techslog

In an article written By Mary Hayes Weier of InformationWeek
A recent survey suggests that business users want more innovative software faster and will bypass the IT department if necessary to get it. Executives of both business and IT departments define innovation as better integration and usability, more so than whiz-bang features. And software costs? For the first time in years, they're not a leading concern for companies. Is this truth or a salesperson's fantasy?

Apparently that is the results of a survey of 475 senior IT and business executives, conducted by consulting firm McKinsey & Co. and Sand Hill Group, a Silicon Valley venture capital firm, on software trends, expectations, and spending habits, now and over the next two years. The survey results, which will be introduced at the Software 2007 conference in Santa Clara, Calif., this week, show the dynamics of a modestly healthy economy, one where companies are more focused on growing their businesses than controlling cost.

In some cases, the research also shows IT organizations turning a blind eye when business units take risks with smaller, more innovative approaches to software. Businesses can do that more easily than in years past since new models, such as software as a service and even advertising-supported software, don't require a lot of up-front costs and support.

When asked what software trend will have the biggest impact on their businesses, and what they need most from vendors, survey respondents cite innovation broadly most often. After that, they cite specific innovations: Software as a service ranks second, service-oriented architecture third, and open source software fourth. "The software industry is emerging from a depression and consolidation, and entering an era where we can feature innovation again," says M.R. Rangaswami, co-founder of Sand Hill Group and one of the survey's authors.

This growing interest in innovative approaches to software is generating new energy, as evidenced by a fresh wave of startups, old startups turning into bigger companies, and a rise in tech-related venture capital funding. Fifty-five percent of respondents agree that software industry innovation is on the upswing, with more expected in the next few years. "The post-bubble flash fire created fertile ground for innovation to take root, but it was a couple of years of developments that led to the flowering we have today," says Ken Berryman, a principal in McKinsey's Silicon Valley office.

Yet a sizable minority isn't nearly bullish on the future. Twenty-two percent of respondents say industry innovation is at its peak right now, and 8% say software's high point is in the rearview mirror.

It's a shift larger software companies need to address. Among respondents who work in IT, 29% say they're confident that large vendors can deliver innovation; among those in non-IT business roles, only 15% have that same confidence. Since business users are involved in 61% of all software decisions, and another 35% offer informal input, according to the survey, it suggests big software vendors need to cut back on the tech talk and work on communicating the value of their offerings to business managers.

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