IT Fails To Communicate Business Value of Core Software

Businesses need to pay more attention to their intangible assets like core software, according to “Recognizing the True Value of Software Assets,” a research report published yesterday from international business school INSEAD and U.K. software vendor Micro Focus. The end goal: Businesses must manage those assets for value creation, not cost containment, says professor Soumitra Dutta, author of the report and INSEAD’s chair of business and technology. But first things first. Do CIOs and CFOs even understand the scope or value of the core software that they have?

The link between core software and business strategy seems clear. Almost 77 percent of the CIOs and CFOs surveyed for the report call their core software assets “critical” or “very critical” for their business strategy. (86 percent of U.S. respondents do.)

Yet 60 percent of the respondents overall don’t know the size of those core software assets. Just 52 percent of U.S. respondents could identify this size; that figure compares to 60 percent of German respondents, 40 percent of Italian respondents, 36 percent of French respondents and 12 percent of U.K. respondents. This situation traces back to the layers of software that business has been adding piecemeal for decades, and to new tools that business units can bring in themselves, the report concludes.

Perhaps most surprisingly, this research shows that 29 percent of the CIOs and CFOs do not know the total amount they spend annually on their core software assets. (Only 10 percent of U.S. respondents say they don’t know their total spend.)

Even the CIOs and CFOs know there’s need for improvement on the communication front: Just 10 percent of the CIOs and CFOs said their team did an “excellent” effort communicating the business value of core software assets to their boards. Twenty-six percent rated this effort “very good.”

“Both CIOs and CFOs need to be communicating the business value of core software assets to the Board and make it a priority to measure the value of their software assets,” Dutta says. For his advice on how to do that, see a full copy of the report, which requires registration.

The survey queried 250 respondents across France, Germany, Italy, the United Kingdom and the United States, comprising 50 percent CFOs and 50 percent CIOs at companies with revenues from $100 million up to $1billion-plus.