Return to Archive Runtime - The Software Outsourcing Newsletter for Executives and Investors from Accelerance and Steve Mezak The 5 Levels Of IP Risk Software companies are concerned about putting their Intellectual Property (IP) at risk. Are you giving your IP the right amount of protection? On the other hand, you can be so protective of your IP that you overlook opportunities like outsourcing to provide resources to leverage your success. Are you being promiscuous with your IP or over-protective? Many years ago I worked for a software company and we licensed a copy of our software to the US Navy. I flew to San Diego to do the installation. Security was a notch higher than at most companies I visited, even in those days. After checking in at the guard shack and meeting my escort I was ready to get to work. But first my escort had to find a third person authorized to bring my tape into the data center so we could read in the software. Then more authorizations were needed to allow installation of the software on their Univac computer. The installation process dragged on. During one of our many breaks, I was escorted to the Men's Room. Along the way I passed someone's cubicle with a big sign on the wall. It said "My job is so secret, I don't even know what I am doing!" That pretty much summed up my experience that day. Sometimes the need, or perceived need, for confidentiality adds a great deal of inefficiency. Software company executives consider their software IP as their highest value asset. But is it? How about your sales contacts and deep knowledge of the market you sell into? The actual software and the work that goes into creating it is more of a commodity. The Accelerance Vision DecisionSM service helps you decide if outsourcing your software development is right for your company. IP Risk is one criteria used in the analysis. You are asked to score your tolerance for IP Risk on an increasing scale of risk from 1 to 5. Here is the meaning of each score value: Very low IP risk. You are using standard or old technology that is widely available and understood. Low IP risk. Some IP is exposed but your significant market knowledge and innovation limits its practical use by others. Neutral IP risk. Some of your IP will be exposed, but you can partition your product to limit exposure during outsourcing. Moderate IP risk. You must be careful about partitioning your product and possibly using multiple outsourced teams to limit access to all your IP. Serious IP risk. You cannot separate out your critical IP. It will be exposed to any outsourced team used. This risk may overwhelm the benefits of outsourcing in some cases. Vision Decision uses a decision matrix to combine your score of IP Risk and sixteen other criteria to evaluate five different outsourcing strategies. A sixth strategy of using in-house development with employees is also included. Here are the six software development strategies: In-house - with your own employees or contractors Onshore - outsourcing to a company in the US Offshore - contract outsourcing outside the US In-house+Offshore Blend - with internal & offshore teams programming together BOT - Build, Operate & optional Transfer to become your own offshore subsidiary after two or three years Subsidiary - create an offshore subsidiary immediately For details on BOT and Subsidiary creation see these previous issues of Runtime: How To Build a Subsidiary in 24 Months (or less) & First Order T-Shirts, Then Create a Subsidiary in India. When IP Risk is serious, creating your software with an in-house team of employees is ranked highest. Offshore strategies are all ranked very low. Onshore outsourcing is ranked low in the matrix for all scores of IP Risk. If IP Risk is low then you save cost by going offshore. If IP Risk is high then any outsourcing is ranked low. Onshore outsourcing can gain in ranking from other criteria in the matrix like your need for technical expertise and fast ramp up of software development. When you have a neutral IP risk then the In-house & Offshore Blend outsourcing strategy ranks highest. You should be able to partition your product or architect your software to enable development of sensitive software in-house and outsource the rest. Creating a subsidiary is also highly ranked when you have neutral IP risk since you should have more control over your IP in your own subsidiary. If your score of IP Risk is Low or Very Low then the offshore outsourcing strategies are ranked high as good choices for your software development. Creating a subsidiary is ranked highest, with BOT and Offshore only slightly lower. In-house development is ranked lowest when your IP Risk score is also low. Low IP Risk lets you take advantage of offshore outsourcing. Of course, having a low tolerance for IP Risk does not mean you should necessarily create a subsidiary! The overall ranking given to creating a subsidiary, and the other five software development strategies, depends on your scoring of all 17 criteria in the Vision Decision matrix. When offshore outsourcing is the highest ranked software development strategy for your company, there are three ways to protect your IP - legal, physical & technical. Technical protection. Basic firewall, VPN and encryption technology is widely available to protect electronic assets like source code and electronic documents. Make sure both you and the outsourced vendor use them. Legal protection. Use the right kind of agreements with local jurisdiction to protect your interests. It is helpful for any offshore firm you select to have a US-based legal entity like a corporation you can hold responsible for any disputes. Physical protection. You probably have some sort of physical security around your computers, servers and source code. Make sure your outsourced vendor has the same. Keeping the computers in a locked room, perhaps with card key access will be sufficient. Don't be promiscuous with your IP. But don't overlook the power of offshore outsourcing. Most offshore firms will fiercely protect your IP as a normal part of doing business. Vision Resources Are you wondering how you will select an expert offshore team to develop your software? Use the Accelerance Vision Resources(sm) outsourced vendor selection service and cut the time of your vendor selection process by as much as 90%. Vision Resources leverages members of the Accelerance's 17 teams in 14 countries around the world. Click here to learn more about Vision Resources Accelerance, Inc. delivers impartial & expert strategies and services for risk-free outsourcing of your software development. Visit our web site at www.Accelerance.com   Until next time, Steve Mezak Accelerance, Inc. Risk-Free Outsourcing www.Accelerance.com 213 Garcia Avenue Half Moon Bay, CA 94019 1-650-712-8990 Contact me by email (c) 2005 Accelerance, Inc. All rights reserved. You are free to use material from the "Runtime" eZine in whole or in part, as long as you include complete attribution, including live web site link. Please also notify me where the material will appear. The attribution should read: "By Steve Mezak, CEO of Accelerance, Inc. Please visit the Accelerance web site at http://www.Accelerance.com for more information and resources on outsourcing and creating great software products."