You have more than 18 years experience analyzing the IT, business process outsourcing and professional services markets. Tell me about your career path.

I had a consulting business in college and did radio station programming. After that I did a long stint with what’s now Accenture. I was there for 18 years and for ten of those I ran the firm’s Software Intelligence unit worldwide. I advised clients on what to buy and what to run away from for big ticket software purchases.

There’s a lot of innovation happening in technology particularly in the way IT delivers computational application services within the enterprise. What are the driving forces behind this innovation and what should Software-as-a-Service (SaaS) vendors focus on?

A lot of the main innovation that has happened in the past decade has been focused in two areas: the first are changes to the business model that have vendors moving away from on-premise to SaaS. The other is baking service oriented architecture or middleware platforms into the product. This has been technical innovation, not business innovation. A lot of vendors like to say ‘look at our analytics or business intelligence’ but they’re still looking at the same transaction data that’s in the same system. Fundamentally, it hasn’t changed the business yet.

There are some vendors out there such as Sonar6 that have used and thought about SaaS in a way that says we have a SaaS-based product, we are thousands of miles away from the North American market, can we use Software-as-a-Service to deliver product at a much lower cost for customers? And the answer is yes. But to do this, they changed the way they sell, market, and deliver service so they can actually deliver an SaaS product for quite a bit less than other firms do. That’s the lesson here. If an on-premise vendor is trying to sell a SaaS-based version of its product and hasn’t changed how it sells, markets, and delivers service, it’s not going to be a real big change.

The newer pure play Software-as-a-Service providers that really rethink the business will change the market because they will deliver a lower cost solution to the end customer. More importantly, because the vendor does all the continuous maintenance of the products, the customers are going to enjoy that. Customers don’t want to spend money on re-implementations and reinstalling products. They expect to get that automatically from a vendor at no cost to them and that’s the big advantage of the SaaS products.

A lot of vendors have been focused on trying to fill out their product suite with other products that are similar to their competitors. What we have is a bunch of vendors that are adding additional functions that just give them competitive parity, but they’re not really advancing the needle. They’re not building an all new application that no one in the industry has ever seen. . The issue here is why isn’t that occurring? It’s because a lot of the vendors don’t know how to innovate.

Many vendors ask their existing customers what they would like to see in a new product and the customers give them a few features or functions that they want to see included. The discontinuity we have is that the software buyers have so few middle management types left in their organization that they don’t have time to coach and teach a software vendor what they need in the market, yet they expect software vendors to provide innovative products for them. That’s the real nut of the problem. Vendors have either forgotten how to innovate, don’t know how to innovate or are too comfortable innovating on the periphery. That’s the kind of innovation we’re drowning in right now in the application space. What vendors should be focusing on is game changing technology.

What’s the current outsourcing landscape and how do you see it changing through 2010 and beyond?

The old school outsourcers that take over a company’s data center and its hardware and applications may not be the most robust market left in the market. Here’s why: IT executives are looking at retiring some of their equipment and replacing it because their servers and software are getting old and obsolete. They’re asking themselves, why do I want to do that? Should I transfer some processes over to a business process outsourcer or to a SaaS software provider? They’re thinking why incur the capital expense if I don’t have to. They’re perhaps less interested in transferring their capital problem to another company, but more interested in avoiding the capital expenditure altogether. Business Process Outsourcing (BPO) is going to have some stiffer competition from the SaaS vendors because the line between what a SaaS vendor does and what a BPO does is getting blurred right now. That’s going to make for some interesting decisions by customers about what they want to buy and what kinds of solutions they’re going to end up purchasing as a result.

What do organizations need to consider when making the decision to outsource or not? What other options should they consider and what should they be looking at from a technology point of view?

First thing is to realize that when you do it you should expect to see a step change in process improvements no matter whether you go with SaaS or BPO. If you’re in the third quartile of performance you should be moving to the first or second. That’s what a lot of people focus on initially on these deals. The bigger question is how tough is it going to be to continue to make additional improvements over time and what is the vendor going to do about that? With the SaaS-based vendors and multi-tenant solutions, customers will be able to take advantage of new technology and new capabilities. It won’t cost a penny and it’ll be done automatically. I’m not sure that will happen with some of the BPO solutions. That’s an area that needs to be explored.

It is not just looking at the immediate change; it’s also looking at the long term change perspective. That’s important because we live now in a business environment that is extraordinarily dynamic and so you need systems that can change on a dime and support that kind of business dynamism. You can’t have some kind of ossified solution that doesn’t adapt. So whether you’re looking at SaaS, BPO, or in house on-premise, you have to ask yourself beyond the capital expenditure, beyond the operating expense, will this adapt to our changing business at the same velocity that the company changes as well.

There’s an art to effectively selling technology or services. Why do organizations need to focus on selling the experience of using great technology versus its functions and features? What tips can you offer our readers?

Some sales techniques and selling technology are appropriate some times, and absolutely inappropriate in others. If you’re selling a very technical tool, such as a disk optimizer, then selling functions and features might be appropriate. When you’re selling a broad enterprise application suite that a customer potentially is intending to use for a decade or more, then the sales effort has to move away from functions/features and needs to address the experience and the afterlife.

The best software sales people selling those kinds of solutions are masters at being like televangelists. They sell the vision of what life is going to be like after a customer has been using that solution. That experiential kind of selling where you understand what kind of experience the customer wants and you couch the solution under those terms shows that you have great empathy and understand the customer, their business and their business problems. The worst sales pitches are the ones that focus only on the vendor’s company and nothing about the customer. There is nothing more repellent than an ego-centric, narcissistic, selfish presentation that has ignored or not even attempted to try and understand anything about the customer. If the sales person won’t make the time and investment in understanding the customer, why should the prospect reward that sales person with a deal? It’s about the customer and the customer’s experience and that’s what needs to be brought out.

You have several successful blogs that cover software, services and technology trends. What three blogs or Web sites do you read regularly?

I look at Deal Architect and Accmanpro and a bunch of others that are written by the Enterprise Irregulars – a group of bloggers who cover the enterprise software space. I also read “First Thing Monday” by Bruce Richardson, a senior research analyst with AMR. I tend to read blogs that are covering or picking up something that is of immediate topical interest to me versus following a particular blogger. It’s not so much who writes the blog, it’s what is this person writing about today.