The growing popularity of Cloud applications has attracted a group of unusual investors wanting to cash in on the current wave of Cloud adoptions in different verticals.
bring together firms with different cultures
In June 2014 WEX, which specializes in fleet payment systems primarily for fuel sales, acquired Evolution1 for its healthcare benefit and payment applications. The $533 million purchase underscores WEX’s desire to reduce its reliance on its traditional payment card offerings for fleet operators, while beefing up its presence among insurers and healthcare providers.
That followed the move in February 2014 by GE Healthcare, which is better known for its imaging equipment than software, paid $340 million to acquire API Healthcare for its Cloud-based and on-premise workforce management applications primarily for the healthcare industry.
While the above purchases are likely to enable both WEX and GE Healthcare to extend themselves with the former in healthcare payment processing and the latter for processes like nurse scheduling, the exact synergy is not obvious. To begin with, both purchases are not expected to bring significant revenue boost to their parents.
The WEX deal appeared to make more sense than that of GE Healthcare, which posted $18 billion in revenues in 2013. Two years earlier API terminated its sale to Kronos, its chief rival in workforce management for healthcare providers. At that time the API and Kronos deal was going to be reviewed by the Justice Department under the antitrust rule.
Still it would be difficult to tell whether customers would be better off now that GE is pursuing its vision for the Industrial Internet of Things by also picking up an HCM applications vendor, which may not be easy to fit into GE’s vast healthcare hardware offerings. A bigger question is whether GE plans to make additional software purchases following its decision to exit the enterprise software business by selling GE Information Systems, which offered B2B eCommerce applications, to PE firm Francisco Partners in 2002.
Similar purchases in the Cloud have resulted in some odd couples. In May 2014 office-products retailer Staples acquired PNI Digital Media, which develops Cloud-based printing applications for retailers to operate photo-sharing and printing kiosks at places like Walmart. Again, it’s hard to tell whether Staples has any plans to further its software ambitions now that its retail business is in a dogfight with online giant Amazon.
Another odd combination is the $27 million purchase of email applications vendor Vertical Response by check-printing company Deluxe in July 2013. In December 2013 media company Hearst acquired Homecare Homebase, which offers Cloud applications for the home and hospice care organizations. The HCHB applications are designed for clinicians and healthcare operators for electronic medical record integration and financial management.
What these acquisitions underscore is that companies that used to have no business selling enterprise applications are warming themselves to such new digital properties. After all, a piece of software is not too different from any other media object that delivers analog viewing or real-time consumption experience.
So as the Internet revolution has irrevocably shifted the media landscape, publishing giants like Hearst, Thomson Reuters and Wolters Kluwer have all scrambled to reposition themselves as digital companies by acquiring software developers.
Thomson Reuters, which owns one of the largest software companies in the legal practice management market called Thomson Reuters Elite, is no stranger to the software business. The same applies to Dutch publishing giant Wolters Kluwer, which has vastly expanded its software operations as its print and book publishing business continue to shrink. In 2013 its print and book businesses accounted for 20% of its total revenues, down from 36% in 2008. Its recurring revenues from digital products now make up three-quarters of Wolters Kluwer’s business.
In another twist to these odd combinations was the $250 million purchase of the iconic US newspaper Washington Post by Jeff Bezos, founder of Amazon, in August 2013, a move that suggests that the Cloud economy is so rich and diverse that it could afford risking any losses from owning print properties.
