When Does an Upgrade Become an Opportunity?

A Reader Asks ...

A Reader Asks: “When it’s time to upgrade, how do I discern between a major and minor one? How do I decide if an upgrade is big enough that it makes sense to investigate my options with other vendors?”

Vince Ciotti, Principal, HIS Professionals

HIS Pros Answer: Most “upgrades” are new releases or versions of a currently installed system, and should have no cost associated with them. That’ what you’re playing software maintenance for. The only cost with a new version or release might be hardware (a larger server) or third party software (newer versions of Windows or Office). If a vendor is charging for a new version or release, something is wrong with your contract, as almost all vendors provide them for free.

Want to have some fun? Take the figure you are paying in annual software maintenance fees, and multiply it by the number of hospitals using your system. For example, say you are paying $250K per year, and your vendor has 400 clients on your system: that’s $100M per year the vendor is raking in to fix a few bugs every year… How many programmers can you hire for $100M a year? Enough to write an entirely new HIS every few years. They shouldn’t charge a dime for a new version or release!

If the vendor claims they have a whole new product that you have to purchase from scratch, then it is definitely time to look at alternative systems. Some examples are:

• Meditech — which used to charge users of their old “Magic” system quite a hefty fee to upgrade to their newer “Client/Server” version. A small Critical Access Hospital might have paid only about $1 million for license fees and implementation of Magic back in the ’90s, so to be hit with $500,000 or more in fees for a C/S upgrade should make them evaluate alternatives like CPSI, HMS or Healthland, who offer an entire new HIS for not much more than these “upgrade” fees.
• Siemens — which sunset its “Unity” system several years back, comprised of a minicomputer front-end running ADT and order-entry to its shared mainframe “FMS” financial system. Unity customers were charged a hefty sum to “upgrade” to Invision, which offered pretty similar functionality, but at substantially increased fees. As with Magic clients, these hospitals should definitely check out alternative vendors, as many offer complete in-house systems whose TCO over 10 years might be substantially less than RCO fees …
• IDX — replaced its aging “LastWord” system with the newer “CareCast” alternative, at a rather hefty fee for such a high-end system. Many of these large hospitals went to market to evaluate alternatives like Cerner & Eclipsys, to check out their price/performance. Yes, it is painful to go through an entire conversion, but maybe not as painful as shelling out large sums to your “partner” who used your annual maintenance fees to build the new system they are now charging you for.

So the simple answer is COST. If the vendor is charging for a supposedly new system, a CIO would be remiss to simply roll over and pay without looking at alternatives. If nothing else, getting quotes from competitive vendors and looking at demos of their systems will give you significant negotiating power with your incumbent. It will teach them that you don’t appreciate having a “partner” pull the rug out from under them, and probably get you a lower price from them for continuing the relationship.