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Business Services Industry

Insead Study Calls for Dramatic Shift in Management and Valuation of Core Software Assets

Business Wire, Nov 5, 2007

* Global companies rarely invest resources in valuing I.T. assets

* Firms have managed core software assets as an expense item to be minimized for far too long

* Time for large organizations to move from cost control to value enhancement of I.T. assets

* INSEAD pinpoints Conjoint Analysis methodology as way forward for assessing true business value of organisations' core software assets

Micro Focus sponsored INSEAD research paper offers CIOs a route to communicate the business value of hidden technology investments to the board

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NEWBURY, England -- Micro Focus[R] (LSE.MCRO.L), a leading provider of enterprise application management and modernization solutions, and INSEAD, the leading international business school, today call for a radical shift in management and valuation of IT assets at organizations worldwide.

An INSEAD research paper published today by Professor Soumitra Dutta, INSEAD Chair of Business & Technology, and sponsored by Micro Focus challenges C-level executives to move away from managing their core software assets as an expense item often written off. It urges them to step up to communicate the real value of core software assets to the boardroom.

Professor Dutta's study builds on quantitative research gathered from CIOs and CFOs announced in October by Micro Focus. The research uncovered evidence that, despite a global annual IT spend of $1 trillion1 in 2006 alone, I.T. systems are the hidden corporate asset. It highlights how the size and value of I.T. assets are being ignored by the world's leading companies, compared to other regularly measured corporate assets such as cash, brand, property and intellectual property.

Professor Dutta's INSEAD report identifies that software is a key asset that is crucial to business strategy and an important vehicle for value creation in business today. He also identifies a complete lack of adequate tools for assessing the business value of a firm's core software assets.

"Firms have managed their core software assets not as an asset for value creation, but as an expense item to be minimized. This has to change," said Professor Dutta. "Both CIOs and CFOs need to be communicating the business value of core software assets to the Board and make it a priority to measure the value of their software assets. Core software assets represent the hidden value in firms and need to be correctly measured for making the right investment decisions; balance sheet purposes; mergers and acquisitions; joint venture negotiations, licensing and franchising and transparent investor relations."

"The INSEAD report demonstrates that corporations are not valuing core software assets. Given global IT spend exceeds the GDP of India2, it is disappointing that corporations have not focused on deriving maximum value from core software assets," said Stephen Kelly, Micro Focus CEO. "These core assets provide the life support system for corporations and deserve the same respect and valuation as other asset classes like brand, property and goodwill."

Professor Dutta suggests Conjoint Analysis as the best approach for measuring the value of core software assets. "In a traditional conjoint analysis application, people make trade-offs across different product attributes. For applying the technique to software assets, the methodology requires people to make trade-offs across different business outcomes associated with the software asset," said Professor Dutta. "If organizations analyze the conversion of real business outcome attributes generated by core I.T. systems into measures of business value, then there is a strong opportunity to calculate the real financial value of core software assets to the business."

"Professor Dutta identifies a clear route for I.T. to move beyond a traditional engineering background role, and offers the opportunity for CIOs take on a much more strategic responsibility by identifying and communicating the hidden value of core software assets to the boardroom," said Stephen Kelly, CEO Micro Focus. "There is huge business value within core software assets, often built up through many business processes over a number of years. For the first time CIOs and CFOs now have the ability to unveil and communicate the real value of this last remaining unvalued corporate asset to the board."

About Micro Focus

Micro Focus provides innovative software that allows companies to dramatically improve the business value of their enterprise applications. Micro Focus Enterprise Application Modernization and Management software enables customers' business applications to respond rapidly to market changes and embrace modern architectures with reduced cost and risk. For additional information please visit www.microfocus.com.

Micro Focus is a registered trademark of Micro Focus. All other products and companies mentioned in this announcement are the trademarks of their respective owners.

1 Source: IDC Jan 2007; IT spend $1.16 trillion in 2006

Business Services Industry

Insead Study Calls for Dramatic Shift in Management and Valuation of Core Software Assets

Business Wire, Nov 5, 2007

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