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Testing the Waters

December 1, 2009
by Vince Ciotti
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IBM made a splash by linking up with supply giant Baxter in 1989. But was the model built for long-term success?

Surprised by Dell's recent acquisition of Perot systems or Xerox's takeover of ACS? Well, the trend for hardware manufacturers to diversify into “services” started exactly 20 years ago this month, as featured in the December 1989 issue of “US Healthcare.”

IBM: It's hard in this 21st century to imagine how dominant IBM was in the early days of IT. In the 1986 list of the “Top 25” HIT vendors, IBM ranked number one with $925 million in sales - four times as much as nearest hardware competitor DEC, with a paltry $175 million Besides their stable of 370 mainframes, Big Blue offered a range of minis, such as the System 38 and its new replacement, the AS/400, and had just eclipsed Apple in healthcare with sales of their “PS/2” line of PCs. In addition, IBM offered software, such as the “PCS/ADS” (Patient Care System/Application Development System) line of mainframe clinical and financial applications written in COBOL, and “HPMS” (Hospital Patient Management System) for their minis written in RPG. So what about their partner, Baxter?

Baxter: This supply giant had already acquired three “turnkey” systems, most of which ran on IBM hardware:

  • Alpha - acquired from JS Data in Rhode Island, a leading player in the small hospitals market of under 100 beds, running on IBM System 34 and 36 minis.

  • Delta - acquired from Dynamic Control Corp. in Florida, a leader in the mid-size hospitals market, running on System 38 minis.

  • Sigma - their version of PCS (based on the Duke-Parkland system), written in COBOL and running under MVS on 370 mainframes.

So from a hardware standpoint, the marriage was made in heaven, and adding Baxter's $115 million in revenue to IBM's software revenue made a dominant player. So what do you name this new entity? …

IBAX: Creative, huh? It sure beat “BAXIBM!” Frank Russo was appointed president of the new firm, owned 50/50 by IBM and Baxter, and renamed the products:

  • Series 3000 = Alpha, the old JS Data system

  • Series 4000 = Delta, the old Dynamic Control

  • Series 5000 = Sigma, the old PCS/ADS.

Reaction: Editor Bill Childs solicited commentary from a number of HIT pundits providing fascinating remarks from this “who's who” in HIT 20 years ago:

  • “I have a great deal of difficulty understanding how IBM will benefit.” - Art Randall, former McAuto vice president of marketing.

  • “For Baxter, the joint venture has to be a gift from heaven.” - Sheldon Dorenfest, HIS consultant.

  • “It is unclear how such a partnership can transform two obsolete systems into an innovative system that will address present and future hospital requirements.” - Ralph Korpman, UltiCare founder

  • “At least 45 PCS sites opted for other systems in 1988; thus, IBM had to do something to protect its remaining PCS clients.” - Ron Johnson, HIS consultant

  • “In my view, the success of the joint venture will depend on striking the right balance between the influence and control of the two parent companies.” - Rich Helpie, Superior founder

  • “In an industry already strapped for capital, it does not make sense to pay expensive consultants to integrate standalone systems. This new venture, with the finance and staffing support of both IBM and Baxter, provides a ray of hope … for an integrated solution. I hope I live to see the day.” - Ward Keever, CIO

Outcome: IBAX initially sold fairly well, especially the Series 4000, and IBM hardware continued to dominate IT. Eventually, however, IBAX sales slowed when the 50/50 R&D promises failed to materialize, and in 1994 IBAX was gobbled up by upstart HBO & Company. What did HBOC do? Why, they renamed all the products:

Series 3000 and 4000 were merged into a single product just called “Series,” still running today in hundreds of community hospitals. Series 5000 became “Healthquest” and merged with Medipac's patient accounting, also running today in hundreds of McKesson sites.

Let's hope Dell and Xerox do a little better at making the conversion from manufacturing commodities to providing superior service.

Healthcare Informatics 2009 December;26(12):80