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Valuing applications

February 25, 2006 @ erp4it from alphasong

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It's easy to put a value on physical computers. It's much harder to put a value on an enterprise's applications, but these are more significant by far. Two interesting developments I noted while perusing some literature on the plane:

The Economist magazine (2/18/2006, p55 - online access paid) has a very focused discussion on the under-valuation of software as an enterprise asset in OECD countries, particularly the United Kingdom: "The new [OECD] numbers reflect a huge exercise to make sure software investment is counted correctly. The big change has been to "own-account" (developed and produced in-house) rather than purchased software. The revisions show [for the United Kingdom statistics] own-account software of £13 billion in 2003, compared with the previous figure of £2.5 billion. Estimates had been failing in particular to capture in-house software in financial and business services."

$17 billion dollars or so delta, yeah, that's real money...

I spoke in a previous post about the Norton/McFarlan article in 10/2005 Harvard Business Review; another section of that article reads: "One rule of thumb in determining intangible assets [i.e. applications] is to first measure the hardware inventory - including all mainframes, servers, and PCs - and then multiply that by ten. This renders a rough notion of what the software inventory will be (including off-the-shelf and proprietary software)."

If applications are real capital showing up on real balance sheets, can more effective management be far behind?

-ctb

PS. And if applications are valued, can data be far behind? DAMA folk take note...


This article is syndicated from erp4it . The original article is available here. Read more in Project Management News .

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