Your company’s technology assets may hold enormous value or could pose a huge risk to your business’s valuation. Whether it’s through the actual state of your technology, or the perception of it, the technology that runs your business should always be in a position to be bought or sold, or even just evaluated by potential partners and customers. Methodical documentation of your assets is the key to maximizing your company’s intellectual property. Despite this, the Corsis Confidence Index has shown that this activity is often the most overlooked aspect of a company’s technology operations, leaving tech staff to scramble at the last minute to compile necessary information.
Our professional services team has decades of experience performing technology due diligence on behalf of buyers and sellers and, with the help of our IT assessment tool, have put together the following observations.
Types of IP
Technological Intellectual Property (IP) is an important asset that can affect your company’s valuation. Tech IP can be classified into two major categories: soft and hard. Soft IP is made up of business processes – proprietary methods or ways of doing business that your company has automated. Hard IP consists of original code or custom-developed infrastructure management systems. Documenting IP is an important aspect of running your business, but is often difficult to understand and perform. For this, Corsis provides a powerful tool for performing periodic reviews of your technology operations and ensuring IP is captured, documented and communicable to a buyer.
What to Document
The task of documenting IP is an ongoing responsibility and likely must be accomplished by several people across different departments. Some examples of areas on which to focus for good documentation include:
Furthermore, those responsible for documentation often have many other responsibilities within the organization, many of which are prioritized over documentation activities. All of this makes it difficult for organizations to track and value their IT assets in a clear methodical manner. To insure success, companies must assign responsibilities to staff members appropriately and implement a system like Corsis to operationalize this important facet of your business.
Determining the quality of your IP is perhaps the most important aspect of this entire exercise. Once your assets are identified and documented you can begin to determine their quality and work towards remediation and upgrades where you find deficiencies. Quality can be based on many attributes, however our research finds the following items most common among companies assessed using Corsis:
Platform: Platform choices may have a significant effect on a buyer’s view of your technology operations. Is your technology stack appropriate to the business? Is it out-dated or made up of a mix of disparate technologies? Are presentation, business logic and data access properly segregated?
Buy versus Build
Organizations often have to make trade-offs in their decisions to buy assets or build applications or infrastructure. The company’s use of open-source applications, if not used properly, could devalue your assets. Of particular note should be a thorough understanding of the type of license that applies to the software, and how permissive (e.g. Apache 2.0) or protective it is (e.g. AGPLv3).
Applications and infrastructure that can withstand both horizontal and vertical scaling to accommodate future growth can significantly support valuation. Sellers should ask themselves, how easily does their architecture lend itself to the use of alternative hosting platforms (managed, cloud, colocation) for scalability and disaster recovery?
Implementation: IP must be implemented in a such a way so that your road map is well defined within the organization. Make sure your team has the necessary skills and structures, that your team can execute the plan efficiently and successfully, and that you have the right partners, vendors, and tools.
Proper documentation is often a neglected aspect of a company’s technology operations, however it is key to supporting and communicating your asset’s value. The Corsis Confidence Index shows that many companies often do not stress its importance and are left scrambling to gather this information once the due diligence process has begun. Having a well-defined IP documentation plan operationalized within your company will allow you to save time, and will leave you better prepared for an upcoming equity event. It may even enhance your company’s value in ways you didn’t expect.