to be used in real time by an entire design team located anywhere with a network connection. Import and export capability allows Onshape to ease the transition from legacy systems.
Disruption will happen in the industry as free, open-source development software is introduced to hobbyists and later works its way through commercial businesses. With cloud and SaaS, multiple people can view a file at once, reducing the amount of time spent on editing. Users can share the document with a large number of people through their browsers, inviting them to view and edit the document in real-time. Furthermore, any edits to the documents are saved automatically as the author types, which prevents accidental loss of data.
Concerns about data integrity during the switch to cloud-based systems are natural and bound to arise. Questions regarding security, accessibility, and cost are among the most asked. Data safety is one of the most prevalent concerns and why most cloud service providers make security their top priority. Cloud infrastructure is constantly monitored, while controlled access to data and frequent auditing reduce the risk of human error and flaws in security protocols.
One company facilitating migration to the cloud is Corent, whose SurPaaS platform analyzes and migrates software applications to the cloud and can even rapidly transform the software application to a SaaS model. Scott Chate, vice president partner and market development at Corent Technology, predicts, “The ongoing global transition to the cloud-based SaaS model is going to affect every industry.”
In a few respects, however, cloud fails to meet the precedent set by its legacy predecessors. Cloud software is often not as refined as older legacy software. Due to this, experienced legacy users often balk at using the new software. Furthermore, cloud systems are often heavily dependent on network reliability and bandwidth. Any outage can leave companies stranded without access to data. Most drawbacks to cloud programs, however, are mitigated by their higher processing power (provided from running on a server) and ability to efficiently update.
It was easier for our company to start in the cloud and incorporate SaaS into the business model. The cloud offers us many advantages. We can securely work from anywhere, using any computer or mobile device. We can leverage previous design work. Reliability is extremely high because cloud providers can invest in infrastructure. Data is stored in a centralized facility with stronger security measures than we could provide on our own, and files can be downloaded when needed. It’s simple to add, remove, or change software and users. Total cost is lower because we require less physical infrastructure and support staff. Our customers’ experiences have changed the way we connect and collaborate, how we do business and, by default, how we innovate. Ultimately, we are more efficient.
Engineering service providers launching new companies today can begin in the cloud, requiring less physical infrastructure and support staff. However, the industry is just beginning to shift from legacy software to SaaS, which won’t be easy for established medical device companies. Eventually, it will transform contract engineering and contract manufacturing services as they migrate to smart manufacturing. Cloud computing is so disruptive because it pressures entrenched firms to modify their business model, often involving changes to business strategy, revenue models, sales channels, and technology.
Jeff Hawkins, president and CEO of Truvian Sciences, reveals, “When Truvian decided to leverage engineering partnerships, we didn’t want to outsource in a classic sense but rather find partners that could operate as an extension of our team. In order for that to be successful, you need a partner with the right company culture and the right tools to facilitate real time collaboration, regardless of where the teams are physically located. New technologies are allowing us to collaborate digitally with our partners on everything from engineering designs using Onshape, to project planning using Smartsheets and general project file sharing using tools like DropBox or Box. These tools make it possible for anyone without training to participate in the process from any location with the [use] of software viewers.”
Technology is evolving faster than ever and business models are changing. The cloud is more secure, cost-effective, and accessible than alternatives, and it’s getting more powerful every year. There are now millions of students using the cloud exclusively. This upcoming generation lives without many past computer constraints.
Like the education system and numerous other industries, the cloud is beginning to disrupt medical device outsourcing. Entrenched companies with legacy systems currently have the high ground, but the cloud is changing everything. With today’s services, remote teams can connect instantly. Cloud services allow for SaaS usability without downloads or installs. Cloud providers make instant scalability possible. Cloud computing and SaaS provide hosting, backup, and security running on various operating systems and mobile apps. If you’ve ever been frustrated with IT requests, firewalls, or internet controls, there’s good news—a solution is on its way!
Steve Maylish has been part of the medical device community for more than 30 years. He is currently chief commercial officer for Fusion Biotec, an Orange, Calif.-based contract engineering firm that brings together art, science, and engineering to create medical devices. Early in his career, Maylish held positions at Fortune 100 corporations such as Johnson & Johnson, Shiley, Sorin Group, Baxter Healthcare, and Edwards Lifesciences.
Shannon White is an engineering student, SaaS user, and intern at Fusion Biotec.