Awarepoint’s New CEO Enacts Plans to Expand Wireless Health Business, Software Portfolio
It’s been a busy seven months since healthcare technology executive Jay Deady took over as the CEO at San Diego’s Awarepoint, which specializes in real time location systems (RTLS) technology for hospitals and other healthcare providers.
The company raised about $9 million from its venture investors with Deady’s arrival, and Awarepoint acquired a Charlotte, N.C. software developer, Patient Care Technology Systems, in April for an undisclosed amount. As part of that deal, Deady tells me he has been remaking Awarepoint’s workforce, first by reducing the company’s roster from 72 to 61 in January, and then by hiring new sales representatives and account managers. Awarepoint now has 102 employees, including those from Patient Care.
Awarepoint also has been raising what Deady says will be the company’s final round of venture capital, which he expects to close before August.
So how do the changes reflect the new CEO’s strategy?
Deady says when he was considering the CEO’s job last fall, he thought Awarepoint had done a great job of developing its healthcare-focused technology. The company’s approach to real-time tracking combines a wireless sensor network (based on the ZigBee standard) with radio frequency identity (RFID) tags to actively track medical equipment, supplies, and people throughout a hospital. He says he also thought Awarepoint had acquired some great customers, including the Walter Reed Army Medical Center in Washington D.C., the UC San Diego and UC San Francisco Medical Centers, and had contracts with Phoenix-based Banner Health and Oakland, CA-based Kaiser Foundation Hospitals.
Yet the company was still facing a fundamental challenge: After launching its technology in early 2008, Deady says Awarepoint had acquired about 8 to 9 percent of the RTLS market in the United States. But industry analysts estimate that the total RTLS penetration of the healthcare market amounts to only about 10 to 12 percent in North America, and just 5 percent internationally.
In other words, Awarepoint was having difficulty expanding its business—at least partly because the healthcare market has been slow to adopt wireless monitoring technologies in general.
Deady’s strategy was to use the Patient Care acquisition to broaden Awarepoint’s software portfolio, making the company more of a full-service provider of health IT products and services with Patient Care’s portfolio of software technologies. Deady also moved to expand and strengthen the company’s ability to expand its technology business—both with existing customers and new customers—by beefing up Awarepoint’s account managers and in-house sales force and by overhauling its partnerships with third-party technology providers of Awarepoint’s technologies.
“My perspective, both offensively and defensively, was to go to market with a broader software portfolio,” Deady says. In the past, if Awarepoint failed to sell a hospital on its ZigBee-based technology, Deady says the company didn’t really have anything else to offer. “Today we can still sell them millions of dollars in software and services,” Deady says. Patient Care had a different customer base, especially for its electronic health records business, so Awarepoint also has a new set of opportunities to cross-sell Awarepoint’s technology to Patient Care customers and vice-versa.
As for revamping Awarepoint’s third-party sales partnerships, Deady says the company has “gone from smaller, regional community-based hospital resellers to [firms] that really understand healthcare technology and who have global reach, with hundreds of [sales] people in the field who have thousands of relationships. Those are the channels, in addition to our direct sales channels, that will really give us leverage.”
In expanding Awarepoint’s in-house capabilities, Deady says he was dumbfounded to learn the company had a single business development account manager. “We’ve got these great clients that are highly reference-able and very satisfied, but they didn’t have an account management program,” Deady says. “So while the clients liked the technology and it worked quite well, nobody was really helping them get deeper adoption, and helping them show the return on investment internally, helping them tell the story to their executives and why they should continue to expand their investment and what it would mean to them.”
Part of the problem in the poor rate of overall market adoption was that some competitors had oversold healthcare providers on the capabilities of RTLS systems based on Wi-Fi technologies, Deady says. “They were really out over their skis, promising a lot more than they could deliver and some early adopters really got burned, and a lot of us got tarred by that,” Deady says.
He estimates that about 25 percent of Awarepoint’s installations require pulling out a previous Wi-Fi installation “that just never scaled across the enterprise.”
So why does Deady think the market is ready now to consider adopting wireless tracking technologies?
“Part of it is confidence that the technology will work,” Deady says, “with a hard return on investment, and with improved patient safety and improved compliance, however they want to measure it.”
The Awarepoint CEO also maintains that the company’s proprietary ZigBee’s mesh networking technology is far less expensive and far easier to install in a healthcare setting than Wi-Fi networks. Deady contends that Awarepoint is driving its gross profit margins “well above 80 percent, and we think we can get those even higher next year.”
In terms of the strategy he’s set in motion, Deady says, Awarepoint is “just about done expanding our account managers and sales force.” The next logical step is to increase the headcount in product development, implementation, and customer support, which means hiring almost 25 more employees. Deady says he expects Awarepoint’s workforce will number 126 by the end of this year.