Can Microsoft Beat Apple in This Critical Growth Market?

It's unclear if Microsoft's (MSFT 2.57%) Surface Pro 3 will become a hit with consumers, but the hybrid device has already been well received by early adopters in the health care industry.

Seattle Children's Hospital, one of the top children's hospitals in the U.S., recently selected the Surface Pro 3 to replace its existing laptops for electronic medical records (EMR) management. According to Microsoft's Surface Blog, Seattle Children's Hospital CIO Wes Wright called the decision a "no-brainer" based on the device's weight, battery life, and application compatibility.

The University of Pittsburgh Medical Center (UPMC), a major integrated health care delivery and financing system, will also deploy 2,000 Surface Pro 3 devices installed with its in-house app, Convergence. Convergence combines UPMC's Epic and Cerner (CERN) electronic health record (EHR) systems with its legacy patient data into a single app.

Source: Microsoft

Therefore, the health care industry could represent a key growth market for Microsoft, which has been marginalized in the consumer-facing tablet market by Apple (AAPL 0.12%) and Google. Apple has notably made substantial gains in the health care market with iOS-compatible medical apps and devices, but it could be premature to consider Microsoft the past and Apple the future of health care IT.

The key strengths of the Surface Pro 3
Microsoft has stated that the Surface Pro 3 is a "clinical grade" device, specifically designed for the needs of medical professionals. They are equipped with powerful Intel Core processors, protected by enterprise level data security, and can be sanitized between patient encounters.

Windows 8 is also better equipped than iPads to interface with legacy systems -- which was a key reason UPMC launched its Convergence app for the Surface instead of the iPad. In an interview at Mobihealthnews, Dr. Rasu Shrestha, VP of medical information technology at UPMC, noted that physicians "hated the workflow" for Convergence on iPads, since they had to put the tablet down and log into a desktop-based EMR system to manually make the changes.

With the Surface and other Windows 8 hybrid devices, physicians only need to use a single laptop which can be converted into a tablet during patient visits. Most importantly, the patient data could be reviewed and modified on the same device. UPMC's Convergence on the Surface also has a notable advantage over iPad apps from a single EHR company -- it allows physicians to swipe between Epic and Cerner's EHRs within a single app.

The key drawbacks of the Surface Pro 3
But that doesn't mean that Surface Pro 3 is the ideal solution for all medical practices.

The first big problem with the Surface Pro 3 is its price. Depending on the hardware configuration, the Surface Pro 3 can cost between $799 to $1,949, and an additional $130 for the Type Cover. That's considerably pricier than other hybrid Windows 8 devices like Lenovo's IdeaPad 2-in-1 series.

The low-end $799 Surface Pro 3 ($929 with the Type Pad) is equipped with an Intel i3 CPU, a 64GB solid state drive, and 4GB RAM. By comparison, Lenovo's (LNVGY 1.55%) $780 IdeaPad Yoga 2-in-1 (a convertible device) has much beefier specs -- an Intel i5 CPU, a 128GB solid state drive, and 4GB RAM. Considering that many of the features that UPMC touted are actually built into Windows 8, wouldn't cheaper and more powerful devices like Lenovo's IdeaPad be potentially more practical that the Surface Pro 3?

Lenovo's IdeaPad. Source: Lenovo

Meanwhile, leading EHR companies like Cerner and Allscripts have introduced "native" iPad apps which are tethered to the cloud rather than desktop-based counterparts. This renders UPMC's "workflow" argument irrelevant for smaller and newer practices which don't use multiple EHR services or legacy patient databases.

Last but not least, Apple's HealthKit, which will tie all iOS medical apps and devices into a single iOS 8 dashboard app known as Health, could become a major threat for Microsoft. Health will not only gather data from multiple EHRs like Convergence, but can also enhance that information with readings from wearable devices and fitness apps.

The Foolish takeaway
The health care industry's early acceptance of the Surface Pro 3 teaches us three lessons -- that older hospitals still need support for multiple EHRs and legacy data, compatibility with older Windows software is still important, and the convertible form factor of Windows 8 hybrids is attractive to medical professionals.

But the high price of the Surface Pro 3, the influx of native iPad EHR apps, and the introduction of HealthKit could nullify Microsoft's advantages among newer and smaller practices. Nonetheless, investors should closely monitor Microsoft and Apple's progress in the health care IT market, which could complement their gains in the consumer-facing market.