Thursday, September 6, 2012

On Business Models for HL7

Now that the Jig is up, HL7 has to act on producing an effective business model.  The HL7 FAQ suggests that HL7 expects that membership will increase due to this major change in policy. Others are concerned that HL7 will experience a drop in revenues because the "major value" in the organization is in the license to use the standards given to members. Grahame Grieve and Lloyd McKenenzie, long-time HL7 members and leaders inside the organization have expressed concerns about what the new HL7 business model will become, after the impact of this decision takes effect.

Both views can be right.  It's entirely possible that the organization will see a drop in "non-participatory" members, who are present only for the license to use the standards.  At the same time, as it could see an increase in "participatory" members who will now join because the organization is better aligned with how they'd like the standards to work.  From a strategic perspective, I believe that HL7's recent action is the right one to encourage growth, but acknowledge that there is certainly a big risk.

Financially, this was probably a good time to make the move.  Looking at the 2011 Annual Report, you can see that HL7 revenues are at an all-time high, as are memberships.  Some of this has been attributed to outreach to industry and the need for licenses under meaningful use.  At the same time, working group meeting attendance is lower.  One contributing factor to working group meeting participation is the change to having at least one international meeting a year, instead of basing all Working Group Meetings in the US.  Again, from the Annual report, you can see that attendance at meetings in locales like Kyoto, Rio, and Sydney are some of the lowest attended meetings that we've had.  Given the distances involved for many participants, these aren't big surprises.  Working Group meetings aren't money-makers for HL7.  They about break-even, and the costs to attend a working group meeting have been routinely adjusted to keep it that way.  Even though attendance is lower, we've managed to hold the line.  Expenses have stayed remarkable stable over the last 5 years, hovering at around $4M a year.  Organizational reserves are also at an all-time high.

Education programs are one of the stronger revenue producing efforts of the organization (after membership dues), and one of its strong sources of Intellectual Property that it likely won't be giving away under the new policy.  The distance learning programs that Diego Karminker has been leading is one that is still growing.  Education (and certification testing) is probably the third leading source of revenue for HL7, and clearly there is a case to provide more of it.  One challenge is that it is also a source of revenue for many HL7 members, and so HL7 competes with its members.  I think some sort of partnership could be established that was mutually beneficial, and could tie together those sorts of offerings with HL7 Certification testing.

Tooling is something that has been mentioned as well.  Many HL7 insiders would scoff at the idea because HL7 tools are mostly considered either to be too complicated, or not ready for prime time. It's also not an area that HL7 is especially effective in delivering upon.

Some have mentioned adding some sort of trade-show opportunity, and there may be some possibility there. It might be interesting to reconsider how we do meetings so that there are two "working group" meetings, and one that is more of a networking, education and trade-show type of function.  That might also affect balloting (reducing the number of ballots annually).  That could also be a good thing, especially if creating more standards doesn't contribute to HL7's income stream in the same way as it did.  If that was done, I think we'd have to consider timing, because we wouldn't want to try to compete with other events like HIMSS, AMIA, AHIMA or RSNA.

Others have suggested that HL7 might start a journal, reconsidering a decision that it made back in the very early days not to.

As Grahame and Lloyd mentioned, the discussions at the WGM next week are certainly going to be interesting.  I'll see you there.  Bring your thinking caps.

1 comment:

  1. Way back in 2005 the HL7 marketing WG did a survey amongst WGM attendees (i.e. active standards creators) about their 'reasons to continue their involvement'. The question was a copy of large survey done earlier that year (by a university) amongst participants in Open Source Projects.

    #3 (out of 10) on the list of most relevant reasons was "standards should not be proprietary". "make money" was #7 on the list. (if you're in Baltimore - I''ll cover this in more detail at the International Council meeting on Sunday) Like developers of open source software HL7 standards developers are more 'idealistic' than one might think. I therefore agree that freeing the IP will have no, or a positive, effect on participation in the standards development process.

    Education: my company is the largest provider of HL7 trainer-lead training courses in Europe. We current partnet with (i.e. act as an outsourcing partner for) various HL7 affiliates. Cooperation is definitely an option - HL7 itself will never be able to cover all niche topics, be aware of how healthcare is structured in financed in all countries, understand local customs, and speak all languages. HL7 will have to team up with commercial partners who can fill those gaps.

    What's still missing on your list (and I will keep reminding people that most proven business models for open source projects apply directly to the HL7 open standards environment): services and support (SLA based, not volunteer based).

    "That will create competition with HL7 members". In some areas, sure. Obviously commercial firms have seen that HL7 didn't persue a very natural revenue driver [sevices], so they filled that gap. No reason for HL7 not to persue some of that stuff - again there will be lost of opportunities left for commercial HL7 consultants, a cooperation is again possible where HL7 acts as a reseller of HL7 consultants not employed by HL7.

    The above business oportunities have always been there for HL7 to persue. But it didn't - it was too easy to get revenue via the licensed IP method (i.e. membership fees). Now HL7 has to wake up and persue those other options. The options are NOT new (most of them are listed in the 2005 marketing plan created by HL7 volunteers) - they just have to be investigated and acted upon.