Can HL7 derive revenue from Tooling?

Sep 6, 2012

One of the proposed sources of revenue to replace the IP based income for HL7 is “tooling”. What kind of tooling could generate this kind of income stream for HL7? Since I can’t imagine other SDOs adopting HL7 tooling (RMIM designer, Rosetree etc) for free - let alone for a decent amount of money - it’s going to have to be implementation tooling that HL7 can sell to implementers - whether members or not. What kind of implementation tooling is there for HL7 related work? Here’s my list:

  • Programming API libraries / generators / Frameworks
  • Interface Engines
  • Middleware
  • Conformance Statement generation, comparison and publication
  • Conformance and Certification Testing
  • Implementation Guide Development

These tools cover

  • HL7 v2
  • CDA
  • V3
  • Terminology
  • EHR-FM

In practice, there’s a high degree of of overlap between the categories, and/or tools cross the boundaries as they seek to value add off the common knowledge base that is needed for any of them. There’s an active market in all of these for the various HL7 specifications, sometimes purely a commercial one, and sometimes with considerable government sponsorship.

From a market perspective, the toolkits range in price from free/open source through into the million dollar range, though no one is getting rich from the tool market. In fact, many participants either give away the tooling or provide it less than cost as marketing for value added services (The simple tools on this site, for instance).

Actual Tools

There are others, but they don’t come to mind as I write this offline on an aeroplane over Mexico.

Prospects for HL7

So can HL7 make money by providing tooling in this space? I don’t think so. Why?

  • The existing toolkits have borderline viability. In the end, this is a supply/demand thing - the market is a fixed size, and there’s many tools at all sorts of price/functionality points. HL7 entering the market will increase supply, but it seems unlikely that demand will increase much, though it’s reasonable to suppose it will increase somewhat due to the free IP (though one would think that the increase in the market that follows that new availability offreeIP will be focused on tools at the low end of the market pricing). Further, the market is characterised by a high transaction cost - the cost of changing tools is much more expensive than most of the tools. Most HL7 implementers already have made their architecture/framework choice from amongst the available tooling options, and won’t lightly change
  • Is HL7 prepared to enter the market of some of its most active members and compete with them? how could they respond, and would their response be even more damaging to HL7?
  • The existing tooling providers are mostly small (though some are very big indeed), and either sell a highly customisable tool, or are structured to be highly responsive to user requests. If HL7 enters this market, what will it offer? From a market position point of view, what HL7 has to offer is alignment - that this tool really does mean doing HL7 standards well. That works against both approaches (customisability or responsiveness), and yet my market experience tells me that one of these two - or both - are critical
  • The existing tooling providers are mostly built around the product - someone created something for their own use, saw the potential for wider use, and made it so. I don’t know what the market failure rate for these tools is, but I think it’s not insignificant. The existing tools have already survived the merciless market cull, and HL7 will have to create tools that will have to survive the cull.
  • Who will lead the tool development? Most of the tools are conceived and brought to market by a particular person. Recruiting such a person is a lotto - the people who have already proved that they can do this are very expensive, and mostly already embedded in the market. So you need to recruit for potential, which is highly risky
  • At present, one of the common accusations about HL7 is that it’s dominated by consultants who prefer the standards to be complex in order to feather their own nest. I know that this is not true - things are complicated enough by themselves, and we don’t want to make them more so, but nevertheless, HL7’s specificationsarecomplex. What will happen when HL7 gives away free specifications, but sells tools to make them work? Now complexity will be (perceived as) directly beneficial to the organisation. And I think it will prove harder than ever to solve the complexity problem correctly, by producing standards that align with consumers expectations
  • HL7 could try for an acquisition - that’s just a straight numbers game: the more revenue you are buying, the more it’s going to cost. HL7 finances aren’t my thing, but I’m thinking that this would not be a good way to spend the existing resources of the organisation

So is there any space for HL7? Well, I go back to my observation that many of the organisations are providing tooling at less than cost as loss-leaders for the services they provide. If HL7 is providing services, then maybe some tooling logically falls out of that. But are services a good idea? That’ll be the subject of another post.