Industry Veterans at Healthlink Advisors Break Down the Vendor Landscape & Offer Bold Advice
Many CIOs — who have spent the better part of the last decade working on EHR implementations and other clinically-related projects — are now turning their attentions to the business side of the house. And few systems loom as large on that side as ERP — a suite of products that run an expansive gamut in functionality, and a large range in price. As they turn to these systems, CIOs are embracing the same move to the cloud seen all over the industry but, according to Healthlink Advisors’s President and CEO Lindsey Jarrell and Vice President Tim Webb, not all vendors are ready for primetime. In this extensive interview with healthsystemCIO Editor-in-Chief Anthony Guerra, Jarrell and Webb break down the vendor landscape and offer CIOs advice on how to navigate it.
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Guerra: Thanks for joining me Lindsey and Tim. To start off, I’d like a little bit of background on your organization and your roles there. Lindsey, we’ve known each other a long time, and I think you’ve known Tim for a long time. Give us a little bit of flavor about your experience.
Jarrell: Yes, thanks Anthony. It’s great to be with you today. So I serve as CEO of Healthlink Advisors. We serve the office of the CIO and other operational leaders in hospitals and healthcare organizations. Prior to founding Healthlink Advisors three and a half years ago, I was a partner with PriceWaterhouseCoopers and led their national revenue cycle practice as well as part of their health information technology practice. Prior to that, I was CIO at Baycare Health System based in Tampa Bay, Fla., and, prior to that, I spent a long time with the original Healthlink which many people may remember. Of course, that’s where we got our name, Healthlink Advisors, so my entire career has been in healthcare, and I’m looking looking forward to talking with you today.
Guerra: Tim, I believe you knew Lindsey back at Healthlink or was it before that?
Webb: I did. It was about 20 years ago that Lindsey and I first worked together at Healthlink. I had started out my career at PriceWaterhouse back in the ‘80s, then went to First Consulting Group, Healthlink, Tatum, KSA and now back with Healthlink Advisors, so I’ve been doing this for over 30 years and have known Lindsey for over 20.
Guerra: Great. Well, we are going to talk about the ERP market today, and I’m very much looking forward to it. Before we start, I think it will be good to set a baseline definition of ERP. Is it always the same suite of products or does it vary?
Jarrell: The classic definition is that ERP includes supply chain, financials and what we’ll call human capital, which is kind of a fancy way of saying human resources. That’s the classical definition of what ERP includes, but I’ll tell you it’s changing and it’s changing because the way technology and process is changing. Tim spends a lot of time in this area so, Tim, do you want to talk about the ERP ecosystem?
Webb: That’s right, you know there’s a lot of additional functionality that’s being focused on by the vendors as they mature their products and it’s not uncommon to see functions like treasury or project accounting or performance management — these are all things that may be considered part of ERP but are actually ancillary in many systems. So there are literally dozens of point solutions, some of which may still provide specific functionality not currently in the newer integrated or even the older integrated ERP systems.
Guerra: All right very good. So I understand you’ve been getting a lot of inquiries for work, for consulting services around ERP. What are people coming to you for?
Jarrell: We’re getting a lot of requests for ERP road maps, where, based on the ERP system I use today, where should I be going over the next one to five years with my ERP systems. Some of that’s driven by the current technology installed today and the maturity level of that technology. There’s some vendors in the market right now that are struggling a lot in terms of their product roadmap.
There’s also some new vendors, newer I should say, that have come into the market and are really defining the conversation, and so one of the things we’re getting asked to do is to come in and evaluate these newer vendors.
So Workday is a great example, Workday is a newer vendor in the ERP market. They really started on that human capital side of the business. They have a really good story, they have a great looking product. And when they’re calling on the VP of HR or SVP of HR in these health systems, that person is seeing a product that shows a lot of promise to solve some of their process problems. And so they get excited about that, which may lead into some internal discussion that, ‘We need a new human capital system,’ and so we get called in to say, ‘Hey, is that right? Do we really need a new system? And if we want a system, what kind of benefits could we expect? Is this vendor for real? How much will the vendor cost?’
So I would break it down and say we do a lot of assessments about how well you’re using your ERP systems today.
We do road maps to help you figure out a good direction to go, and then we do a lot of system selection work, so ‘I know I need a new ERP system, help me find the right fit in the right areas for my organization.’ And then once that type of work is complete, we’re also doing project and program management over implementations as those things get going.
Guerra: So you mentioned that the business leaders are the ones who are often sold to. And then it would be the CIO who’s calling you in for an assessment — is that usually what’s happening?
Jarrell: Yeah it is, that’s usually the way it works. I don’t want to minimize that fact that a lot of times it’s the CIO who’s coming up with the ask as well. That’s more driven by the CIO recognizing their current vendor today really is not doing what needs to be done in order to serve the organization for the future. So, for example, we’re seeing quite a bit of pain come out of Infor clients today. Infor is struggling on their ERP roadmap and so that’s causing some CIOs to just pause and say, ‘Do I need to be considering something different here?’
Guerra: So you actually see CIOs that are being proactive by looking into the businesses in different areas, one of them being ERP, and you’re saying they may not even be getting complaints from business but they may be identifying a problem that business hasn’t even identified?
Jarrell: I would break it down though in a couple of areas, so I think the problems the CIOs are seeing are more along the lines of, ‘The last couple of upgrades taken from this vendor, the code quality has been really poor,’ so my IT team is telling me this vendors code quality is poor and we can’t get through the upgrade. And then the vendor is showing up and not really having a clear road map on where they’re going on integration and functionality. So I think the CIOs are seeing that.
The business leaders are feeling like, ‘Oh my gosh, the recruitment module that I’ve been promised now is never coming to fruition. Where is it?’ The business leaders are getting more frustrated by the lack of functionality, and the CIOs are seeing the quality wavering and that causes some red flags.
Guerra: I guess the perfect storm for the vendor would be when they’re getting complaints from both constituencies, so then you’d have alignment on the provider side in terms of IT and business not being happy.
Jarrell: That’s exactly right, that kind of nightmare scenario. When we arrive the conversation often starts with, ‘Hey I know we need a new system. Help me figure out which one.’ A lot of conversations are starting there, just because of that frustration level.
Guerra: So you could have different scenarios — that perfect storm of both sides not being happy, or you could have one or the other not being happy, so things would play out differently depending on which.
Jarrell: You could, and I’ll add a little bit more to that, Anthony, on the technology side. The cloud delivery of software-as-a-service applications is where, of course, everyone is headed, and that further really illuminates the technology conversation because Workday and Oracle — who have true cloud-based offerings in this ERP market — are out there selling and delivering cloud-based ERP applications. Infor, who is installed in hundreds of hospitals across the U. S., they are not ready to move to cloud yet. I think they would tell you they are, but our research and work says they’re not quite ready yet, and so that’s putting Infor at a disadvantage in many selections. That illuminates that technology discussion, because there are a lot of organizations who were saying, ‘I need to be evaluating cloud-based products for total cost of ownership to save a capital outlay,’ but it’s just another layer on that competitive piece of who’s winning in the market and whose losing. That cloud piece is really playing into the system selections around the ERP that we’re seeing.
Guerra: We’ve spoken to many CIO’s over the past couple years who are total cloud advocates/converts. They want everything off prem that they can get, and it’s almost a mission to them. Are you seeing the same thing — that the most forward-thinking CIOs just want everything in the cloud?
Jarrell: Yes. We definitely see that trend. We spend a lot of time helping people look at the true total cost of ownership of moving to the cloud. What we often see is that the vendors offering cloud-based solutions today have figured out the pricing model to get as much as they can out of the organizations, so sometimes cloud, in fact, isn’t cheaper, it’s neutral, because of the way the vendors are pricing it. But, I agree, it is a huge trend, forward-thinking CIOs are headed that way, and so much of what we deal with today will be cloud based in the future. It’s clearly the direction.
Guerra: Let’s take those vendors one at a time. Is there any more you want to offer about Infor specifically?
Webb: As Lindsey referred to, Infor has been in the market a while. They acquired Lawson. Lawson had a large market share in healthcare as the leading solution, so a large portion of healthcare systems today have Infor as their current vendor. Infor established a road map to their cloud products. The focus initially was on that human capital management because, generally, financial and supply chain users were okay with the legacy solution but, as Lindsey alluded to, oftentimes this starts in HR. HR leaders in healthcare have been struggling to find the functionality that they need. They have been implementing point solutions around Lawson for years and there are many available to fill the gaps in performance management, recruiting, etc. So this has resulted in integration issues with manual data entry between applications, that results in errors, gaps in data. Different user interfaces from the application make gaining adoption difficult, so these healthcare organizations are paying a lot in application fees, manual processes and still not getting the value. So the logical first option was to follow the Infor roadmap and, as they’ve tried to move from the legacy Lawson/Infor platform to the new cloud-suite solution, they have struggled, they struggled with the upgrade, and even when upgrading portions of the HR application. So yes, this pain has made them stop, take a step back, reevaluate their position on Infor’s roadmap and look at other options in the marketplace.
Guerra: What about Oracle?
Webb: So Oracle, historically, they entered this space through a couple of acquisitions, the big one being PeopleSoft in 2004, which led to the founders of PeopleSoft leaving and forming Workday the next year. So Oracle has PeopleSoft and they’ve continued to support the product and they’ve pushed out the end date, the end of life for that product by a couple of years, announcing 2029. Interestingly Infor has not published an end date for the legacy Lawson product that’s still out there. So Oracle has PeopleSoft but they came out with their solution based on their fusion architecture. They really only entered healthcare a couple of years ago, so when you look at Oracle, they were selling PeopleSoft until a couple of years ago. In fact, I still hear occasionally about somebody buying. Quite frankly, they have continued to do updates but they change their model, and the number of updates they’ve done in the last five years is equivalent to one upgrade, so they’re not investing in that product. It will eventually end, but who’s to say exactly when. Their new product is hitting the market, they’re gaining market share but, again, they’ve only been selling in the healthcare for a couple years so they don’t have as many clients as Workday, for example with their new solution.
Guerra: Let’s talk a little more about Workday.
Webb: Sure, so Workday has been around since 2005 and they entered healthcare early. Their first product was human capital management. They have since added financials. They have grown and they probably have the largest market share. They have about 190 clients under contract, about 150 of those live. Oracle, by the way, has about 65 or 70 clients under contract, and about 25 of those live. So Workday is coming along. They just really introduced their supply chain function, so their focus in healthcare, as Lindsay alluded to, they’ve been selling to the CHROs, the people in charge of HR, because that was their sweet spot, that’s what they really have a solution for. Only about a third of their healthcare clients have their financial model and they only have a handful that are live now on their supply chain — they have about six or seven and they are smaller. They are just getting into the full capabilities.
Guerra: What’s your advice for current Infor clients?
Webb: So, as Lindsey alluded to, we’re getting a lot of inquires from them such as, ‘What do we do? Are we the only ones in this situation?’ because Infor has kept it very close to the vest when they’ve sold new clients. So the first response we give to an Infor client is, ‘You are not alone, all of your peers are going through the same situation.’ They’re struggling with those upgrades, they’re struggling with the wrap arounds, really understanding where Infor is with the vision, so our first response is, ‘You’re not alone. The Lawson or Infor community in healthcare is very much at the same spot.’
The second thing we say to them is, ‘Take a step back and let’s look at it from a complete ERP perspective. Let’s not think about it as just an HR solution.’ There are organizations out there that have implemented Workday but not as an ERP strategy, really more as a human capital management strategy, and what that has led to for those early adopters is they’ve — particularly the ones that went with Workday — they’re waiting on the rest of the functionality, they’re still waiting. Supply chain is still a very immature product.
So when we talk to our clients we say, ‘You’ve got to take a step back and think about this as an enterprise type of approach.’ You want to form an oversight committee that includes all of the senior leadership — the CIO, the CFO, the CHRO — and we also include in that the COO and the CNO because we think it’s important to remember that ERP is part of the business system portfolio and it’s used by every employee in your organization. So it is as comprehensive as an EHR in many ways. That’s why we recommend you have the voice of the customer at the table when you start talking about an assessment or roadmap or even a selection.
Jarrell: I think Tim did a great job covering it. I would just add from the governance perspective to broaden that conversation quickly and early, even though you’re likely to be getting pressure from one key department like HR which we keep referring to in this discussion. It’s important keep that broad mindset in play — when you buy, you don’t have to buy and implement human capital, finance, and supply chain all at the same time. You can stagger those implementations, but when you buy it’s important that you have a holistic mindset around that to understand, ‘Will I be using the same vendor for all of these in the next three to five years,’ so you can buy and just implement human capital but you really need to determine if you’re going to go and roll that out to the rest of the organization as well in a three to five year time period.
Guerra: So based on a client’s situation, you might advise them to stay on their current vendor or switch, but even if they switch, there will be a lot of work for them to do, correct?
Jarrell: Yes. Especially with the advent of moving to a cloud-based solution. The vendors, as they sell the product today, once you sign that contract and you decide you’re going to buy a new ERP system — as part of the implementation methodology that those vendors are coming to the table with — they really expect the organization to arrive with a standardized vendor master, standardized supply master, standardized pay practices. They expect your organization to arrive with a lot already done.
As organizations think about acquiring these new ERP systems, there’s really been a change in the way the software vendors think about implementation and an implementation methodology, and what I mean by that is once you sign the contract and you bought the software, these vendors expect these organizations to arrive ready to go. They expect these organizations to arrive with standardized pay practices across the board from an HR perspective, or a standardized supply master across the organization for supplies, perhaps standardized financial processes to close books across the organization, and these are all really large undertakings. It’s necessary to be standardized in these ways in order for that cloud-based application to work well. These cloud-based new applications are tightly integrated and they really work well and best off of standardized practices across large organizations.
And I mention all of that because it’s not just about buying the software and allowing the vendor to implement the software. There’s a lot of business transformation practices that come along with that, just what I was talking about there, so when we think about buying new ERP software, we’re working with organizations a lot on total cost of ownership to say, ‘What it will really take to buy it,’ so we’re looking at the cost of the software, we’re looking at how much the vendor costs to implement the software, but then you need to go hire third-party consultants, and you need to be ready for the kick off, you need to have standardized a lot of things I talked about before and more, and really think about how you’re going to take advantage of this software, because it is very expensive when you think about tens of millions of dollars, and so without that business transformation and without really being ready for the software vendor, you’re not going to get your money’s worth out of these new systems.
Guerra: It’s kind of fascinating that it’s necessary to bring in third-party help in order to figure out what something costs. You can’t just take the vendor’s word for it.
Jarrell: I agree with you, and we see it all the time. I think it just comes down to how different businesses are incentivized to sell and create revenue, so the software vendors want to make it sound easy and want to kind of grease the skids so that they can get that transaction through procurement, the client will sign the contract. We spend a lot of time helping organizations look around the corner so they can anticipate the unknowns.
Guerra: And that’s the difference between selling it to the business leaders who want it because it’s going to help them do their jobs, but they may not understand all the nuances of bringing a piece of enterprise technology on board, versus selling to CIOs who will.
Jarrell: Yes. One of my favorite examples in that regard and it’s a simple one — and I’m sure Tim has more — is I’ve literally sat in sales presentations with Workday where the sales reps say, ‘Don’t worry about the interfaces, those are right out of the box, you don’t even need to involve IT.’ I’ve heard that with my own ears, and that’ll just make a CIO’s hair catch on fire when they hear that.
Webb: That’s right, absolutely, and there are other vendors that do it as well, and it plays to the business owner — the head of HR who wants to hear that because they feel like IT has held them back, the system capabilities held him back, and to hear the vendor say, ‘You don’t need IT,’ it’s music to their ears, but unfortunately they don’t even know what the implications of that are. To Lindsey’s point about total cost of ownership, these systems do not implement themselves, and I’ve talked through reference calls with several of the vendors that if a client does not dedicate resources to the implementation similar to an EHR, to a person they will say their number one lesson learned is, ‘Make sure you bring sufficient resources to the implementation — pull people out of their jobs so they’re dedicated to the implementation.’ These are not simple, off the shelf, install the software implementations, there’s a lot of business process that needs to go into it and, if you’re not there, not involved, it results in a less-than-optimal implementation.
Guerra: Let’s give our vendor friends some advice here. You want to sell something to the person who’s going to use it, so I understand going to the business leaders — they’re the ones who would be using it as opposed to going to IT first, but to try and cut IT out of the process is just ridiculous for an enterprise buy. What’s your advice on what the proper way to sell these types of products?
Jarrell: I hear you and I agree with you. We witness it all the time though that the salespeople have good success by starting with the business. I think they view it that once they create the momentum from the business side, it would be hard for IT to stop it, and they’re kind of willing to put up with IT being mad at them, as opposed to going and working with IT as a partner. We really do see it a lot. It’s not an exaggeration. I think it is declared sales strategy. I don’t know that for a fact, but I can tell you that my advice to any folks selling this is focus on the benefits, don’t over promise on the easy implementation because the truth is going to come out and then you’re going to get hurt by that. Focus instead on the benefits and the good things that will come by doing this implementation or using this new product well. If you focus on that, there is a lot to be gained here but, you know, it’s hard work to go get it — anything worth having is often hard work, and I think this is a good example of that. So really lead with the benefits about how it’s going to benefit the organization, how it’s going to benefit the patients, how it’s going to benefit the market and the employees, and focus less on just the collection of functionality.
Guerra: We’ve talked about capital outlay — this is not quite EHR dollars but it’s not insignificant. How would you describe the outlay?
Jarrell: In the tens of millions of dollars. When you look at the cost of the software, the cost of vendor implementation, the cost of third-party consultants, all the costs of the go-live activities that go on, it ranges. I mean, we’ve seen it as large as $30 to $50 million for very large enterprises, so it’s going to range based on the number of facilities, the number of users you have, whether or not you’re going to just start with human capital — which is common these days — and go with finance and supply chain in the future. So a lot of those variables come into play, but it’s a significant expense.
The way you will first see it from many of these vendors — if you’re a CIO or in a leadership role in IT — the first time you see the proposal you’re simply going to see a few dollars for implementation. By a few dollars, I mean $5 million or less, and then you’re going to see an annual rate — depending on your organizational size — say $500,000 to $2 million a year in subscription fees, and that’s not going to feel like tens of millions of dollars because you’re not looking at all the components of true total cost to implement it. So we’re not trying to scare folks off, we’re just trying to be really thoughtful and realistic about the cost burden for the organization.
Guerra: Let’s talk a little bit about your advice for the CIOs on dealing with the business leaders. What about a scenario where the business leaders want a new tool because they’re not getting the functionality they need but, for any number of reasons, the CIO doesn’t believe it’s the right move for the organization.
Jarrell: I’d start by challenging the framework of how that discussion is happening. If you’ve got a business unit coming to you declaring they have a need, I think we have to challenge the business unit to be clear, ‘What is it that you see in this new product that you don’t have today.’ And then the CIO and his or her team need to deploy into that business unit — HR, finance, supply chain, recruitment, wherever it is, and get out of the meetings and go observe. When I sat in the CIO seat — and I know it was the same for Tim in his roles — we are both very big proponents of walking a mile in our customers shoes, whether those customers are internal or external, so let’s get out of the meetings, let’s send a couple of managers or directors to go observe in the department, let’s experience their pain firsthand and really help be advisors to them to help them make the right decision. I would just challenge folks to say if the discussions are really only happening in meetings that people schedule, and that’s where the decision is being reached about what a department needs or doesn’t need, I think that not good enough. I think people need to deploy into departments and witness it firsthand.
Now that kind of deployment and partnership at the department level will illuminate one of three scenarios. One — the tool in use today can actually do the things the department needs it to do, but they just don’t know of the functionality or understand how to use it, or old processes have just been inherited there over time and they just need some retraining and re-baselining because the tool they have today can actually help them out a lot.
The second is — the tool they have today can’t do it, the software application cannot do what they need, but our current vendor is about to come out with an upgrade that will solve that problem for them. Or the current vendor has some training or some work-around that will really improve process and save time and money.
Or third — this current solution is not getting it done, so we do need to be looking outside. And then that’s a richer conversation done in true partnership. I realize that that is the intent of any of us who have worked in this industry and served internal customers, but sometimes it’s just that those kinds of conversations need to happen at a detailed level inside the department and outside of conference rooms.
Webb: I think those are excellent points, Lindsey, and I would add that oftentimes this discussion starts to center around what are the skills that IT is bringing to the table to help the end users through that discussion, and oftentimes what we see is a lack of true business analysts skills. IT oftentimes has the technical expertise to support ERP and other business systems, but hasn’t lived within the department, etc. The department may have one or two people who sit there but, again, they’ve always been focused around, for example, Lawson that’s been installed for 20 years and so they’re very application-centric and they’ve forgotten how to look at operational processes.
So that business analyst still is an important component of that discussion and making sure we are looking beyond the technology, truly at the process you alluded to before — the standardization is key for a new system. Many clients look at this is as a journey that takes a year or more to clean up the data, clean up the processes, standardized those processes, mature those processes, optimize what they have today, and then go out and look at the marketplace and compare that to the vendor they’re on and what that roadmap looks like, and what the technology alternatives are with the new systems.
Guerra: I think we’ve covered most of the issues I wanted to cover today. Is there anything else you want to touch on or anything you want to add? Any final advice?
Jarrell: In summary, think ‘enterprise not department’ is one tagline I’d probably put on this, so even though you may be feeling a lot of pain in one single area or with one single module of your current ERP vendor, it’s important to think broadly about where this roadmap is potentially going to take you over the next five years. And I would get a broad set of stakeholders involved. Tim did a great job outlining that. Depending on how your IT governance model works today, that may feel a little unnatural, but all of these business stakeholders and clinical stakeholders are working to get more efficient to drive costs out and — to use a lean term — to remove waste out of the system, and I think they’re eager to engage in really strategic discussions like this. And then look hard at the market to find the right fit. It’s not just a matter of going and buying new technology. There are paths to save your current technology today, so think carefully and look at the market as a whole.
Webb: I think the conversation we have with clients that is really important here is if you’re going to look at the vendors that are out there, hold them accountable to bring best practice, not to just show you all the bells and whistles and the functions, but actually how they’ve used their tool and developed best practices with their other clients to bring you a best practice, because this is truly about business transformation. Nobody’s really excited about just changing out a lot of software that impacts a lot of people, with all that cost involved, without getting some real benefit, and Lindsey alluded to it — that benefit comes through your best practices and you’ve got to hold the vendors accountable.
The most beneficial selection projects have been where the vendors have done that, and it is not necessarily natural for them to do that. They would much rather go through a script in a demo and completely ignore what’s relevant to you, so I would add if you’re going to go out and look at the vendors, make sure that you’re holding them to bring best practice — not, ‘We can do it however you want,’ because unfortunately, with any technology, we can pave the cow path, we can we can automate your horrible manual process that you have today and you’ll be no better for it.
Guerra: Very good gentleman. Thank you so much for your time today.
Jarrell: Thanks Anthony, appreciate the opportunity.
Webb: Thank you Anthony.