Comment: IT projects need to earn their keep

1 Sep 2004

A lot of people with an eye on Ireland’s economic development are speaking more about the emergence of a knowledge-based economy as Ireland and other developed countries migrate from manufacturing-type industries to knowledge-based enterprises, all seeking to become the most competitive knowledge-based economies in the world.

For us it means that we are turning more to knowledge products such as software by harnessing the skills and competencies of highly educated people to create new products and services that we can market throughout the global economy.

So in this age of knowledge economics we need to bring some clarity to the definition of what precisely these new intellectual assets are and how they are being created. For years many organisations have been creating new assets in the form of new software solutions to business problems. Indeed, many spin-off businesses have been spawned as a result of original investment in software systems that were subsequently found to be marketable to other businesses.

In the case of the Government, we know that it has been spending significant sums of money in the development of major systems, some of which have been breaking new ground. Given that the Government is perhaps the biggest spender on IT, it begs the question of what it is doing about intellectual property (IP) or what it will be doing in the future about all the intellectual assets it is paying for. The problem or challenge is not unique to Ireland, as all governments are increasingly relying on the private sector to build the complex systems that governments use.

I was talking recently to a senior official from one of the large US departments about these issues. He knew exactly where I was coming from. He said that most IT managers in the public service were focused on getting systems built to spec and implemented on schedule, within the terms of the contract. It requires very skilled project management that was not always what is should be, even in the US, and contractor management that was becoming a greater issue as governments are increasingly outsourcing development projects. But he felt part of the problem was the type of people who are overseeing the building and implementation of systems, in that they lack the sophistication that you find in business to cope properly with the issues surrounding IP. But he also said that it probably required new skills that governments would not have seen the need for in the past.

Quite apart from the skills required for greater IP management, there is also the problem of identifying the new IP asset and how it should be managed afterwards. Many applications are built-on systems that have been developed on previous projects and are only adding some additional value to what was already there. For that again, some systems are unique and have a lot of potential for resale later. Clearly, the definition of IP in the case of software products and solutions is not always easy or straightforward, but it would make sense to start with a standard approach in drawing up development contracts. With the contracts properly drawn up to specify what constitutes the new IP and who owns it, there would be less danger of giving away valuable new assets to contractors that can subsequently market these without having to consider royalties to those who originally paid for the products.

I’m not saying this is a major problem, but it strikes me that in this knowledge age that puts a high value on intellectual assets – and rightly so. We need to start looking more closely at how we are managing the assets we are creating at the taxpayer’s expense to ensure that the public good is being protected.

As far as I can gather, a lot of IT managers cover IP to some degree in contracts, but there is a feeling that it is difficult to police. At this stage, there doesn’t seem to be a standard treatment used across the public sector in the form of a standard clause that they use in contracts. Devising such a clause or clauses would be a good beginning in that it would lay the legal foundation for how the Government could start to explore getting more value from its considerable investment.

As I said, determining the IP of the investor in software development may be difficult, but it is not impossible. After all, the private sector has been doing it for years. Part of the problem with the public sector is that it does not have a lot of people with the relevant business experience and drive to manage IP as a business. And you wouldn’t really expect them to.

But it may be possible for the Government to set up an IP management agency that could be run to exploit IP created by the Government on a commercial basis, either in partnership with the original build partners or on its own. It could even sell the IP to the agency so that it operates with freedom as to whom it partners with and where it markets the new products and so on.

We know that Ireland has gained international recognition for its achievements in e-government. And I am aware that some of the recent entrants to the EU have expressed interest in a number of the solutions developed here. Indeed, it is even possible to envisage that some e-government services could be run for other countries here in Ireland on a transaction charge basis to enable countries to get up and running without the pain and expense of a design and build process.

However, I imagine that if this were to happen, some minds would have to be changed to get over the control and ownership problem because governments tend to want to control these processes themselves. But still, if we were to start looking at it as a real business opportunity, we might realise that we have far more assets than we previously thought.

By Syl O’Connor