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Boards missing software's hidden value

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Businesses need to radically shake up their attitudes about how they value information technology assets, according to new research released yesterday.

The Paris-based business school Insead, which carried out the study, said it found that far from understanding IT assets as a core business need, many firms instead wrote hardware and software development costs off as mere expense items.

It also reckoned that IT assets at the world's top companies should be kicked up to the boardroom rather than left in the laps of middle management.

The study, which was sponsored by UK software developer Micro Focus, said that core IT assets deserved the same value as corporate assets such as brand and intellectual property.

Insead Professor Soumitra Dutta said:

"Core software assets represent the hidden value in firms and need to be correctly measured for making the right investment decisions."

The study built on a Micro Focus report released last month which surveyed some 250 CEOs and CFOs from the US, UK, France, Germany and Italy, and found that fewer than half had attempted to value their IT assets.

It said that 30 per cent of all respondents were clueless about how much cash was spent each year by their companies on software.

Dutta suggested that firms large and small could consider adopting a statistical methodology dubbed conjoint analysis, where people make trade-offs across different business outcomes associated with the software asset.

"If organisations analyse the conversion of real business outcome attributes generated by core IT systems into measures of business value, then there is a strong opportunity to calculate the real financial value of core software assets to the business," he said. ®

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