Don't ask your tech supplier for intellectual property. Ask them to put a ring on it.

18 Feb, 2021, by Cosmin Marginean

Before founding Blue Anvil, we’ve been delivering custom 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 piece equipment (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 (but often 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 develops - the cost of that is something no business we’ve known can afford.

The worst thing about this argument though is that it’s the moral equivalent of printing generic wedding invitations that can be re-used in case you divorce and re-marry later. If you’re not ready to invest in the relationship, what are you doing getting married?

“We (the client) 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 open-source’s favour. 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 will re-use their knowledge of local streets when they change employer. You can’t prevent that just because the knowledge was accrued while they were in your employment, nor can you charge your former employee for that “IP”.

In other words

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”.

Custom business software is not like other products bought by a procurement department though. Yet there’s a stubborn tendency - from both suppliers and consumers - to treat it like a warehouse lease or hardware equipment purchase.

Uninventive pricing models are the critical point here. Yes, a supplier must charge something for the work: there is labour and resources involved. But most lack the ability to make the client’s investment fair and are unable to stress the value of the work rather than the hours. When instead of a service you sell man-hours, fairness and value become that much more complex.

At Blue Anvil, we believe that by retaining the IP, we can provide our clients with bespoke solutions, sustainable services and a fair investment (no, they’re not mutually exclusive). This way, everyone benefits from the economies of scale that come with technology re-use and re-purpose. And last but not least, from meaningful and mutually beneficial relationships.

Common sense, really.

Get in touch if you’re tired of swiping left/right and are looking for some substance in your business relationships.


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

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