1 Huge Opportunity Salesforce and Philips Are Attacking

Salesforce and Philips just announced an ambitious new partnership to bring cloud-based telehealth to the masses. Here’s how the deal with benefit both companies.

Jun 28, 2014 at 7:47AM

Cloud computing giant Salesforce (NYSE:CRM) recently launched an ambitious telehealth collaboration with Dutch conglomerate Koninklijke Philips (NYSE:PHG).

Philips' medical monitoring devices will send biometric data to mobile apps, which will then relay the data to Salesforce's Salesforce1 Platform for analysis. Philips will launch two apps for the platform, eCareCoordinator and eCareCompanion, and open up its APIs for third-party developers to create additional mobile apps. The ultimate goal is to help medical professionals in hospitals monitor the daily health of hundreds of patients at home.

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Philips' monitoring devices. Source: Philips

If Salesforce and Philips' partnership takes off, it would mark a big leap forward in merging telehealth, which has mainly focused on one-on-one remote care, with cloud-based services.

Why Salesforce wants to connect hospitals to the cloud
Salesforce is a subscription-based customer relationship management (CRM) service that helps businesses organize and analyze contacts, reports, and accounts over the cloud.

This makes it an attractive alternative to storing data on on-site servers, which are expensive to maintain and prone to failure. Last quarter, Salesforce's subscription and support revenues, which account for 93% of its top line, soared 36% year over year to $1.15 billion.

Recognizing the potential of the company's CRM platform in health care, Peter Gassner, Salesforce's former senior VP of technology, and Matt Wallach, the former GM of pharmaceuticals and biotechnology at Siebel Systems (now part of Oracle), founded Veeva Systems (NYSE:VEEV) in 2007.

Veeva uses Salesforce's CRM platform to track prescriptions, clinical trials, regulatory filings, and industry regulations for drug companies. In March, Veeva agreed to pay Salesforce annual payments that will eventually equal or exceed a total of $500 million to maintain their existing partnership through 2025.

Through Veeva, Salesforce gained a foothold in the biotech and pharmaceutical industries. Through its partnership with Philips, it can extend that reach into hospitals and homes as well. During a recent webcast, Salesforce CEO Marc Benioff noted that the telehealth platform with Philips could eventually connect to consumer-facing health data platforms like Apple's HealthKit, Google (NASDAQ:GOOG) (NASDAQ:GOOGL) Fit, and Samsung's SAMI.

In other words, if those three companies tie together the fragmented market of wearables, devices, and apps, Salesforce could potentially swoop in and connect all of those services to its subscription-based cloud.

Why Philips craves growth in health care
Partnering with Salesforce is only one way that Philips intends to connect its medical devices to the cloud.

Last October, Philips partnered with Accenture to launch a proof-of-concept project for Google Glass, which displayed vital signs and data from a patient's EHR (electronic health record) on Glass' heads-up display. Although the system hasn't been tested on real patients in a hospital environment yet, it proved that Philips' IntelliVue patient monitors could effectively retrieve data from the cloud.

Partnering with Accenture and Salesforce will put Philips at the forefront of three rapidly growing industries -- telehealth, mobile health (mHealth), and enterprise cloud computing. IHS expects that the U.S. telehealth market will grow from $240 million today to $1.9 billion in 2018. Transparency Market Research forecasts that the mHealth market will grow to $8.03 billion by 2019. Meanwhile, the global cloud computing market is expected to grow at a compound annual growth rate of 36% to $19.5 billion by 2016, according to 451 Research.

When we consider that Philips' Healthcare segment, its largest business, posted a 2% year-over-year decline in comparable sales last quarter, it's easy to see why Philips is so interested in tethering its monitoring devices to the cloud.

Connecting bodies to the cloud
In 2013, 190 million patients worldwide were monitored by Philips monitors. 40 million babies were monitored by Philips' fetal monitors. If Philips and Salesforce's partnership is fruitful, those monitors could connect to other medical devices, EHRs, and smartphone apps, completely connecting patients to the Internet of Things for around-the-clock monitoring.

This would be a big benefit to companies, hospitals, and insurers. The margin of medical error could decrease dramatically, and medical practices would earn more government subsidies for achieving "meaningful use" standards under the HITECH Act. Data breaches exposing patient records would fall dramatically as records are moved to cloud-based services like Salesforce, helping practices remain HIPAA-compliant while using telehealth services. Insurers would have to pay less for ER visits and hospital readmissions.

The Foolish takeaway
Salesforce's partnership with Philips could just be one of many cross-industry deals which help medical device makers connect their devices to the cloud. Therefore, investors in both the tech and health care industries should keep an eye on how these companies intend to profit from the growth of the telehealth, mHealth, and cloud computing industries in the near future.

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Leo Sun owns shares of Google (C shares). The Motley Fool recommends Google (A shares), Google (C shares), and Salesforce.com. The Motley Fool owns shares of Google (A shares) and Google (C shares). Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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