ASPs Need to Understand the Value of 'Business IP'

The most precious thing that a business owns never shows up in its balance sheet. Much more important than all its physical assets and patented intellectual property is something that's far more difficult to define and measure. I call it "business IP."

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Business IP is the sum of everything an enterprise and its employees know that enables the organization to do what it does. It's all the stuff that never gets properly written down or recorded anywhere and yet somehow still permeates the fabric of the enterprise — all of the special relationships, knowledge, processes and culture that collectively make up its business operations.

Business IP is unlike other forms of intellectual property such as copyright, trademarks and patents, which can be captured and registered to an owner. If business IP is captured at all, it's only because it's become part of the habitual daily routine as employees and their colleagues go about their duties.

But it can easily be lost, stolen or shattered. Lose a key employee and much of the business IP they carry around with them either disappears or gets carried across to their new employer. Install a new application and you may unwittingly disable large chunks of business IP as you implement new processes around the computerized system.

Perils of Automation
One of the major challenges in maintaining and growing a durable business is the constant struggle to capture and replicate business IP. Training, apprenticeship, procedural manuals and company culture all play their part in codifying and passing on business IP from existing employees to new recruits.

In today's information age, we have another tool at our disposal. Software allows us to capture and automate business IP. That's been a great boon, making it far easier than ever before to rapidly expand a business. But there's a hidden peril too, for it also makes it easier to lose control of that precious business IP.

Every software application comes with its own ready-made business IP built into the product. Sometimes those off-the-shelf processes improve on the existing routine within an enterprise; and sometimes they don't. Either way, the organization has to adapt the way it works to accommodate the new business IP, giving up some of its own uniqueness.

Software can often be reconfigured or customized to better match the way the enterprise works. That helps the organization preserve its unique way of working, but there are hidden dangers. Every time an enterprise or one of its employees configures an application — even a change as simple as creating a new document template in a word processor — it embeds a piece of its business IP in the software. Once there, that business IP is both harder to change and easier to steal.

That's manageable if you own the software and the means of changing it. But very few enterprises these days actually write and configure their own software. Most of them hire outsiders to carry out the initial implementation and subsequent modifications. Those who turn to ASPs for their applications have even less control. They don't even own the software their business IP has been captured in.

Business IP Can Be a Barrier
This is a major issue for ASPs, since it's the main reason why enterprises are reluctant to outsource computing. Much more than data security, which is relatively easy to ensure, their real concern is losing control of their own business IP. Once it's embedded in the ASP's software, it is literally a hostage to the ASP's fortunes. If the ASP goes out of business or fails to honor its contract, the enterprise is suddenly cut off from a large part of its very being. Yet business IP is such an elusive thing, it can't be legally protected or guaranteed by service level agreement (SLA). Most enterprises instinctively feel that the safest way to ensure its continued survival is to keep it in-house.

ASPs must overcome this very powerful objection by promoting the concept of portable business IP. Here's how enterprises can ensure they keep control of their business IP without becoming tied to a single provider, systems integrator or software vendor:

• Build applications in a way that keeps business policy and profile information separate from software processes
• Keep that policy and profile data in a format that allows you to easily transfer it to an alternative application platform
• Always take maximum care to protect policy and profile data from unauthorized access and use

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