Enterprise software giant Oracle will acquire electronic health record vendor Cerner, one of the company's largest acquisitions to date. It's a deal that puts Oracle in a competitive position among business application cloud providers and EHR vendors, analysts said.
Oracle will acquire Cerner through an all-cash deal for $28.3 billion. It is expected to close in 2022 subject to receiving regulatory approvals and meeting other closing conditions. Cerner is one of three major EHR vendors, and its customer base includes the U.S. Department of Veterans Affairs.
"Cerner will be a huge additional revenue growth engine for years to come as we expand its business into many more countries throughout the world," Oracle CEO Safra Catz said in a news release announcing the deal.
One competitive win for Oracle is cloud services, analysts said. Cerner currently partners with Amazon Web Services, and Oracle plans to move the Cerner EHR onto Oracle Cloud. The EHR vendor provides Oracle with a vast amount of data in one of the fastest-growing segments of the economy and expands its service offerings, especially to its healthcare customers, analysts said. In the U.S., healthcare grew 9.7% in 2020, accounting for nearly 20% of the nation's gross domestic product, according to government data.
The purchase provides another foothold into the healthcare industry for Oracle and offers a particular boost to its cloud offering and enterprise applications, such as Oracle Enterprise Resource Planning (ERP), said Ray Wang, analyst at Constellation Research.
"If you're going into the cloud business, you want to go after the biggest workloads," Wang said. "Healthcare, at the electronic health record level, provides massive workloads, massive transaction volumes, massive storage requirements. It's perfect for the cloud."
Charles KingPresident and principal analyst, Pund-IT
Cerner a boost for Oracle Cloud
Indeed, Cerner's systems will be moved to Oracle Cloud Generation 2, said Mike Sicilia, executive vice president of vertical industries at Oracle, in the news release.
Wang said the deal is "doubly sweet" for Oracle since Cerner has been an AWS partner for the last two years.
Oracle and AWS compete directly for business, said IDC's Dave McCarthy, research vice president of cloud and edge infrastructure services.
By buying Cerner, Oracle can improve its business applications and take cloud business from AWS as well, McCarthy said. "That's something Oracle has been investing in a lot."
The deal demonstrates two trends in enterprise tech: the desire among vendors to secure significant positions in vertical industries like healthcare and financial services, as well as the need for businesses to maximize the value of their data and their customers' data through advanced analytics, said Charles King, analyst at Pund-IT.
The acquisition will open doors and business opportunities for Oracle, King said. "A deal would immediately broaden the solutions and services that Oracle can offer and provide to its ecosystem of healthcare customers."
Acquisition bolsters Oracle's enterprise apps portfolio
Wang said the acquisition provides Oracle with the opportunity to cross-sell its ERP and human capital management (HCM) systems.
"It might get people to use Oracle ERP if you're a healthcare customer," Wang said. "They can actually start providing different types of cross-sell, up-sell opportunities, more discounts if you buy up through the Oracle stack. I think there's that opportunity."
However, not all analysts agree.
Predrag Jakovljevic, analyst at Technology Evaluation Centers, believes the deal was more about Oracle having special products for specific vertical industries like healthcare than a cross-sell between Cerner EHR and Oracle's ERP and HCM platforms.
Cerner EHR impacts
Cerner will become a dedicated business industry unit within Oracle, according to the release.
"Working together, Cerner and Oracle have the capacity to transform healthcare delivery by providing medical professionals with better information -- enabling them to make better treatment decisions resulting in better patient outcomes," said Larry Ellison, chief technology officer at Oracle, in the release.
Oracle will use its autonomous database, voice digital assistant user interface and low-code development tools to modernize Cerner's systems, Oracle's Sicilia said in the news release.
Sicilia said he expects this integration work to be done quickly because Cerner's largest business and clinical systems already run on the Oracle database.
"What will change is the user interface," he said. "We will make Cerner's systems much easier to learn and use by making Oracle's hands-free voice digital assistant the primary interface to Cerner's clinical systems. This will allow medical professionals to spend less time typing on computer keyboards and more time caring for patients."
Oracle also plans to "maintain and grow Cerner's community presence," including in Cerner's base location in Kansas City, Mo., according to the release.
In a tweet, Kansas City Mayor Quinton Lucas said he plans to speak with Cerner officials "about the impact of the Oracle acquisition on the 13,000 Cerner associates in the Kansas City area."
TechTarget News Writer Jim O'Donnell contributed to this report.
Makenzie Holland is a news writer covering big tech and federal regulation. Prior to joining TechTarget, she was a general reporter for the Wilmington StarNews and a crime and education reporter at the Wabash Plain Dealer.