Software appraisal and valuation
| Suzanne Atkins |
ICT Institute carries out an appraisal and valuation of software. The purpose of a valuation is to estimate the worth of software on behalf of an interested party. The estimate is determined by an official protocol, to ensure a well-substantiated valuation report. This report can then be used for purchase or sale, accounting valuation or other purposes. Each valuation at ICT Institute is done by a sworn IT expert and checked by a second expert.
Software Value Definition
The challenge in evaluating software is defining the concept of value. For cars there is a purchase value and current value. In production companies there is a difference between cost price and selling price. For each software valuation, we therefore first investigate why the valuation is being done. Based on this, the correct concept of value is chosen, for example replacement value or historical cost price. This choice is explained in the valuation report.
Content of a valuation report
Each valuation report contains at least the following:
- Client data
- Details about the appraiser
- Instructions given to the appraiser
- Purpose of the valuation
- Investigation into the copyright owner
- Organisation of the research
- Starting assumptions of the appraiser
- Draft report
- Review by a colleague
This content is based on the NVBI software valuation protocol, which was published in 2017. This protocol ensures that all experts use the same concepts and methods in a valuation, so that reliable valuations are made.
Execution of the valuation
To do a valuation, interviews are done with the client, developer and possibly others involved in the system. Subsequently, technical research is carried out into the system itself: this can be done, for example, with function point analysis and source code measurement. An estimate of the value follows from this. This estimate can then be adjusted based on external factors, such as use of outdated technology.
Lead time and costs
The costs and lead time of the valuation depend on the size of the system to be valued. It can take anywhere from a few days to two weeks. Contact us for a no-obligation cost estimate.
image source: ibrahim-rifath via unsplash
Dr. Suzanne Atkins is a geophysics researcher and was consultant at ICT Institute from 2021-2022. She is now working at TNO as machine learning expert in Geophysics.