(MSFT) Microsoft Office 365 Makes Gains in Healthcare Sector

The world’s largest software maker Microsoft Corp.’s (MSFT) Office 365 is gaining traction in the healthcare sector with organizations such as FHI 360, Gwinnett Hospital System, Kindred Healthcare Inc. and Mihills Webb Medical all opting for it.

The suite won on different counts at these players. While FHI 360 chose the solution to smooth its transition to the cloud, Gwinnet wanted better collaboration between its cloud-based and on-premise operations and Kindred wanted a standardized platform that could increase the efficiency of its operations.

Therefore, the Office software is equipping these healthcare organizations with advanced technologies such as cloud computing, with the intention of increasing the efficiency of their operations and improving resource allocation. It is also facilitating communication and collaboration among the healthcare services and at the same time reducing IT expenses of healthcare organizations and partners across the world.

The fact that Microsoft’s Office 365 takes care of the regulatory and privacy requirements of the U.S. Health Insurance Portability and Accountability Act of 1996 (HIPAA) is no doubt playing a part in the large number of customer wins.

Since Office 365 is sold as a service, it’s a way for Microsoft to earn ongoing revenues instead of a one-time licensing fee. Launched in 2011, the new Office comes with the traditional word processing, spreadsheets and email programs.

Microsoft also recently launched an online version of Office 365 that is focused on touch devices. Further, it is being deployed at several retailers such as J. C. Penney Company Inc. (JCP) and U.K.-based Tesco, as well as government departments such as the Texas Department of Information Resources, which chose the software for inter-departmental activities. The latest to join the bandwagon is the International Federation of Red Cross and Red Crescent Societies (IFRC), which also signed an MoU with Microsoft.

As per a report by GIA, global healthcare services may become a trillion dollar industry, which may reach $3.0 trillion by 2015. The growth may be driven by rising investment in areas such as healthcare IT and others. Thus, booming healthcare services may become the catalyst for Microsoft’s Office 365 going forward.

Currently, just like other PC makers, Microsoft is also battling the slump in the PC market caused by the sluggish economy. In addition, the popularity of smartphones and tablets from Apple (AAPL) and Google (GOOG) has been cannibalizing on its core PC market. Whether it can come out of the slump on the back of its new software and OS remains in question. Recent data from independent market research firms seems to indicate that pickup will be slow.

Microsoft reported revenues, excluding deferrals, of $21.46 billion in the second quarter of fiscal 2013, up 34.0% sequentially and 2.7% from last year, in line with our estimates. All except the Entertainment & Devices segment grew both sequentially and from the year-ago quarter.

Microsoft has a Zacks Rank #3 (Hold).

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