Commercial potential

When none of the available packaged software will do, a little creativity can lower the cost and overhead of building and maintaining proprietary apps. One method is to collaborate with competitors to build vertical software that can eventually be licensed.

"The marketplace and economies of scale are forcing competitors to work together more often," Lutchen says. As an example, he cites a client in the entertainment industry that is partnering with a competitor, venture capitalists, and a software company to develop a royalty information system. Off-the shelf royalty systems have been tough to implement, he says, because each contract is different, incurring complicated tracking and payment processes. Together, these partners are working on a system that will account for such wide variations.

The University of Pittsburgh Medical Center took things in a similar direction. In the late 1990s, UPMC was looking for a PACS (picture-archiving communications system) to convert radiology film to digital images for easier storage, viewing, and analysis. The problem was that none of the PACS vendors at the time offered a product that would display images on standard PCs.

With the help of an informatics lab on campus, UPMC developed its own PACS, still in use today. Soon after, UPMC partnered with venture capitalists to launch Stentor (a company that Philips Medical later acquired) to take ownership of product development.

Commercialization helped lower the risk in long-term support and maintenance. "We saw that the only way it could be really successful for the long-term was to get it outside of UPMC," says Duane Falk, UPMC's director of enterprise middleware. Falk also notes that having ample resources (250 developers in a total IT staff of 900), a sophisticated development culture (relying upon the Carnegie Mellon Capability Maturity Model), and an on-site lab makes major development decisions less of a gamble. "For us, it's not so much starting from scratch," he says.