Dell Inc. (DELL) is slowly expanding its reach in the Health IT marketplace. NextGen Healthcare has entered into an agreement with Dell to jointly market health information technology products and services to medical practices, hospitals and physician networks.
As per the new agreement, Dell is expected to market, sell and support NextGen’s ambulatory EHR, practice management, inpatient clinical and inpatient financials products as components of Dell’s electronic medical records platform for hospitals and physicians.
Moreover, the company will also use the cloud computing platform, to host the NextGen applications in an effort to simplify access and data management for Dell and NextGen clients. Moreover, this alliance brings together Dell and NextGen, wherein NextGen products will take the help of the Dell hardware platform to enhance efficiency.
We think this is an ideal time for companies like Dell to focus on this business, as the federal government passed a bill last year, granting around $19.0 billion in incentives to medical practitioners and hospitals for buying and using IT Healthcare products. We believe this could be a lucrative business for companies like Dell, as it will find takers among hospitals and medical practitioners.
Moreover, the market is more or less recession-proof, which is an added bonus for Dell. This apart, only 10% of American health care providers have adopted a full fledged IT Healthcare system, so there is substantial growth potential in the segment. Dell is planning to combine its hardware with software provided by third party companies and provide services such as need assessment, system configuration, workflow process drawing and training and support to medical practitioners and hospitals.
Although Dell is a technical giant, we believe it will face competition from other bigger players. Companies such as Google Inc. (GOOG) and Microsoft Corporation (MSFT) will soon enter the IT Healthcare space. So this is a good business opportunity for Dell, but with obstacles which the company has to overcome to achieve success.
We believe healthcare professionals are increasingly adopting the concept of a paperless office, and recognizing the benefits of cost efficient storage and efficient management of medical services. This is likely to act as a catalyst, increasing spending on cloud-based solutions.
Currently, Dell has a short-term Buy recommendation, as indicated by the Zacks #2 Rank.
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