In the digital economy, source code often lies at the core of intellectual property rights—but how is its financial value determined? Analysis of our assignments carried out between 2017 and 2025 places the Information Technology, Software, and Digital sector at the forefront of our engagements. From Fintech platforms to SaaS solutions, here is a breakdown of the methods and trends governing the valuation of these complex intangible assets.
1. The Sector’s “Flagship” Method: Adapted E-COCOMO
Unlike traditional assets, software is sometimes measured by the complexity of its architecture. In our engagements, the E-COCOMO (Constructive Cost Model) method, which we have adapted to sector developments, is frequently used to establish an objective technical value.
Principle: This method estimates the resources required for development based on the volume of lines of code (KLoC) and the intrinsic complexity of the solution.
Application: It often helps define a “floor value” or corroborate internal development costs. For example, for software in the logistics sector, this method enabled an estimate of technical value between €8 million and €11 million, based on coding effort. Conversely, for aging or standard software, the method may reveal a more modest value, as observed in the case of software in the training sector.
2. The Growth Challenge: DCF vs. Historical Costs
IT valuation always fluctuates between “what it cost” and “what it will generate.”
For start-ups and in-kind contributions: When the software is not yet commercialized, reconstruction or historical costs are often favored. This secures the accounting contribution value based on actual investments such as R&D and labor time.
For scale-ups and disposals: Once a business model is validated, the income approach, particularly DCF (Discounted Cash Flows), becomes dominant to reflect growth potential. This was the case for a Fintech platform valued at around €14 million based on its projected future cash flows, well beyond its development costs.
It is nevertheless necessary to assess the extent to which the source code is critical to operations and to compare future profits with the possibility for a competitor to replicate the software and threaten its activity. The value of source code must not be confused with that of other assets that gain value during commercial exploitation, such as brand or customer relationships. The key issue is determining how much the business depends on the source code “as it stands.” If replacing the solution requires, for example, three years of development, it becomes relevant to focus on the expected profits over those three years to accurately assess the intrinsic role of the source code.
3. A Strong Trend: Innovation Taxation (IP Box)
A significant portion of our assignments in the Tech sector does not aim at a sale, but at tax optimization through the IP Box regime, which offers a reduced corporate tax rate on income derived from intellectual property.
The objective here is to determine the specific contribution of the software to the company’s overall revenue generation.
Case study: For a software publisher, it was necessary to isolate the share of revenue attributable to the software compared to hardware sales.
Result: These analyses often demonstrate that the “software license” represents between 60% and 80% of the value of the customer contract, with the remainder related to services or maintenance. In other cases, however, the rate may be lower. Assessing this ratio requires a comprehensive analysis encompassing legal, technical, operational, and financial aspects.
4. The Risk Factor: Technological Obsolescence
A key insight from our experience is the speed of depreciation in the Tech sector. Software that is not maintained loses value rapidly.
Example from the logistics sector: While the software was valued at up to €15 million during full operation, its value became “low or even nil” following the liquidation of the group and the cessation of development, rendering the asset obsolete.
Key takeaway: Our reports often incorporate a discount for obsolescence or for the “refactoring” costs required to bring code up to current standards.
Conclusion
Valuing an IT asset requires a dual capability: understanding “technical debt,” through methods such as E-COCOMO and advanced code audits, and projecting the scalability of the business model through DCF analysis. Whether preparing for fundraising or justifying intra-group transfer pricing, methodological rigor is essential to transform lines of code into tangible financial assets.
