Professional Documents
Culture Documents
by other orgnaisations who are able establish their own control over the software. This is a strong
argument for allowing the software provider a complete capital value write-off against corporation
tax. Such companies plan to gain in the medium-long term through the provision of attached
services or products in accordance with well trodden open source business models.
OK So how could you attach a value to OSS?
Here is the rub, open source software would have to be valued against an 'in production' cost model
for it to be added to the asset register. A simple download for personal or development use would
clearly not count. Many proprietary software suppliers use an 'in production' model in their license
payment terms to match the customer's derivation of value from their software. The extent to which
software is deployed into production is normally specified in the terms and measured by audit-able
factors such as number of users, servers or data used by the software. OSS code is not normally
published with any similar valuation models. However, if software providers were more aware of
the financial benefits to Trusts, and further motivated by the a potential tax break related to this
benefit, then providers may consider publishing such models to assist Trusts and procurement
professionals in project planning. In the absence of such guidelines, Trust accountants could
calculate the 'fair value' of their OSS assets by using the proprietary pricing model data of a product
of the same functional class. Other valuation models are also possible like COCOMO, but they lack
market testing.
The numbers involved are big
Just looking at the NHS Trust side of things, there appears to be potentially huge Trust benefit of
migrating to OSS and recognising existing OSS used within the organisations. For instance,
a) if just half of the NHS Trusts migrated to a simple open source infrastructure component
attracting a license fee of 50K, then the NHS as a whole would:
spend nothing on license fees
create 5m of Capital Asset value, excluding project costs
b) for a relatively 'cheap' 1.5m OSS electronic patient record system license:
over 150m would be added to balance sheets, excluding project costs
Given the size of potential OSS uptake in use across the NHS and UK public services, a UK OSS
accounting policy may even give a significant boost to UK GDP, fueled by an increased motivation
to use OSS.
All this makes the 20m of open source funding announced by NHS England sound not only
prescient, but also a real bargain!
How would an OSS asset value accounting policy affect the general perception of OSS?
If assets have no visible impact on the balance sheet, there is nothing to be discussed in the annual
report, no 'value at risk' to be proactively managed and no impact on financial planning. OSS
promotion is currently left to the 'techies', who are usually too embroiled in software delivery and
risk. With an OSS presence on the balance sheets, OSS tax breaks in place this transparency
witwould result in more promotion of OSS by software providers and Trusts, together with a global
view of how much OSS is being deployed across UK businesses to feed statistics to guide Health
(or any other) sector tech strategy and procurement strategy that involves OSS.
More work required!
In a market which is still suspicious of OSS, we need first need to take baby steps forward toward
an OSS valuation policy, but there certainly seems to be enough potential benefit here to warrant
more work in this area. Guildfoss has opened the discussion by presenting the case at EHI Live
healthcare IT event on 4,5 November, and is following up with a small group drawn from industry,
Trust representatives and NHS England, to see if it there a clarification of OSS accounting policy is
needed.