MEDICAL DEVICE MANAGEMENT - Axeda

MediCAL deViCe MAnAgeMent 

Axeda Platform Enables Ventilators for 

Remote Upgrades and Diagnostics 

Harbor Research, Inc. 

B O S T O N | S A N F R A N C I S C O | L O N D O N 

A hARboR CAsE stUDy 

June 2006

Medical Device Management 

Axeda Case Study 

Introduction 

For many manufacturers, saturation in their core markets has led them to scramble for new 

sources of growth and revenues. Companies in search of growth are increasingly focusing 

on services-based models. On the other hand, networking their devices seems like a distant 

opportunity (or threat) sitting off close to the technology horizon. Many players will wait 

until they see it in their rear view mirrors before they make a move. However it will be the 

early movers who most quickly implement “smart services:” who will ultimately benefit in 

the end. 

One of those early movers is Respironics, a leading developer, manufacturer and distributor 

of innovative products and programs that serve the global sleep and respiratory markets. 

With annual sales of over $1B, Respironics markets its products in more than 125 

countries and employs 3,600 people worldwide. 

Respironics needed technology partners who could help them both in collecting the 

diagnostic information about their devices and also in transmitting that data back to their 

systems. The company turned to Axeda for their expertise in device relationship management. 

Axeda is a leading provider of device relationship management (DRM) software and 

services now implemented in over 50 major OEMs in over 20 countries. 

Respironics is using Axeda software to deliver software updates, feature options and offer 

proactive maintenance and service support of its Esprit® Critical Care ventilators. This new 

service, called Respi-Link, allows Respironics’ customers to change software and options 

on a schedule convenient to them and also to receive remote support from Respironics’ 

technical staff when needed. Respironics is the first ventilator company in the world to 

implement this type of service. 

Opportunities and Challenges 

Respironics like so many other manufacturers under pressure to differentiate their products, 

had been investigating new ways to deliver new value-added services, lower their 

customers’ total cost of ownership and deliver superior service at lower costs. Moving from 

a product-centric to a service-based model would certainly give an edge to Respironics in 

this market, as no other competitor was offering such support for their products. It was 

also decided early on that complimenting the biomedical (biomed) technician’s effort to 

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service their own equipment was highly preferable. Having the biomed play an active role 

in the upgrade and diagnostics process would undoubtedly increase their efficiency and 

speed in optimizing their equipment. 

In addition to the financial benefits of remote monitoring and management, an opportunity 

to improve the quality of patient care would provide a real incentive for end-users to 

buy into this new form of extended service options. However, attention was given to the 

probability of push-back from hospital’s biomed staff. To promote their buy-in and acceptance, 

it was determined that these technicians would be made aware that their input was 

vital to the success of the system. 

Internal factors that lead to the implementation of Respironics’ “Smart Services” program 

included the calculated boost to demand that could be realized without increasing the proportional 

need for personnel. The company took a decisive step in recognizing the opportunity 

and pushed quickly for a transition that would turn its services organization into a 

profit center. The byproduct of placing greater emphasis on service and support would lead 

to a more productive and motivated staff. And for the sales team, the inclusion of Smart 

Services immediately differentiated the product offering and could often clinch a deal in 

question, not to mention a higher commission. 

By looking at the larger picture, Respironics carefully examined how this new offering 

would affect its entire organization. Literally every department of the company stood to 

benefit. For example, engineers relished at the possibility of seeing product performance 

data from the field remotely and having the ease and flexibility of changing software and 

options without having to be physically present. Those responsible for quality assurance 

surely would see the benefits of rapidly deploying software updates during a field action. A 

remote services platform would also vastly improve the tracking of software installations. 

A major endeavor such as this would require the buy-in from those who oversee the P&L 

for any product under consideration. Being able to provide the finance committee with an 

ROI and payback analysis led to the swift decision to go forward with the Axeda platform. 

Axeda’s experience played a key role in the creation of the ROI analysis. 

The Offering 

Respironics set a clear goal of creating a partnership with its customers that allows them 

to assist in the diagnosis of their Esprit ventilators. Using Axeda’s DRM application, these 

users are able to download software on their schedule, minimizing disruption to their pa- 





tients. Via a simple Internet connection the ventilator’s activity can be viewed, diagnosed 

and repaired remotely from any desktop computer. 

Prior to broadband connectivity, device networking of this kind was not practical due to 

transmission speed and phone-line reliability. Using the Internet was also a problem due 

to the customer’s network security concerns. Resprionics has overcome network objections 

from hospital IT managers since they use the patented “Firewall-Friendly TM ” technology 

from Axeda. The software is designed so only the customer can access and authorize 

connection. Respironics doesn’t enter the customer’s network, so there are no changes to 

customer network configuration. 

Another major customer concern that Respi-Link addresses is the need for tracking software 

and option installations, as well as documenting the installation itself. Respi-Link 

automatically sends back a message that indicates who, when, and where packages were 

installed. Respironics can pull this report and update its internal business processes. The 

same can be done on the customer’s end. In addition, when a software/option package is 

deployed for a customer’s Esprit, Respi-Link automatically sends an email to the customer 

advising them they have a package waiting for them. 

The Esprit Ventilator combines sophisticated design with easy-to-use features. The microprocessor 

driven unit is easily upgradeable and offers a range of modes and breath types 

including volume control, pressure control, and fully integrated noninvasive ventilation. 

Because it has no need for wall air or compressors, and can be run on either ac power, a 

battery pack or an external battery, the Esprit’s mobility and versatility make it ideal for 

use in any setting, from hospital to sub-acute care facilities. Respi-Link provides access and 

control of the Esprit ventilator in diagnostic mode to allow for enhanced troubleshooting, 

updating and enhancing software, and providing assistance for device operation. 

Field deployment is straightforward and simple. Respironics’ Field Service Specialists (FSS) 

load the Respi-Link agent (software) onto one or more PCs at the customer site. After a 

one-to-two hour training session, the customer is able to download software, options, or 

connect to allow an FSS or tech support specialist help in troubleshooting a reported problem. 

The customer simply connects a RS232 cable from their PC to the Esprit and powers 

on the Esprit in the Hardware screen. 

From a customer perspective, Respi-Link has two major benefits: The first involves the biomedical 

department, since Respi-Link gives that group the ability to connect the ventilator 

to a PC and get immediate remote assistance from a skilled FSS or Product Support Spe- 



cialist. This troubleshooting capability and remote connectivity helps reduce equipment 

downtime and the associated costs. 

The second benefit involves the clinician, and more importantly, the patient. In the past, if 

a customer needed to have their software upgraded or have an option installed, they would 

have to remove the ventilator from the patient to allow the FSSs to perform the installation. 

Now, the customer can simply connect the Esprit to a PC and they will automatically 

receive notification that software or options are available for download. This operation can 

be done at any time and will generally be done during routine maintenance or between 

patients. 

The process is as simple as powering on the vent in the hardware configuration screen, and 

clicking four times as a response to popup dialog boxes on the PC. That is all it takes for 

the customer successfully download and install software or options. In discussions with 

Directors of Respiratory Care and physicians, this has a significant benefit in eliminating 

any distress or risk to the patient when removing ventilators for this type of servicing. It 

also eliminates the need for assigning a therapist to rotate ventilators during the installation 

by an FSS. 

Benefits 

Six months into the rollout of this platform, with over 1,000 units now connected, Respi- 

Link has earned overwhelming customer acceptance. Medical instrument manufacturers 

are pressured by high field service costs and the need to respond quickly and efficiently in 

an environment where downtime is not acceptable. 

The tangible benefits of the Respi-Link platform include: 



• Faster call resolution resulting in reduced downtime 

• Leveraged technical expertise on a global scale 

• Fewer on-site repair visiits 

• The elimination of on-site visits to install base software or software enhance- 

ment options = no additional installment fees 

• Base software or software enhancement options can be installed at the custom- 

er’s convenience, thus not interrupting patient care 

• Enhanced communication between Respironics and the bio-medical dept. 

• Enhanced learning 





• Reduced cost of certain service agreements 

ROi AnAlysis 

From the start, Respironics enlisted Axeda to construct it ROI analysis. They decided that 

the first point of order would be to focus on the initial benefit of cost reduction. All cost 

savings and avoidances were identified and quantified. Not surprisingly, the starkest effect 

of enabling remote monitoring was the potential reduced costs of an onsite service. The 

additional costs involved with implementing the Axeda-driven platform were also scrutinized. 

This included the software, licensing/maintenance fees and the costs involved with 

operating the solution. The team next solicited the input from people within Respironics’ 

marketing and sales groups to determine potential increased sales that might be directly 

associated with the new offering. A “rule of 3” was applied to account for the typical exuberance 

in this kind of exercise; a realistic sales forecast was calculated and then divided by 

three. 

Even with this conservative approach, the 3-year ROI for implementing remote services 

was an impressive 207% -- an annualized 69% boost. Below is breakdown of the payback 

analysis. 

Benefits Year 1 Year 2 Year 3 Total 

Reduced On-site Repair Trips x $640 (8 hrs x $80 p/hr) $64K $64K $128K $320K 

Avoided Installation Trips x $640 (8 hrs x $80 p/hr) $256K $640K $384K $1280K 

Increased Service Contract Revenue (margin $) $50K $100K $250K $400K 

Increased Product Sales (margin $) $90K $100K $200K $390K 

Total Benefits $460K $968K $962K $2390K 

From an internal perspective, Respi-Link offers Respironics an opportunity to save (or 

avoid) literally hundreds-of-thousands of dollars a year in labor expense involved in providing 

software/option installations for our customers and sales force. The company’s FSSs 

can rather turn their attention to providing their customers with other more critical support 

functions, such as training, repair, troubleshooting, etc. 

Respironics hopes to have 40-50% of its installed Esprit base Respi-Link enabled by the 

end of 2006. Future releases of new Critical Care products will also have the capability of 

remote connectivity through Respi-Link. Respironics will be able to develop this internally, 

saving both time and money. Giving clinicians remote access to charting and patient 





monitoring, in addition to offering data collection for performance and predictive reliability 

are capabilities that both Axeda and Respironics are shooting for. Ultimately, improvements 

that could provide for capturing input from the customer and both sales and service 

representatives would be invaluable 

The company will be working with its international service group to roll this out across 

its global locations in the latter half of 2006. More importantly, the Critical Care division 

will be sharing its knowledge and experience with their counterparts in the Sleep and 

Home Respiratory Service organization. 

Conclusions 

In this decade, networked smart devices will transform public and private life more than 

any computing development since the PC. But many companies find it difficult to envision 

the impact, and they are reluctant to embrace an embryonic development in the face 

of technological and competitive uncertainties. Even companies that understand Smart 

Services – knowing that it will radically change their business models – are waiting for the 

phenomenon to “shake out” and become widely available. 

This posture is a major mistake. We believe that the risk of staying out is now greater than 

the risk of getting in. Networking changes everything, and the first-mover advantages in 

many markets will be close to incalculable. 

Once device networking begins to be adopted in a market, it will create significant barriers 

to vendor-switching because suppliers will become deeply involved in adopter operations 

and new business models, and adopters will become deeply involved in their customers’ 

lives throughout the product life-cycle. While we don’t believe there will be a Microsoft 

of pervasive computing, we do believe that early action will obstruct entry by the laggards 

and will enable companies to effectively own pieces of markets. 

By optimizing preventative maintenance, Respironics will actually be extending the lifecycle 

of its products. If ventilators break down less, customers won’t have to buy new ones 

as often. If the company realizes this and adjusts its business model accordingly, this won’t 

be a problem. Regardless of anything else, Respironics is providing a valuable service to 

their customers – automated ventilator maintenance. Beyond the convenience factor, this 

mitigates nearly all risk of breakdown, and that stability is worth a lot to any manufacturer 

whose revenue is tied to the up-time of its equipment. 





The services-based concept based on lowering infrastructure costs and gaining visibility 

into out-of-reach devices in the field has been percolating for a few years. But some of 

the key ingredients to really allow this technology to proliferate are just now rolling out. 

Things like an industrial-strength communication standard, the ability to connect the local 

mesh network with a wireless wide-area network, having a service-broker to manage the 

communication calls and designing applications that can operate on the wireless network 

are in the early introduction phase. Once everything comes together – in about two-to-five 

years – it will change the way manufacturers gather information without adding a lot of 

overhead. 

AbOut hARbOR ReseARch 

Founded in 1983, Harbor Research Inc. has been providing strategic consulting and research 

services to clients for more than twenty years. With a reputation as specialists in understanding 

emergent and disruptive opportunities in high technology, Harbor Research 

works with clients who seek to establish strategic advantage in changing markets. Harbor’s 

groundbreaking Pervasive Internet research is widely regarded as the definitive work on 

the business impact of integrating networked devices into business processes.

MEDICAL DEVICE MANAGEMENT - Axeda

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