Software has become a major component of products that are produced by most technology companies and is rarely written from scratch. Resourceful software development organizations and developers use a combination of previously created code, commercial software and open source software, and their own creative content to produce the desired software product or functionality. Anytime a product containing software changes hands there is a need to understand its composition, its pedigree, its ownership, and any third-party (including open source software) licenses or obligations that govern its use by its new owners.

Avoiding Uncertainties in a Technology Transaction

Technology transactions that involve software include the launch of a product into the market, mergers & acquisitions (M&A) of companies with software development operations, or technology transfer between organizations whether they are commercial, academic or otherwise public.

Any uncertainty around either ownership of software or compliance with the licenses associated with software can:

·         deter downstream users,

·         reduce ability to create partnerships,

·         create litigation risk to the company and the downstream users,

·         increase risk and threaten closures in funding deals,

·         negatively impact M&A activities,

·         increase product time to market, and

·         affect company valuation.

So how can all of this be avoided?

A software code audit is a good way to determine what is in your software product. A software code audit should not be confused with the more common place software audit process, the latter generally has to do with making sure you have paid for the software applications (eg Microsoft Office) you are using in your organization. Software code audits identify building blocks (files or software modules or packages, or even five lines of external code) that are used in a product or exist in the code inventory of an organization.