I’ve spent quite a lot of time with SI‘s, both at the coalface as a consultant and as a customer. One thing that occurs to me with SI’s is that not many make the most of their IP effort, and in turn, are not aware of the IP moneycycle. What’s the IP moneycycle? It’s the process of identifying IP, and then putting it through a process that converts it to money.
How do you convert IP to money as an SI? Well, there are two ways, you can back-license IP from customers for exclusive resale into non-competitive market segments, or you can license IP to internal business units and charge them for the use of that IP.
The other aspect of the IP moneycycle is the management of that cycle. See, most SI’s like things easy. For example, while there might be some fantastic tax benefits or relief associated with converting IP to money, if it’s too complicated, then most will not adopt. So the key is to create simple, pragmatic processes that enable people to identify and process IP effectively.
So again, let’s flesh out the two processes I introduced above.
The back-license approach is really about saying, “Hey, we just did a bunk of work for a customer, and got a great outcome. Now how do we re-use that in a scalable way to make money?”. This is not about sharing IP ownership (which is very messy and hard to control and exploit), it’s about approaching a customer who owns the base IP outright, but are also wearing a huge TCO and looking for a great ROI and saying, “If you exclusively license your new shiny application to me for resale into non-competing markets, then I can make you royalty revenue, increasing your ROI and lowering your TCO!”. That’s a great conversation starter!
The second approach is aimed at internal technology practices who are always looking for ways to make their number. Now, most practices are doing individual effort, and at the core, some are duplicating effort. So let me give you an example. The Application Development practice has just developed a great set of web services for connecting to a large business platform, like SAP. Now, at the same time, the Business Solutions practice is about to start a big integration project, and are looking to develop a set of web services to connect to their customers SAP implementation. Now, the risk and cost of doing this is going to be high, and most probably will eat into their potential profits through MEE (man effort expense). If they could “license” the App Dev’s technology for their project, and pay a lower MEE to the App Dev practice, then two wins occur, the App Dev practice now has a passive income stream into their number, and the Bus Solutions practice lowers their risk and MEE while increasing their profit margin for that area of work!
I see big things for this type of thinking from SI’s looking to make more from their current efforts. I’m keen to hear from those in the SI space as to whether this sounds like it would fly within their organizations!