Fastcat
Introduction:
FastCat is a Minnesota based private company that was founded in 2001. They have created a niche in healthcare support software for small and medium-sized medical facilities, markets that were overlooked and underserved by established players. FastCat is a relatively small but nimble organization of 200 employees generating $36.5 million in revenues and $8.9 million in net income.
The changing landscape is presenting multitude challenges and opportunities for FastCat. Increased competition from entry of giants like IBM, Oracle and SAP is a major threat. FastCat does not have the resources to match the breadth of services the big organizations can offer. A major boom in form of Health Information Technology for Economic and Clinical Health (HITECH) Act will spur growth as health care providers with will invest in health care technology / software. For FastCat the challenge is to balance advantage from this growth with cost discipline keeping in mind the long-term sustainability of the business.
Our consulting firm will create a compensation plan for FastCat that aligns with the strategic needs of the organization. We have done Porter 5 force analysis[1] of the industry to assess the role of compensation i.e. being a source of sustainable competitive advantage vs supporting strategic initiatives.
There appears to be very low rivalry threat currently in small and midsized medical facilities that receive healthcare support from FastCat. FastCat’s product seems to highly differentiated, extremely customizable, and well received in the market. High corporate stakes involved for FastCat and high expected industry growth should increase rivalry threat industry wide. There is a medium threat from new entrants. Big players entering the market can make heavy investments with low risk of retaliation from FastCat. The HITECH Act has made it lucrative for these players to enter the market. Medium to high network effects, strong brand identity and proprietary learning curve to design customizable software should factor positively in reducing the entry threat. Though we don’t know much about the buyer switching costs, it is safe to assume that switching from one service to other will take significant investment and therefore would not be preferred, however there seem to be low-cost products available in the market that would challenge FastCat. Looking at the long term sustainability, FastCat’s small size might make it possible to be profitable with smaller revenues contrasting it against bigger firms that might require higher economies of scale. Substitute threat is also low to medium because of high buyer switching costs and low propensity of buyer to switch, however, competitors offering services beyond software platform might be an incentive for some buyers to switch. The threat from buyers is expected to be low; low buyer concentration, low volume of purchase, low switching