Peachtree Healthcare Case Analysis
IST 635
Spring 2012
Sean Coyne
Table of Contents
Table of Contents ................................................................................................................ 2
Introduction ......................................................................................................................... 3
Strategy and Business Model .............................................................................................. 4
Organizational Impacts ....................................................................................................... 6
Capabilities ......................................................................................................................... 8
Reliability and Security .................................................................................................... 10
Implementation and Service Delivery .............................................................................. 11
References ......................................................................................................................... 14
Introduction
Peachtree Healthcare is in a difficult position, they must choose how to overcome
their failing IT infrastructure. The CIO of Peachtree Healthcare has suggested two viable
options, a monolithic system or a SOA based system. In addition to each system type the
CEO is tasked with the decision of a full scale implementation, or incremental
implementation. The healthcare field is a unique case in that not only is security and
reliability important, but the buy-in of the doctors could make or break the new system.
In order to best asses the situation and provide the optimal solution multiple
variables must be analyzed. Issues such as the strategy and business model of the hospital
system, the organizational impact the system will have on the hospital and the capabilities
of the system. In addition the reliability and security of the new system and the
implementation and service delivery process must be considered.
By evaluating the choices available to Peachtree Healthcare and by focusing on
the issues specific to Peachtree’s business and current IT system the best solution can be
formed. The issues specific to Peachtree include the lack of standardization throughout
the multiple locations, and the problems related to healthcare and standardization. The
business model and strategy of Peachtree will dictate the needs of the IT system and
therefore should be the first consideration.
Strategy and Business Model
Peachtree Healthcare’s strategy has changed as the healthcare system has grown.
What was first a pair of teaching hospitals has become a regional network of 11
institutions with additional support facilities. With over 4,000 employees, and a million
patients Peachtree’s IT infrastructure has not kept up with their growth. Peachtree’s
reputation is built upon its “quality, consistency, and continuity of care across the entire
network” and while doing so they strive for the “highest levels of efficacy, economy, and
respect for patients and staff” (Glaser p.1-2).
While the healthcare industry has moved towards standardization Peachtree has
resisted. Peachtree’s CEO believes that “the last word in all matters of patient care should
rest with the doctor and the patient”, and instead of blanked standardization, he prefers
selected standardization of “clinical treatment – immunizations, pharmacy record
keeping, aspects of diabetes care” and other areas where there was little disagreement on
the best solution.
Peachtree Healthcare is in a difficult situation, it must choose how to best
implement a new IT system in order to grow and account for Porters five forces. While
the threat of new entrants, threat of substitutes, and bargaining power of the buyer
(patients) is low, the bargaining power of the suppliers (doctors) and rivalry among
competitors is high. Porter states that “There is no substitute for what the supplier group
provides. Pilots’ unions, for example, exercise considerable supplier power over airlines
partly because there is no good alternative to a well-trained pilot in the cockpit” (Porter
p.83). Just as pilots cannot be easily replaced, neither can good doctors, Peachtree must
consider this when implementing a new system. While the Healthcare industry may not
be competing on price it is competing on dimensions, Competition on dimensions other
than price – on product features, support services, delivery time, or brand image, for
instance – is less likely to erode profitability because it improves customer value and can
support higher prices” (Porter p. 86).
Peachtree will need to consider not only the 5 forces affecting its profitability, but
also how the new IT system will be aligned with its current business practices. The
strategic fit of the new system must consider Peachtree’s external and internal domains.
Peachtree’s external domain is “the arenas in which it competes and is concerned with
decisions such as such as product-market offering and the distinctive strategy attributes
that differentiate the firm from its competitors” (Henderson and Venkatraman p. 474). By
using this definition the new IT system must not disrupt the way Peachtree provides
quality, consistent care throughout its entire network.
Peachtree’s internal domain pertains to the “logic of the administrative structure
and the specific rationale for the design and redesign of critical business processes
(Henderson and Venkatraman p. 474). By using Henderson and Venkatraman’s definition
of internal domain the new IT system must not interfere with the way doctors use
selective standardization or the way quality care is provided to the patients. Peachtree
Healthcare can align its external and internal domains by analyzing the best alignment
perspective for their business.
The service level perspective focuses the top management’s efforts on prioritizing
the allocation of resources, while I/S management focuses on creating an IT system that
works within the guidelines of the top management. The service level perspective places
the focus of the entire project on the needs of the customers, which in this case are the
doctors. By basing the performance of the IT system on the satisfaction of the doctors
Peachtree can design a new system that allows for reliability without squashing the
independence of the doctors (Henderson and Venkatraman p. 480). By using a service
level alignment perspective Peachtree can insure that their internal and external domains
align, they maintain their quality of care, and their greatest asset, the doctors, receive a
voice in the implementation process.
Organizational Impacts
Peachtree Healthcare will be impacted by the new IT system, it is unavoidable
and necessary. In order to make an educated decision on the best IT system for Peachtree
these impacts must be analyzed. The inaction of a new IT system will inevitably impact
the doctors, patients, administrative staff and possibly the business processes. By
forecasting the impacts of a monolithic and SOA based system the best choice can be
made.
One of Peachtree’s main concerns is the doctor’s resistance to standardization and
a new IT system. Max, the CEO, voices these concerns in Glaser’s article saying “a
monolithic system would render the surgical approach difficult to the point of
impossibility. But SOA might blow up in everyone’s faces”. SOA systems without
proper planning are likely to “blow up in everyone’s faces”, however; integrating the
business processes into the design of an IT system. Peachtree is already on the right track
as Upton and Staats suggest having the CIO report directly to the CEO in order to
streamline the process. By identifying the business objectives and using an IT strategy
that fits them, such as a service level perspective, Peachtree can forgo the rigidity of a
monolithic system and focus on a high performing SOA system.
In order to retain the flexibility of the doctor’s decisions, Peachtree must provide
an IT system that allows for surgical standardization. Using a monolithic system will not
accomplish this goal, and yet a SOA system might be too complicated for doctors to use
properly. By focusing on extreme simplicity Peachtree will be able to provide a user
friendly system for doctors, while maintaining the quality of care their business is built
on. By using pre-built SOA modules when possible, and basing all modules off of a
single standard the modules can communicate data and the users (doctors) will see
familiar interfaces in each module (Upton and Staats p.121-122).
On the basis of a service level perspective, performance is measured in the
satisfaction of the user. In order for the doctors and patients to be satisfied the new
system must be extremely reliable, easy to use, and allow doctor’s to make the final call.
By following the mantra: “firms should not have to sell new systems to users; rather they
should build systems that users willingly accept” (Upton and Staats p.123). When
building the new system Peachtree must take care to avoid information overload.
While Peachtree’s young doctors may master a new system, monolithic or SOA,
with easy, the older population of doctors may struggle and resist the change.
Interruptions caused by the new system could reduce doctor efficiency and slow down
the care provided to patients. While the new system might not rely heavily on email, the
following principle applies, “researchers say that the stress of not being able to process
information as fast as it arrives – combined with the personal and social expectation that,
say, you will answer every e-mail message – can deplete and demoralize you” (Hemp
p.85). The new system can not be effective without a culture change, but this change
must be seen favorably by all, and must be seen as a positive move by the doctors. In
order to avoid a negative impact on the performance of the doctors the new IT system
must be capable of providing a user friendly interface, while conforming to the
computing standards users have come to expect.
Capabilities
The capabilities of the monolithic and SOA options vary greatly, as do their
benefits. A monolithic IT system would allow Peachtree to implement standard
procedures across all hospitals with little risk of system failure. The monolithic approach
has been implemented time and time again, therefore the costs, challenges, and benefits
are known. With a SOA based system the costs, challenges, and to some extent, benefits
are largely unknown in a healthcare setting.
Figure 1
Reynolds and Feeny’s article Evolving IS Capabilities to Leverage the External IT
Service Market suggests nine main capabilities a successful information system must
have, this can be see in Figure 1. While all nine capabilities are important the following
best apply to Peachtree’s situation: making technology work, informed buying, leadership
and relationship building (Reynolds and Feeny, p. 128). Due to the strong reliance on
doctors Peachtree must push relationship building as a main priority for their new system.
In the case of a monolithic system, relationship building would be near impossible. By
implementing a SOA system Peachtree can use input from the doctors, both young and
old, and tailor the system to meet their needs.
While the monolithic approach does not allow for outsourcing, SOA thrives off of
it. By purchasing pre-built or custom-built services Peachtree can focus its time and
energy on the aspects of the modules that pertains to their business alone. For this reason
a strategic partnership with a vendor would be an excellent fit for Peachtree. A Strategic
partnership lets “the vendor can take the lead in defining, implementing, operating, and
updating a standard technology environment. The client need not invest in developing
these skills and can, instead, focus on IT strategy and policies” (Beath p.184). Peachtree
Healthcare is in a unique position in that there is no prebuilt SOA for the healthcare field
which may result in unexpected costs, but should allow for more customized modules,
making the training and acceptance easier. With any outsourcing solution, especially one
in the healthcare field, reliability and security are large concerns.
Reliability and Security
The holy grail of an IT system is one that is 100 percent reliable and 100 percent
secure, while impossible Peachtree needs to strive for these figures in order to maintain
quality care for their patients. When outsourcing a business process Peachtree must
insure that their patient’s confidential data remains secure, and system downtime is
minimal, in this area the monolithic system would be an easier choice. Both the
monolithic system and the SOA based system have weaknesses such as connections to
the internet, on screen visibility by employees, and possibility of malicious attack or
infiltration, however a SOA based system has an additional concern.
With a SOA based system additional persons would need access to confidential
data in order to implement the processes, while not a deal breaker Peachtree will need to
research the company they outsource to and insure they can be trusted. One way
Peachtree could insure the confidentiality of their patients, and the integrity of their
research is by breaking the intellectual processes into segments with different providers.
One way they could do this is by using one provider for research based information, and
one provider for patient information (Lacity p. 59).
The new IT system not only needs to be secure, but must be extremely reliable as
well. In order to insure reliability the SOA based system must be well planned and based
on a single transferable platform to allow for efficient data sharing. Sticking to the plan,
and maintaining a rigid schedule, and resisting change to the scope of the project will
allow for a more reliable system. By using ideas previously mentions such as sticking to
simple processes and pre built modules when possible, the system can be built for both
reliability and security (Flyvbjerg and Budzier p. 23). In order to insure the highest level
of reliability the new system must be implemented effectively and with the business
objectives in mind.
Implementation and Service Delivery
In order to insure reliability the new IT system must be implemented in a manner
conducive to doctor’s interaction while still maintaining alignment with the business
model of Peachtree Healthcare. In the unlikely event that the new system is a total failure
Peachtree must be prepared to terminate the project if necessary. In order to prevent
project failures Peachtree should insure that the CEO and CIO make many important
decisions together, even decisions that seem to only affect IT. Finally Peachtree needs to
analyze the strategic impact the new system will have on their business and enact an
oversight board accordingly.
While even the best planned IT system can fail, a poorly planned system is sure to
fail. By sticking to the schedule and resisting change to the scope of the project Peachtree
can defer some of this risk, but the project still remains a risky one. Using a monolithic
system would reduce this risk, but by locking the doctors into standardized procedures
the quality of care would decrease, going against Peachtree’s business model. Before
taking the plunge with a SOA system Peachtree needs to ask itself the following
questions:
Are they strong enough to absorb the hit if its biggest technology project goes
over budget by 400% or more and if only 25% to 50% of the projected benefits
are realized? Second, can the company take the hit if 15% of its medium-sized
tech projects exceed cost estimates by 200%? (Flyvbjerg and Budzier).
If Peachtree cannot answer yes to both of the above questions they will seriously need to
reconsider using a SOA based system. In addition to considering the budget over run,
Peachtree needs to consider how IT decisions will be made. The old school of thought, IT
decisions should be made by IT, no longer applies. Decisions such as the IT budget and
how the budget should be spent should be made not only by the CIO, but with input from
the CEO. In Peachtree’s case this should no be an issue as the CEO appears to be
interested in becoming involved in the IT process. In addition to costs both the CIO and
CEO should be involved in decisions that focus on security and reliability. By involving
both the CEO and CIO in critical decisions they can both accept the success of the
system, as well as blame for any issues (Ross and Weill p. 3).
In order for Peachtree to have the greatest success with a SOA based system, as
the pros for SOA greatly outweigh the pros for a monolithic system, an oversight board
must be formed. In order to prevent budget overruns, maintain a strict schedule and
insure that the new system aligns with business models, an oversight board should be
enacted. According to Nolan and McFarlan, Peachtree Healthcare would fall into the
Factory Mode of IT strategic impact. The factory mode describes a company who’s IT
system is critical to the point that even one second of downtime could be disastrous. This
mode requires the CEO and CIO to plan for security against power failures, hackers and
even hardware failure. Rather then working on improving cutting edge processes, the
factory mode focuses on reliable systems with minimal downtime (Nolan and McFarlan,
p. 99.) Nolan and McFarlan go on to say “A lack of board oversight for IT activities is
dangerous; it puts the firm at risk in the same way that failing to audit its books would.”
There is no way for Peachtree to eliminate the risk of a SOA based system, but
the downsides of the monolithic system greatly outweigh the reduced risk. In order to
insure success of the SOA based system Peachtree must carefully consider how the new
system can best align with their business model. Once the outcome desired is decided,
Peachtree should use pre-fabricated SOA modules coupled with customized modules to
achieve the most basic and critical system functions first. The capabilities of the new
system must align not only with the business model, but they must allow for a user
friendly interface in order to appease the doctors. This can be accomplished through a
strategic partnership and a relationship oriented design. In order to maintain quality care
of its patients the new SOA system must excel at reliability and security. Reliability can
be accomplished through proper implementation, risk management and cooperation
between the CEO and CIO. While SOA might be a risky move for Peachtree, with proper
planning, understanding and training the probability for success is greatly increased.
References
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Henderson, J, and N Venkatraman. "Strategic alignment: Leveraging information
technology for transforming organizations." IBM Systems Journal. 32.1
Upton, David, and Bradley Staats. "Radically Simple IT." Harvard Business Review.
(2008): 118-124
Nolan, Richard, and Warren McFarlan. "Information Technology and The Board of
Directors." Harvard Business Review. 96-106
Porter, Michael. "The Five Forces That Shape Strategy." Harvard Business Review.
(2008): 79-93.
Reynolds, Peter, and David Feeny. "Evolving IS capabilities to leverage the external Is
services market." MIS Quarterly Executive. 6.3 (2007)
Ross, Jeanne, and Peter Weill. "Six IT Decisions Your IT People Shouldn." Harvard
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