Acquisition of a clinical data management product has kicked off Microsoft's expansion into healthcare software. Microsoft has purchased Azyxxi (rhymes with "pixie"), an application for integrating and presenting diagnostic results, notes, and other patient care data. The move is part of a broader initiative that could squeeze healthcare partners but also simplify the design of Windows-based healthcare solutions by customers and systems integrators.

A Vertical Move

Azyxxi is a Windows application originally developed at the Washington Hospital Center in Washington, D.C., and owned by Datomics Licensing and General Datomics (the latter co-owned by MedStar Health, which operates the center). Azyxxi integrates, caches, and presents clinical data (such as X-ray images and scanned documents entered by doctors) from multiple databases, enabling rapid access by doctors and other providers. As part of the deal, Azyxxi developers Craig Feied and Fidrik Iskandar and 40 employees will join Microsoft. A third developer, Mark Smith, will stay with Washington Hospital but will work with Microsoft to further develop and test the software.

The acquired product and new employees will join the Global Health Strategy unit, led by Corporate Vice President Peter Neupert, former Drugstore.com CEO.

Neupert has reportedly told the New York Times, "You'll find us expanding to a suite of healthcare solutions." The acquisition already represents a major expansion of Microsoft's efforts in healthcare. The company has been adding marketing muscle for healthcare for several years, and already sells some healthcare-specific software, such as BizTalk adapters for healthcare data exchange. However, Azyxxi will be the first Microsoft product to incorporate healthcare-specific business logic and support day-to-day operations by healthcare providers. That realm has traditionally belonged to ISVs such as Allscripts, Eclipsys, iSOFT, NextGen, and Siemens.

More generally, Microsoft has invested little in vertical software: Apart from its retail store management products, BizTalk adapters, and a short-lived online service (DealerPoint) for auto dealerships, Microsoft has left the field clear for ISVs that build on Windows, SQL Server, and general-purpose business management applications, such as Dynamics AX (See "Industry Builder Program Grows".)

Thus, the primary challenge of Neupert's organization will be to keep the loyalty of vertical ISVs that have been instrumental in sales of Microsoft's platform. Azyxxi itself suggests one strategy: The product is designed to wrap, rather than replace, existing clinical systems. In the short term, a similar "wrapper" strategy could give Microsoft a foothold in healthcare and similar verticals without losing established partners.

A 2004 Microsoft case study describing Azyxxi is at members.microsoft.com/CustomerEvidence/Search/EvidenceDetails.aspx?EvidenceID=2885&LanguageID=1.

A demo of Azyxxi from the 2006 Financial Analyst Meeting appears at www.microsoft.com/msft/speech/FY06/MundieFAM2006.mspx.