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Triple G on ASPs

February 2001
Eric Skjei

Triple G Systems Group has committed itself to supporting the ASP model, but it is finding market acceptance to be slower than expected. "Over the past six months, I’ve found two things," Lee Green says. "First, there’s no question that this method of delivering software and service will be a dominant deployment and/or licensing model in our industry." However, he cautions, "what’s changed in my thinking over the past six months is that I think the rate of adoption is going to be slower than anticipated."

The Triple G ASP service already includes a facility in Raleigh-Durham, NC, one that will handle network and hosting functions. After a client laboratory signs up for the service, which involves an initial subscription fee and ongoing transaction-based fees, Triple G sets up the system, trains the client, and initiates the service.

For clients, ASPs can eliminate the need for capital investments, reduce the length of the implementation cycle, decrease the need for information technology staff, who can be hard to attract and keep in a competitive job market, and make possible more timely software updates.

In addition to offering a direct ASP model, Triple G plans to offer a branded ASP model, one in which a primary laboratory customer acts as an ASP for other secondary lab clients. "We have major customers in the U.S. that wish to act as the ASP and offer lab IT services as a value-added to those it is already providing to its customers," says Green.

For software vendors, Green adds, the major advantages of an ASP model are a stable, predictable revenue stream, elimination of the need to go to the client’s capital committee, and shorter selling and implementation cycles. "If you can cut your sales lead times and reduce your implementation times, you can recognize revenue faster," he says.

So why isn’t this promising alternative to traditional software acquisition catching on more quickly? First, says Green and others, is that health care is a conservative sector of the economy, especially with regard to adopting new information technology.

HIPAA regulations pertaining to security and confidentiality also may be contributing to the hesitation. HIPAA, the Health Insurance Portability and Accountability Act of 1996, is intended to safeguard health care information through federal security standards and privacy legislation. (For more on HIPAA, see "Newsbytes," page 82.)

"Certainly some of it has to do with concerns about where the data resides," says Green. "It takes some adjustment for health care organizations to get used to the idea of clinical data living outside their computer centers." Green expects it will take two to three years for ASPs to become a mainstream business model in the clinical laboratory setting.

Prospective clients may find the ASP model does not represent a savings, suggests Hal Weiner, president of Weiner Consulting Services, Eugene, Ore. "By the time you look at the cost of communication lines and the cost of services-the service agreement is a very important part of the ASP model-the question may be, Will I save any money at all?" he says.

"You’ve got to look at the five-year cost of ownership," he adds. "And in doing so, you’ve got to make sure that you understand what all of your service fees are going to be, what is included in that service fee, and what is not-that’s the real key."

Weiner says the ASP model will be most attractive to smaller laboratories, those that would otherwise find their LIS choices limited in terms of functionality and for whom the costs of a dedicated, internal information technology staff may be prohibitive. Weiner also suggests that the ASP model will become more competitive in certain niche markets, such as the blood bank.

What are the risks of an ASP service? "The first one is what I call Internet constipation," says Weiner. "If you’re in a lab using an ASP service that is connected to the Internet through the public telecommunications system, you could find yourself stuck in that slow-crawl mode that most of us have experienced, where the volume of traffic becomes so high that your response time becomes almost unacceptably slow." Implementing a solution, such as a private network, virtual or otherwise, begins to degrade the cost-effectiveness argument, he adds.

Furthermore, the network connection between laboratory and host may be lost, something that is also possible with internal networks. "The question is, What happens to the instrument data if the network goes down?" says Weiner. "If your instruments are sitting there kicking out results and suddenly the connection is severed, what happens?" Laboratories and vendors must ensure the system has an intermediate buffer to capture the data if the network link vanishes.

Security, a second common concern, is less of a problem in Weiner’s view. "There are appropriate and powerful security, authentication, and encryption techniques that can provide adequate protection," he says. "The question labs need to ask is whether the vendors that are offering ASP services are at least HIPAA compliant."

While focusing on alternate deployment models, such as the ASP, Triple G is working globally-and finding the advantages to be unmistakable. "We have found that many of the driving factors-cash-flow pressures, consolidation, higher volumes, multisite and distributed operations-that we encountered in our first installations have become factors in other markets," says Green.

And because the company had already developed functionality to respond to these factors in one region, it found it could capitalize on and leverage that initial investment as it moved into other countries and regions. "In the U.K., for example," says Green, "laboratories are starting to go through what the U.S. went through four or five years ago in terms of regionalization and consolidation, with groups of hospitals joining together to open core labs and so on."

In short, laboratory medicine in different markets evolves similarly, and Triple G has positioned itself to benefit. "We have found that we are able to stay at the front end of the emergence of demands for new capabilities in our software," says Green, "as well as tweak it to meet local requirements."

True, he adds, Triple G does operate in countries-the United States, Australia, New Zealand, Singapore, Malaysia, China (Hong Kong), Canada, India, and the United Kingdom-that primarily use English in the laboratory. And the laboratories in these countries are staffed with pathologists of very similar education and training. Similar, too, are the cultural perspectives on the purpose and operation of the clinical laboratory, as are many of the laboratory procedures and technologies. "A CBC is a CBC; a Coulter is a Coulter," says Green. "We’re dealing with instrumentation and core laboratory requirements that are pretty standard around the world."

Triple G, says Green, has found more similarities than differences among its customer base, which extends across 10 countries. "Billing and some of the rules associated with order entry tend to vary by location," he says, "but the core application and the business issues it must meet, the objectives that labs are trying to achieve with their software, are pretty universal."

Triple G develops its products in Canada, the United States, Australia, and India. "It’s a challenging model," says Green, "but we grew up with it, and we can leverage advantage and extract benefits that may not be available to a company that is more centralized."

"With the advent of the Internet, it really doesn’t matter where you or your services are physically located," adds Weiner. "It is now entirely possible to have a support center in Australia that supports the U.S. market."

Green acknowledges that Triple G faces competition from local LIS vendors and developers in the markets it serves. By and large, however, he finds that, in countries other than the United States, competition tends to be highly localized. "Those companies are generally small five- to 15-person operations," he says. "Because of the limited size of their markets and their revenue streams, they typically cannot afford to make heavy R&D investments in their products, like we are able to do."

Eric Skjei is a freelance writer in Stinson Beach, Calif.