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Did Sam's Club expose a great SaaS opportunity?

Wal-Mart division will sell electronic medical records tech to small physician and dental groups. But why choose an archaic licensing scheme over cloud computing's "pay-as-you-go" benefits?

The news this week from retail giant Wal-Mart Stores is that its Sam's Club wholesale stores will be selling a health care electronic records management software bundle to medical and dental clinics.

The New York Times covered the details, but the short-short version is that doctors and dentists can purchase the software for an up-front license fee (on a per-physician basis), and will receive the software and a Dell tablet PC for each license.

Boosting the value of the offering is the availability of $19 billion in federal stimulus funds to support conversion of clinics to electronic records management. Each physician could see as much as $44,000 through this program, which would theoretically cover the $25,000 license fee for the first physician.

Brilliant idea. And as the article notes:

Only about 17 percent of the nation's physicians are using computerized patient records, according to a government-sponsored survey published last year in The New England Journal of Medicine. The use of electronic health records is widespread in large physician groups, but three-fourths of the nation's doctors work in small practices of 10 physicians or fewer.

This equates to a tremendous opportunity to change the nature of the health care business. If Sam's Club can package technology, functionality, and support at a cost that makes it simple for the average physician, then this can only be a good harbinger for the efficiency and reliability of patient records management.

Too bad Wal-Mart missed a brilliant opportunity to revolutionize the way IT services are acquired by small businesses. In this era of "on demand" pricing, charging an up-front license fee for this type of software seems almost archaic. It certainly creates a new capital expense requirement for the average medical clinic that may be a difficult pill to swallow in this economy.

A much better idea would be to offer subscription-based pricing, with perhaps some additional up-front fees for the PC, training, and installation. Or how about an entirely Internet-based solution with a secure connection between the host and a rich Internet application user interface? Best of all would be a solution delivered in a true service delivery platform, with complete end-to-end trust and performance features.

Then again, perhaps it's a good thing that Sam's Club is being so public about this old-school software packaging. If it gets any traction at all, I expect the pure software-as-a-service competitors to come out of the woodwork, offering zero (or near zero) capital investment services to a small-business market that could use the break.

Imagine the ease of adoption that would occur if Sam's Club were to partner with a SaaS offering, selling a "getting started" kit consisting of the tablet PC, training and, say, 90 days of subscription time. If pricing started at--oh, I don't know--$5,000 per physician and about $500 per physician per month in ongoing subscription pricing, it would beat the Sam's Club offering hands down. Especially when you include the latter's ongoing maintenance charges.

Data security will be at the top of every physician's mind, so it's not just a matter of pricing. However, the security story around the cloud is slowly getting better (Gmail failures not withstanding), and I believe that it is a matter of a year or two before the general public gets comfortable with a business running entirely on software as a service. When that happens, doctors and dentists will feel much more comfortable with a secure, trusted SaaS-based medical records offering.

My hunch is that Sam's Club has highlighted a marketplace that has software as a service written all over it. I can't wait to see who is the first to test my premise.

You can follow James Urquhart on Twitter.