Your orthopedics company may not be in the software business, but eventually, a software company will be in your business.
This article is a primer for ortho suppliers considering generating revenue from the new business model – software. Many people inside device companies don’t understand software products. Today, most of us are wired with a “device mindset”, but tomorrow a piece of your revenue will come from software products.
Forward-thinking device companies are starting to experiment with software products. Software products can be sold differently. Most software is sold through SaaS business models.
SaaS stands for “Software as a Service”. We all use SaaS products such as Google Drive, Dropbox, Adobe, Slack, Oracle, AWS, or Evernote. In my recruiting business, I buy subscriptions from LinkedIn for recruiting and from Freshbooks for accounting.
I have previously written that software is the future of orthopedics. In the 2020s decade, you can either sit on the sidelines and watch, or start experimenting. Many of today’s progressive device companies will learn to deliver value to healthcare customers with new software analysis tools. They will gradually move from hardware –> software.
Hospitals will not “own” these new software analysis tools… they will simply “borrow” them. Hospitals will pay the orthopedics supplier directly to rent or subscribe to the data.
What are some real examples of SaaS businesses by orthopedic suppliers today?
- Software revenue model for remote OR support – Avail Medsystems. Avail is here today. They have raised $129M to date. Avail sells a SaaS-based membership model to hospitals and installs the hardware in the operating room FOR FREE. Avail has built a new “operating system” for remote collaboration during procedures.
- Software revenue model for smarter purchasing of ortho implants – Relatable‘s SaaS solution is here today. Relatable provides analysis to compare devices across suppliers. Relatable sells SaaS-based membership models to hospital administrators and purchasing agents. Relatable has built a new “operating system” for hospital/ASC purchasing.
- Software revenue model for a digital surgical ecosystem – enhatch launched the Intelligent Surgery Ecosystem at AAOS/NASS this year. The ecosystem helps companies manage surgeries from preop to postop using artificial intelligence and advanced workflow to accommodate any medical device.
- Software revenue model for surgical training – Explorer Surgical is here today. Explorer sells a remote medical training platform and also has tools for the OR staff for case support and workflow. Explorer’s primary business model is SaaS.
- Software revenue model for post-operative joint issues – Here are three examples of SaaS plays in the future. TracPatch enables healthcare providers to make evidence-based care decisions using real-time patient data. Today they sell wearables, but tomorrow they may sell data. Canary Medical completed its first-in-man surgery with its sensor in a Zimmer Biomet Persona IQ total knee. Data is being collected on patient #1. There will be many ways to sell the data in the future to healthcare providers. Corin hasn’t figure out how to sell this software yet but their CorinConnect has a cloud-base intelligence system named OPSInsight to predict early problems with hip surgery, such as impingement and dislocation risks.
- Software revenue model for intra-operative super-intelligence – Emerging. Proprio Vision is an early-stage startup. Proprio will leverage AI/ML/AR with a smart vision system to turn a regular surgeon into a super surgeon. Proprio is a software play, not a hardware play. They are in the process of building the new “operating system” for complex surgery.
7 real benefits of SaaS for ortho suppliers
- Little Competition – If you are selling a valuable software product, you likely have very little competition compared to the myriad of similar hardware devices for sale today. You are unique and differentiated.
- Expanded Market – Since your SaaS product is agnostic to hardware, overnight, you can sell SaaS to hospital customers with locked-in device contracts with Stryker, Medtronic, S+N or anyone. Everyone is your customer now.
- Less Sales Friction – Most of the SaaS solutions are priced per user or per month or per use session. This price transparency (compared to devices) allows the end-users to calculate costs easily. It eliminates the sales friction that can come as a result of a hospital admin budget approval of capital equipment or devices.
- Less Overhead – A SaaS product company has less employees, so your SG&A is minimal and your margins are healthy.
- Recurring Revenue – One of the greatest benefits of the SaaS business model is that it allows a recurring stream of revenue which helps you control churn. Just like selling devices, but without the servicing costs.
- Seamless Product Upgrades – With SaaS, you can continuously update your product. This will help fine-tune your product so that you can increase retention and attract new customers in the process. Devices are very difficult to upgrade (regulatory, quality, testing, etc).
- Optionality – As the owner of the data, you can deliver multiple products from the same cloud-based data set. You can also experiment with new product offers with one hospital customer at a time. The flexibility is endless. Dear insurance provider, would you like to know which hospital or surgeon has the best outcomes? Yes, we can sell you this data.
What is the best SaaS play for you?
Well unfortunately, you will have to figure that out for yourself, but one big hint is that your software or data analysis must provide real value to healthcare customers – better outcomes, less OR staff, shorter OR time, less mistakes, lower implant costs, etc. There are many untapped opportunities. Here are a few.
Who is going to create the software revenue system for virtual reality surgery training? PrecisionOS has a good start with this one.
Who is going to create the software revenue system for better surgery?
This one is up for grabs but Proprio is the most promising to date.
Who is going to create the software revenue system to design a better clinical trial?
Who is going to create the software revenue system to execute a better clinical trial?
Who is going to create the software revenue system for better technical support during the procedure? Avail Medsystems and Explorer Surgical have a head start.
Who is going to create the software revenue system for better device inventory management?
Questions – tiger@tigerbuford.com