What is the value of your software?

Abstract

Assessment of the economic value of software systems is useful in contexts such as capitalization on the balance sheet and due diligence prior to acquisition. Current accounting practice in determining software value is based on the cost spent in software development. This approach fails to account for the efficiency with which software has been produced or the quality of the product. This paper proposes three alternative models for determining the production value of software, based on the notions of technical debt and interest. We applied the models to 367 proprietary systems developed by a range of different organisations using a range of different programming languages. We present the valuation results and discuss the weaknesses and strengths of the models.