Don't ask your tech supplier for intellectual property. Ask them for their hand in marriage.

18 Feb, 2021, by Cosmin Marginean

Before founding Blue Anvil, we’ve been delivering bespoke business software for clients in a wide variety of sectors. Two things they all had in common though was that none of them was a technology company, yet all of them were adamant about owning the entire output - the intellectual property in the product.

The arguments for IP ownership (as opposed to contracting the solution as a service) are usually based on a mixture of real constraints, business folklore, and supplier ineptitude. So let’s have a look at some of these.

If you (the supplier) sell the same product to one of our competitors, we’ll lose our competitive edge

Businesses who genuinely have innovation as their competitive edge, usually have a culture and a process developed around continuous innovation. If you’re not a technology company or this constant innovation stuff sounds far fetched, then you shouldn’t worry too much about software IP. It’s a lot like a talented local baker worrying about owning the wheat fields - it’s just not your industry, stick to what you’re good at, these are expensive distractions.

Alternatively, if your competitive edge hinges on using a piece of software, you will lose that in a matter of time anyway, for two reasons. Firstly, unless the supplier (with your partnership) continuously evolves the solution, the software will rot at a similar rate as any other tool, but often quicker. Second, if your competitors have the same problems, it’s only a matter of time until other software solves them in similar ways, but often in better ways.

If the relationship with the supplier fails, we can always take this somewhere else

The few cases where we’ve seen this done in practice have had the immediate effect of ramping up costs and throwing many plans in the air. The long-term result is that the project is abandoned. Eventually, a dysfunctional relationship between business and tech delivery starts to develop - the cost of that is something no business that we’ve known can afford.

The worst thing about this argument though is that it’s the moral equivalent of making generic wedding invitations just in case you divorce and might re-marry at some point. If you’re not ready to invest in the relationship, what are you doing getting married?

We (the clients) bear the cost of delivering this software, so we should own it

Of course, no one should pay exclusively for intellectual property that gets resold, but this is always much more complex than it seems. Mediocre suppliers, either intentionally or accidentally, will often charge you for capabilities similar to the work done on other projects. Engineers might take code, ideas, or both, between projects in ways that are not always distinguishable as new or re-purposed work.

Savvier consultancies will already have a lot of tested, designed-to-be-re-usable kit, included in your solution. Materialising these in licensing terms is hugely complex, so what qualifies as “the client’s IP” is often miscalculated.

Crucially, software in general contains more open-source that proprietary code and that proportion is slowly shifting in favour of open-source. This is a predictable development, and it’s at the heart of software solutions becoming gradually commodified.

Lastly, some of the intellectual property in a product might be nothing more than wiring lots of third-party tools and platforms. The outcome of this effort is something you’ll never truly own: your supplier will repurpose that knowledge inadvertently or deliberately because it makes sense to do so. A delivery driver is not going to take driving lessons every time they change employment.

What do you suggest then?

This last point warrants more context: often you don’t have a choice but to buy the IP because it’s the way the supplier works. Often there is some outdated tender process that’s counter-productive to what these relationships should be. Then people end up making decisions a bit on “do I trust these guys” and a lot on “who’s cheaper”.

Bespoke business software is not like other products that a procurement department buys. Yet there’s a stubborn tendency - from both suppliers and consumers - to treat it like a warehouse lease or hardware equipment.

Uninventive pricing models are the critical point here. Yes, a software delivery supplier must charge something for the work: there is labour and there are resources involved. But most lack the ability to make the client’s investment fair. When you sell intellectual property instead of a service, fairness becomes that much more complex.

At Blue Anvil, we believe that by not offering you IP, we can provide you with bespoke solutions, sustainable services and a fair investment (no, they’re not mutually exclusive). Get in touch to find out more.


Blue Anvil Ltd
International House, 12 Constance Street
London, E16 2DQ
United Kingdom
Company no. 11697283

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