As I stated in a previous article, the foundation for modernizing U.S. hospitals and helping new “smart” medical devices flourish is a healthy Wi-Fi network. A recent study from Ponemon Institute found that outdated technology such as pagers, poorly run email systems, BYOD (bring your own device) bans, and the lack of stable Wi-Fi connections cost U.S. hospitals $8.3 billion annually.
These shortcomings are impeding the adoption of useful mobile medical reference apps such as athenahealth‘s Epocrates and popular mobile EHR products such as Allscripts‘ Wand and drchrono. They also make medical tech based on wearable smart devices more of a dream than a viable future.
Therefore, let’s focus on the primary players in enterprise Wi-Fi — Cisco Systems, Inc. (NASDAQ:CSCO), Juniper Networks, Inc. (NYSE:JNPR) , and Hewlett-Packard Company (NYSE:HPQ) — and see how each company intends to improve the connectivity of U.S. hospitals.
Meet the 800-pound gorilla
Cisco Systems, Inc. (NASDAQ:CSCO), the largest networking company in the world, is the dominant company in enterprise Wi-Fi with a market share of 52.9% according to the latest numbers from IDC. Cisco Systems, Inc. (NASDAQ:CSCO) has a strong presence across multiple industries, and it has used a strategy of bundling network products together at a discount to gain market share from smaller rivals.
Even after those discounts, however, Cisco Systems, Inc. (NASDAQ:CSCO) has impressively retained higher margins than its primary competitors.
| Operating Margin (mrq) | Profit Margin (mrq) | |
| Cisco | 23.69% | 20.54% |
| Juniper | 11.64% | 6.74% |
| Aruba Networks, Inc. (NASDAQ:ARUN) | 0.33% | -5.39% |
| Hewlett-Packard | 7.84% | -2.79% |
Source: Yahoo Finance, 9/2/2013.
Smaller competitors such as Aruba Networks, Inc. (NASDAQ:ARUN) have been crushed by Cisco’s strategy. While Cisco Systems, Inc. (NASDAQ:CSCO) can bundle together WLAN and other data center products, such as video security solutions, smaller companies (in terms of market share) like Aruba Networks, Inc. (NASDAQ:ARUN) can only provide standard WLAN products at higher prices.
In healthcare, it’s the same story. Aruba Networks, Inc. (NASDAQ:ARUN) has a suite of mobility options for healthcare practices to increase Wi-Fi connections for clinicians and patients, including robust support for EHR (electronic health record) software.
Cisco has gone several steps further, however, by partnering with tech giant IBM to create an all-in-one digital hospital solution that includes RFID tags for patients, biometrics-activated work terminals, and improved security measures which optimize clinician workflow via integration with EHR software.
As a result of its bundling and strategic collaborations, Cisco Systems, Inc. (NASDAQ:CSCO)’s enterprise Wi-Fi revenue surged 23.4% year-on-year in the first quarter of 2013 while Aruba Networks, Inc. (NASDAQ:ARUN)’s only grew by 8.5%, according to IDC. Hewlett-Packard Company (NYSE:HPQ)’s Wi-Fi enterprise revenue grew 12.4% during that period, giving the company a 5.4% share of the market.
Are Juniper and HP doomed to follow Aruba?
Juniper Networks, Inc. (NYSE:JNPR), on the other hand, has attempted to boost its presence in healthcare IT by emphasizing the more robust security measures in its WLAN products. According to the Ponemon survey, weak security measures caused 63% of hospitals to suffer data breaches in the past two years; this caused BYOD bans to continue.
Juniper Networks, Inc. (NYSE:JNPR) is attempting to simplify networking in hospitals by assigning a single policy per user which works across the entire network. While tougher security and simpler procedures sound catchy on paper, they don’t substantially alter its original business of selling routers and switches.
Hewlett-Packard Company (NYSE:HPQ), on the other hand, has recognized the need for expansion into other areas of healthcare IT. It recently announced a major deal with healthcare IT giant Cerner Corporation to upgrade the data analytics that form the backbone of its EHR business. In addition to selling routers and switches that only generated 2% of its 2012 revenue, Hewlett-Packard Company (NYSE:HPQ) could expand its much larger HP Services segment that accounts for nearly a third of its top line to also cover the healthcare sector.
Companies like Aruba and Juniper Networks, Inc. (NYSE:JNPR), which primarily produce routers, switches, and WLAN access points, will be at a disadvantage against Cisco and Hewlett-Packard Company (NYSE:HPQ) which have more flexible business models.
While companies like Cisco have focused on building large enterprise Wi-Fi networks, Broadcom Corporation (NASDAQ:BRCM)’s WICED Direct allows OEMs to create wearable smart devices which can seamlessly connect and share data across the cloud. WICED Direct emphasizes higher performance coupled with more efficient power usage, making it an essential component in next-generation wearable health monitoring products.
Broadcom Corporation (NASDAQ:BRCM) noted that a study from Juniper showed that the smart wearable tech market could be worth $1.4 billion by 2014.
The Foolish bottom line
Just as telecom companies laid down the groundwork for the growth of the Internet, networking companies are building the infrastructure to help EHR companies flourish to optimize patient care.
More diverse companies like Cisco and Hewlett-Packard Company (NYSE:HPQ) might have an easier time growing their market share, while companies like Aruba Networks, Inc. (NASDAQ:ARUN) and Juniper Networks, Inc. (NYSE:JNPR) that are less diversified might struggle to maintain their profit margins. Other companies focusing on wearable tech, like Broadcom Corporation (NASDAQ:BRCM), are also worth following in anticipation of a new wave of wearable smart devices.
The article These Networking Companies Are Modernizing U.S. Hospitals originally appeared on Fool.com is written by Leo Sun.
Leo Sun has no position in any stocks mentioned. The Motley Fool recommends Cisco Systems (NASDAQ:CSCO).
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