AutoID & Data Capture Blog

US Government Investment--The Prescription for Growth in the RTLS Healthcare Market?

Real-Time Location System (RTLS) solutions have benefitted from significant media coverage this year, most notably due to recent activity in the market for solutions targeted at the healthcare sector. VDC Research believes RTLS solutions are on a strong growth path in this vertical for a number of reasons.  Major indicators include a steady stream of announcements showcasing new, prominent deployments, government initiatives/funding and mounting asset management and visibility challenges that are fueling demand for wireless solutions in the healthcare industry.

Within healthcare environments, inside a hospital, for example, RTLS solutions are used for tracking equipment, supplies, personnel and patients. RTLS also serves reporting and alert functions such as nurse call stations and hand hygiene washing compliance systems. RTLS solutions for use in healthcare are highly specialized systems designed to work in the confines of “the four walls” of the enterprise whether operating in a defined zone/area, department, floor, site or campus.

Keeping in mind the points above, the fact that two major investment deals in the market for RTLS in healthcare have been announced during recent weeks is highly noteworthy:

• Aeroscout, a provider of WiFi-based RTLS solutions for health care and industrial verticals, was acquired by Stanley Healthcare Solutions (SHS), a division of Stanley Black & Decker (SBD). The addition of Aeroscout is intended to accelerate the growth of SHS, a provider of patient/resident safety solutions as well as supply chain and storage solutions. Aeroscout’s industrial-focused solutions will augment the security and industrial offerings of the acquirer’s parent company, SBD. Specific terms of the deal were not disclosed, but estimates value the deal at approximately $200-250 million.

• Awarepoint, a provider of ZigBee-based RTLS solutions, recently received $14 million in new funding. The company, which specializes exclusively in solutions for the health care market, raised $7.5 million from the Heritage Group, a health care-focused VC firm, in addition to $6.5 million from existing investors. Awarepoint will use these funds to develop existing hardware and software offerings and expand its services portfolio.

Could this sudden flurry of investment in the RTLS market be just a coincidence? We do not believe this is the case. VDC believes the likely catalyst of this activity is a recently funded federal contract worth $543 million, funneled through the US Department of Veterans’ Affairs for the explicit purpose of funding RTLS solutions within the VA. Although HP ultimately won the bidding for this contract, competing RTLS vendors such as SHS/SBD and Awarepoint are not excluded from benefiting from this contract. Whereas HP is a services provider, it will need to source RTLS hardware (and perhaps software) from other vendors. Accordingly, SHS/SBD, Awarepoint and other competitors are now likely jockeying for position to win these future opportunities.

VDC expects federal funding for RTLS solutions will drive a noticeable increase in competition within the RTLS market. With over a half billion dollars at stake for this single contract alone, we think a number of firms competing in adjacent Auto-ID markets (e.g, RFID, barcode) will evaluate RTLS market entry in the next 12-24 months.

Historically, RTLS has been a market with protracted sales cycles, limited/one-off deployments and restricted opportunity for scaling across multi-site locations. This federal contract, of course, changes all of this—the US Government has already earmarked the RTLS funding, the VA operates many locations and the agency is fully onboard for scaling RTLS across its entire operation. Given the recent VA contract, healthcare solutions will be an obvious strategy for market entry, but we believe other government opportunity exists in asset tracking applications for military/DoD as well.