les Nouvelles - December 2008

Software & Valuation In The Information Society Part Two: The Software Inventory

Dwight Olson

CLP, V3Data, Principal, San Diego, CA, USA

Denny Kolb

DNE Information Services, LLC., Managing Partner, San Diego, CA, USA

The intangible assets owned by any software development enterprise, include: the technical knowledge (and know-how) of its staff, the competence of its sales force, the business knowledge (and experience) of its management, its goodwill and reputation (including trademarks), the value of its intellectual property (including copyrights, trademarks and patents), the commercial value of its licenses, and the value of its software inventory.

Recent les Nouvelles articles discussed the need to accurately identify, analyze, and evaluate intangible assets within an enterprise as regulations such as Sarbanes Oxley and Financial Accounting Standards Board (FASB) Statements 141, 142 that force governance of these assets. There were three questions asked: Which software assets can be monetized? And third, what is the commercial value of software, whether as a capital asset or as debt security? Further to a recent les Nouvelles article’s discussion of a software asset’s monetization, this article will address which software assets have value.

Mr. Kemerer, a writer for Information Week asked, “Do you know what your software inventory is worth?” It’s a question you may not have addressed, or even thought of, but knowing the value of your software inventory can help you manage it better. Furthermore, the current spate of mergers and acquisitions means that enterprises must estimate the value of existing software application inventories for financial and tax reasons. It is not an easy task as many software products today, including embedded software, are actually complex information systems that involve many components, networks and other related assets. Those assets are highly sophisticated, highly integrated, and many have the ability to communicate directly via secured network connections. Many software products cost millions of dollars to develop, millions of dollars to deploy, and tens of millions of dollars to adapt to ever-shifting conditions over time.

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