Companies need to value software

Companies need to value software

Report calls for a radical shift in the way businesses measure their technology portfolio

Businesses must value corporate software as a company asset rather than a cost, according to new research.

Despite a global annual spend of $1tn (£500bn) in 2006, IT systems are a hidden corporate asset, says the study by European graduate business school Insead sponsored by Micro Focus.

Companies are failing to value IT assets in the same way that cash, brand, property and intellectual property are measured.

And the research found that global companies rarely invest resources in valuing IT assets, said the report’s author Professor Soumitra Dutta, Insead chair of business & technology.

“Firms have managed their core software assets not as an asset for value creation, but as an expense item to be minimised,” said Dutta.

Chief information officers (CIOs) and chief financial officers (CFOs) need to be communicating the business value of software to the board, and make it a priority to measure the value of their software assets, said Dutta.

“Core software assets represent the hidden value in firms and need to be correctly measured for making the right investment decisions, balance sheet purposes, mergers and acquisitions, joint venture negotiations, licensing and franchising and transparent investor relations,” said Dutta.