An Interview With Bob Sage, President and Founder

This year, laboratory information system (LIS) provider Psyche Systems Corp is celebrating its 30th anniversary. Three decades in business is a significant accomplishment when you consider how much the LIS market has changed since 1976. CLP asked Psyche’s president and founder, Bob Sage, how the company has managed to achieve success in this crowded and ever-changing market.

CLP: Tell us something about your company’s history.
Bob Sage: Psyche Systems’ origin was really a matter of serendipity. In 1975, while working as a contract programmer, I developed an LIS for a small laboratory in Providence, Rhode Island. The LIS was a break from what was commercially available at the time because it was the first system based on a standard microcomputer operating system. A hospital in Wisconsin heard about the system and contracted me to develop one for its laboratory. Soon after, I found myself in the LIS business and founded System Analysis Corp in 1976.

Since that time, though the company changed its name in 1994 to Psyche Systems Corp to reflect its structural metamorphosis, we’ve stayed true to our core principles: a drive for technology innovation and our focus on customer-guided product development. In fact, Psyche Systems has pioneered many new areas in laboratory information systems, thanks to collaboration and even inspiration from our customers, including the first true client/server anatomic pathology system, the first securely hosted LIS, interactive voice software for Pap cases, and support for full automation in the anatomic pathology laboratory.

CLP: How has your company managed to remain successful in a crowded market?
Sage: Over the past 30 years, we have seen a lot of change in the landscape of the LIS market. Three of the four major players selling LIS software at the time of Psyche Systems’ founding no longer exist, and dozens more have taken their places. We’ve witnessed firsthand the evolution from a nascent, emerging market dominated by a few vendors to a mature, crowded marketplace stratified into many submarkets and niches.

I firmly believe that Psyche Systems’ success is attributable to two seemingly contradictory characteristics: being both revolutionary and conservative at the same time. We’re revolutionary when it comes to product innovation. We’re constantly developing new solutions using the latest technologies to address challenges our customers are facing in the market. We are very bold when it comes to taking chances on new products. A shining example is our voice-operated software for GYN Pap cases, called Vox Pap. Vox Pap is based on an emerging technology category called conversational computing that literally allows the cyto tech to interact with our anatomic pathology system WindoPath through a series of voice commands to complete Pap cases. The user talks to the computer and the computer talks back, enabling the technologist to focus exclusively on the slide in the microscope.

Our conservative nature is evident in our operating philosophy. We are very cautious on financial matters. We never borrow, and we don’t accept venture funding. Psyche Systems is entirely profit-driven and has been for nearly 30 years. Our belief is that taking unnecessary financial risks not only jeopardizes the future of the company, but perhaps more importantly, it also endangers the future for our employees and customers. And those are risks we are unwilling to take.

CLP: How has the LIS market changed since 1976, and how has Psyche Systems impacted the market?
Sage: The LIS market has changed dramatically since 1976 in so many ways—from the operating systems and platforms the software runs on to features and functionality, as well as connectivity and support for automation. The LIS market has kept pace with the changes impacting the laboratory itself, and the field of laboratory science has undergone a dramatic transformation in the past 30 years.

In 1976, the fledging LIS market was dominated by a few vendors offering large mainframe-based systems, and the concept of time-sharing (multiple businesses sharing time on one mainframe) was popular due to the size and complexity of these systems. Psyche Systems introduced an alternative in 1976—a smaller, more flexible, and cost-efficient system based on a standard microcomputer operating system, which made it possible for smaller laboratories to own and operate their own systems. Widespread adoption of standard personal-computer operating systems and broadband technology, more recently, have continued to transform the market, essentially making the LIS ubiquitous and giving life to a new subcategory: the hosted LIS. Ironically, in 1998, Psyche Systems—the company that helped usher in the end of timesharing in the LIS market—delivered the first hosted LIS.

Probably the greatest area of change in the laboratory in the past 30 years has been in instrumentation. My first contact with a lab involved interfacing an SMA6 to a PDP-11. The SMA6 had a potentiometer on it, which sent a stream of values indicating where the pen was on the graph paper. My LIS software had to figure out where the plateaus were. Sometimes the plateaus would have bubbles in them, so it was an interesting challenge. Today, automation and instrumentation is common in the clinical laboratory. We’re now interfacing flow cytometry and other image-producing instruments in the anatomic pathology laboratory bi-directionally over the Internet using HL7 and other standards. It’s truly amazing. The SMA6 looks like an ox cart by comparison.

CLP: What have been Psyche Systems’ most significant offerings in the past 2 years, and why are they important?
Sage: The newest versions of our flagship products, LabWeb 8.0 and WindoPath 6.0, represent significant strides toward the future of laboratory information systems—each boasting hundreds of new features and truly innovative capabilities. However, I think our two most significant offerings in the past 2 years are those that really open up new opportunities in the market. The first is the latest incarnation of our hosted laboratory information systems (www.onlinelis.com). We can now deliver Windows®-based laboratory systems securely over the Internet, including instrument interfaces, that authorized users can access anytime from anywhere. The advantages of hosting are overwhelming. I really believe that the Web-deployed LIS has the capacity to change the way laboratories do business. Right now, our early adopters are reaping the benefits, and soon the whole industry will realize the flexibility and freedom hosted systems provide.

The second significant offering we’ve introduced in the past 2 years is actually not really a new product, but more a reinvention of a product that we have had in our coffers for a while: our Systematic Blood Bank (SBB) software for transfusion services. SBB has always been an advanced feature module that we’ve offered as part of our LabWeb LIS suite. However, a little more than a year ago, we saw a real market need for a complete, easy-to-use system that smaller blood banks could afford. Offering our SBB software as a hosted, stand-alone blood-bank system was a perfect fit to help these blood banks realize the benefits of computerization.

CLP: What challenges has the company faced over the years, and what have you done to overcome them?
Sage: Our biggest challenge is the same as any company facesthe competition. It comes from all angles and is frequently very well funded. In order to survive, our company has had to continually innovate. An example of that is WindoPath, our anatomic pathology system. WindoPath was the first Windows®-based system on the market and was therefore able to capture market share from the DOS-based systems already settled into this important emerging market niche. If we had simply introduced a system similar to existing systems, we would not have succeeded in growing our AP system business. The other early players in this market have been bought out or closed up entirely.

The other challenge is keeping both your employees and your customers happy. We do that by a system based on mutual trust. The structural metamorphosis that spurred the name change in 1994 was a move from a traditional hierarchical corporate structure to a unique and fluid hierarchy of interlocking teams. We have no managers at Psyche. This structure allows us to maintain a constant interaction among our employees. Because of this aspect, our customers find that we are all well informed of current situations and able to respond more quickly as a group to their needs.

It is this dynamic group organization system that fosters strong employee loyalty and infuses energy and innovation into all aspects of Psyche’s operations. The advantages of this hierarchical group structure pervade every level of the organization. At the highest level, a Directions Group serves as the corporate leadership for Psyche Systems. They are responsible for setting the vision and directing the daily operations of the company. In this capacity, talented individuals, who each bring strengths in various areas, together act as the chief executive officer.

Likewise, our customers are in control of how our products develop. We have always relied on customers to help guide the direction of our product development. Customers provide regular input into the R&D process, both formally through our semiannual user symposium and informally through conversations with Psyche employees. We actively solicit suggestions from them and implement more than 80% of the changes and features they recommend. It is in this way that we leverage the intelligence and expertise of hundreds of health care professionals to build products that will have a real, positive impact on their businesses.

CLP: What sets Psyche Systems apart from the competition?
Sage: I’ve talked a lot about our product innovation and customer-guided development. I think what really sets us apart from the competition is the commitment we make to our customers. We offer them a real partnership by listening and acting on their ideas, by offering them personal attention from talented employees, and above all, by taking steps to ensure that we have the staying power to continue this partnership well into the future.

CLP: Where do you see Psyche Systems in 5 years?
Sage: This market is so dynamic, I honestly can’t see that far ahead to know how we’ll have changed. I wouldn’t have predicted 5 years ago half the advancements we are introducing today. It’s how you take advantage of opportunities and how you cope with challenges that determine where you end up.

Carol Andrews is editor of Clinical Lab Products.