Why do tech vendors exhibit this behavior?

• Pressure to focus on near-term growth: Most vendors prioritize investor or shareholder expectations, and few can afford to say no to a sale even if the prospective partner requires outsized resources to support post-implementation. We heard this unequivocally throughout our vendor interviews—sales are the priority.
• Fear of missing out: If a competing vendor makes a market-moving sale, other vendors may approach health systems with their own products reactively to secure market share against the competitor, even if the reactive deal theses are questionable.

What are its potential consequences?

• The vendor’s health system clients become too heterogenous to serve at scale. The vendor’s product support teams are stretched thin, having to customize products to each system’s unique needs and sink time and energy into navigating each system’s cultural dynamics and governance. This product support expansion drives down margins.
• If product teams fail at meeting expectations, that can harm the relationship and push health systems to terminate contracts or not renew.

Why do tech vendors exhibit this behavior?

• Pressure to focus on near-term growth: Most vendors that sell to health systems spend years perfecting their health system value proposition before expanding to new markets. Vendors that successfully embed themselves into health systems workflows can upsell and grow alongside those partners over time. But pressure to grow in the near term can push vendors to sell to adjacent markets (e.g., health plans, independent medical groups) before they’ve secured their long-term footing with health systems. As we heard in one vendor interview, “We get distracted by the buffet in front of us. We love shiny new things.”

What are its potential consequences?

• The vendor diverts staff and resources away from its core health system business and into its growth/new markets division. This may result in immediate contract growth, but that growth does not account for the near- and long-term opportunity costs incurred from shifting away from the core business too early.
• Unless the vendor has perfected their ability to serve health system clients at scale, health system partners will feel de-prioritized by these vendors as they experience increasingly thin product support. There is a higher likelihood of health systems terminating or not renewing their contracts.

Why do tech vendors exhibit this behavior?

• Pressure to focus on near-term growth: Implementation timelines, as well as financial and performance returns for technology products, often reflect best-case scenarios. Sharing realistic projections can prolong or disrupt the sales cycle.

What are its potential consequences?

• As implementation (and ROI) meet roadblocks, health systems will feel pressure to invest more resources into the product. This can cause persistent timeline revisions and change management challenges, increasing the likelihood that the relationship sours.

Why do tech vendors exhibit this behavior?

• Pressure to focus on near-term growth: Most vendors will promise health systems the ability to provide input on product direction without ceding complete control. However, our research uncovered several examples of vendors sacrificing product roadmap ownership to secure sales. One vendor found that a single health system accounted for 95% of its overall revenue after five years of the health system driving product direction unchecked.

What are its potential consequences?

• Immediate vendor growth eventually hinders long-term success as the vendor is unable to sell to other health systems. Over time, expanding the product suite becomes increasingly costly. Ultimately, the vendor risks product sunsetting or being acquired by a larger entity.
• Sometimes the health system’s role in product direction is not clarified during the sales process, leading to challenges later if product direction is biased. This poses substantial risk to health systems. End users can lose access to a technology used at scale, and health systems must replace the tool at significant time and capital cost. There is an opportunity cost as well: while the health system focuses on recovery, other systems with more secure vendor partnerships will continue to innovate ahead of them.

Why do tech vendors exhibit this behavior?

• Ongoing market differentiation and long-term survival: Vendors that have moved past “startup” status report that they increasingly sell only as long-term strategic partners. This is primarily to secure long-term contracts with health systems that are seen as market-leading. Vendors hope this will confer a long-term competitive edge in the market.

What are its potential consequences?

• Skewing toward the long term creates risks specifically in times of crisis. Many tech vendors with long-term value propositions were unable to complete sales in 2020 and 2021, as Covid-19 emerged and systems wanted vendors who could provide immediate ROI to ease the shocks from the pandemic.

Health systems can buy products due to fear of missing out (FOMO) or fear of falling behind, instead of buying products that help them solve a core business problem. Before going to the vendor market, systems must clarify what problem(s) they want to solve, whether that’s an internal issue or a problem that, when solved, will unlock growth avenues. If your vendors are not aligned with you on the problem at hand, it should become an easy decision to move on to another option.

Most vendors’ product roadmaps and development timelines are not shared with a health system partner until they sign the contract. One health system partnered with a vendor on good faith, only to find out after signing that the vendor had only trialed that product in beta with two other systems. Further, the vendor was operating on a burn rate that would run out in a matter of weeks. Investing time during the discovery phase can help health systems avoid such situations.

If the vendor is selling the product to multiple markets, push them to clearly explain how they can effectively serve both health systems and other non-health system clients. And if the vendor is selling only to health systems, consider the type of system that they’ve historically sold to. Does 95% of their revenue come from urban AMCs, while you operate a midsized suburban facility? These lines of questioning will uncover how closely the vendor’s development plans and support teams align with your organization’s needs and goals.

It was clear in our interviews that health systems under-communicate the overall purpose of a new product to their staff, and they sometimes expect the vendor to handle that work regardless of if the vendor is aware. IT teams or clinicians—or patients—can stall and block implementation of a project if they aren’t brought in early and if they don’t understand what is in it for them. This is ultimately the responsibility of the health system executives and no one else.