CS207
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CS 207: The Economics of Software.

As of the 2015-2016 Academic year this is course is no longer being offered.

Sorry, however past material is still on this website.

Gio Wiederhold <gio@cs.stanford.edu>

Gio is a member of the infolab.

The course is being co-taught with Vishal Sikka.

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CS207 is 2 units, given as two hours each Friday. That arrangement allows a speaker from industry to present background and answer question on each topic. The intent of CS207 is to be a course that presents a coherent body of material.
Time & Venue: We meet Fridays, 10:00am to 11:50am, in Hewlett 103, across the street from the Gates building.

CS207 Wiki page created 11 September 2009, updated weekly during class. The contents of this page will be revised as needed.

Slides presented in class are uploaded and hyper-linked a day or so after the class. The past set of slides were presented in the fall quarter of 2013.

This course is intended for students interested in the software industry at all levels. It will provide an understanding how software products are moved into the marketplace and how the resulting intellectual property is exploited. No specific background is required. The course will introduce concepts that are outside of the common knowledge of computer scientists and requires becoming familiar with relevant business terms and concepts. Spreadsheet computations will be used to quantitatively compare alternatives. The understanding gained will have broader applicability than just software, but contribute to informed decision-making in high-tech product design, acquisition, production, marketing, selection of business structures, outsourcing, and even the impact of taxation policies.

Syllabus:

Why should software be valued? Principles of valuation. Cost versus value. Market value of software companies. Examples of estimation of the value of software. Intellectual capital and property (IP). The role of patents, copyrights, and trade secrets. Open source software. Life and lag of software innovation. Sales expectations and discounting. Alternate business models. Licensing. Separation of use rights from the property itself. Risks when outsourcing and offshoring development. Effects of using taxhavens to house IP.

This class is offered for 2 units, P/F for

  • 1. a paper on a topic relevant to the class, to be delivered in two phases, allowing review and feedback for the final paper.
  • 2. attendance in each class. A very brief report on a class topic can substitute for any missed classes.

Drafts of the paper are due 14 Nov. 2014, and will receive feedback before 24 Nov 2014, Final papers are due 4 Dec. 2014.

CS207 is a class with an objective, not just a seminar and will require participation and work by the enrolled students. The final papers should be well-structured: Topic issue, discussion, conclusion, references.

All submissions in electronic form to Gio@cs.stanford.edu.

Time Schedule:

Fall Quarter 2014-2015, Fridays 10:00 - 11:50, in Hewlett 103, starting 26 Sep. 2014, final class 4 Dec 2014. Attendance will be recorded starting 3 October 2014.

All papers and reports are due on Friday, 5 Dec. 2014. A complete draft of the final report is due 14 Nov. 2014. It will receive feedback by 24 Nov. 2014.

Instructors:

Gio Wiederhold, Prof. Emeritus, Gates 436, hours by appointment, and Vishal Sikka. There will a guest speaker conversant with the current topic most weeks. (Gio's home page)

Motivation:

Few computer professionals are aware of the economic value of their products. The assessment of the value of their work has been left to business experts, economists, lawyers, and promotors. The lack of understanding hinders rational decision-making for tradeoffs in software design and implementation, market timing, and choosing business models. Having simple, quantitative models enables substantiating and revision of decisions made when planning software products.

Book:

We will cover material from Chapters 1-5 of: Gio Wiederhold: Valuing Intellectual Capital, Multinationals and Taxhavens; Springer Verlag, August 2013. Pointers are at VIC book description. It is available as an e-book, allowing individual chapters to be purchased. The substantial appendices,including Definitions, Laws, Formulas, a Glossary, References, and the index (221 pp.) are available for free download at the Springer Verlag site for Valuing Intellectual Capital

Class notes from this and prior years.

The notes are inserted as the 2014 course progresses, all dates are for 2014.

26 Sep. 2014: Intro, Definitions, IP value: Why does knowing its value matter? Base for market cap. Financial data. 2014 class 1.
 Prior years: 2013: Intro, Definitions, IP value: Why does it matter.  Background and Motivation, from 2012, from 2011, from 2010.
3 Oct. 2014: Intellectual Capital, Components of value. Spending on people, SW, advertising; Topic discussion, reference sources. With Gene Miya. 2014 class 2.
 Prior years: 2013: Overview, Requirements, Methods, Life and Diminution. from 2012, from 2011, from 2010.
10 Oct. 2014: Valuation principles, Software growth. Simple model. Legal & Forensics With Bob Zeidman. 2014 class 3.
 Prior years: 2013: Review. spreadsheet examples for one-time sales, for service model, Pareto allocation. Government software.   Valuation completed for simple business, from 2012; from 2011, from 2010. 

12 Oct. 2014: Email with Paper topic selection due.

17 Oct. 2014: Alternate valuation based on income from sales and maintenance. Patents with Ron Burback. 2014 class 4.
 Prior years: 2013: Freemium business model, disclaimers, 1999 Internet bubble. Alternate  business models, allocation, from 2012; from 2011, from 2010. 
24 Oct. 2014: Business types. IP allocation; Pareto. Growth in a service company (Infosys), with Vishal Sikka. 2014 class 5.
  Prior years: 2013: Vishal Sikka, CTO, SAP: Renovate or Reconstruct SW; From 2012: The intellectual capital represented by a company's workforce: Guest speaker: Vishal Sikka, CTO, SAP Vishal_Stanford_Driving_Growth, from 2012 as pdf slides;  from 2011, from 2010.
31 Oct. 2014: Open source, theory and reality. Freemium approach, with Larry Tesler 2014 class 6.
  Prior years 2013: Growth and lag, estimates and at SAP.   Valuation Allocation, Rollover, and lag from 2012; from 2011, Not presented 2010, from 6 Nov 2009.
7 Nov 2014: Lags, Startups first to market advantage. Thresholds, own versus rent. With Vishal Sikka 2014 class 7.
  Prior years: 2013: Ron Burback, IP protection, IP Rights. Example: Google patent. 2013: IP Rights, and Transfers, from 2012. from 2011, from 2009.
14 Nov. 2014: Growth, risks, acquisitions, Selling IP rights, licensing. Government role. With Eugene Miya. 2014 class 8

Prior years 2013: IP transfer, Bob Zeidman: IP forensics., Advertising, Money,

Also 14 Nov. 2014: Draft of class paper and brief reports for missed classes due, will be returned by 25 Nov 2013.

21 Nov. 2013: Outsourcing and offshoring. Tax avoidance, US economy. 2014 class 9
 Prior years: Outsourcing to Taxhavens: Own versus Rent; Flow of IP rights, Changing the US tax corporate system. from 2012, Taxhavens and their effect, from 2012;  prior from 2011, from 2010. 

24 Nov. 2014: Brief reports for missed classes due.

28 Nov. 2012 Thanksgiving break, no class

5 Dec 2014: Corporate Taxation abolition proposal. Summary and discussion with guests: Ron Burback, Gene Miya. 2014 class 10 (last)
 Prior years: 2013: CS207 next year, Projects Snapchat Taxation of High Tech  Richard Stallman proposal on taxing to avoid Too Big to Fail;    Guests Ron Burback and Vishal Sikka. Sides cover candidate topics from Dec.3 2010: from 2011, from 2010, [[http://infolab.stanford.edu/pub/gio/cs207/CS207-11.pdf | 

Offshore flow for various industries, Royalties and setting license fees, Advertising, Money ]].

End of course, happy holidays.

Reading

Chapters 1-5 from Gio Wiederhold: Valuing Intellectual Capital, Multinationals and Taxhavens; series Management for Professionals, Springer Verlag, New York, August 2013. Information about the book is at i.stanford.edu/VIC. Individual chapters are available as e-books. The Foreword, Table-of-contents, and the substantial appendices are available free on-line.

Read at least three papers relevant to the course and your chosen topic.

Worksheet from Oct 2010, a Spreadsheet for Computation in Excel 2003 (xls) format; note: it's all presented on a simple annual basis, in practice the sheets would be done per quarter and really get big!

Papers relevant to the class include

Three extensive list of references are available. These will be updated prior to the course start 1. list of references for software economics Course 2012 2. list of references for Valuing Intellectual Capital, Multinationals, and Taxhavens and 3. Citations for the current article are available. They are organized by name of first author. It is best to use search to locate references on a particular topic.

Book used for class material: Carlyle Adler: Behind the Cloud: The Untold Story of How Salesforce.com Went from Idea to Billion-Dollar Company-and Revolutionized an Industry; 2009. About Marc Benioff.

Recent relevant articles:

Peter Coy: Why Apple takes on Debt (to avoid US taxes). 13 Nov 2014.

James Biddle: Like Everyone Else, Twitter Hides from U.S. Taxes in Ireland, Valleywag, 18 Oct. 2013.

Richard Stallman Free Software is more important now (and is not the same as Open Source), Copyright © 2013 Richard Stallman.

Tam Harbert: The Law Machine, How a Silicon Valley Start-up Aims to Overhaul Intellectual Property Litigation; IEEE Spectrum, Nov.2013, pp.30-34,53-54.

Mike Mandel: The GDP Mirage The failure to account for IP generation makes predictions of growth suspect; Business Week, 9 Nov. 2009, pp.35-38.

Ken Auletta: Abstract or Audio: Searching for Trouble, Why Google is on its Guard; New Yorker Magazine, 12 Oct. 2009, pp.46-56.

James Surowiecki: Innovative Consumption; New Yorker Magazine, 16 May 2011, p.42.

And a half-hour video on international tax avoidance and its effects: English translation of German Broadcast, NDR, 11 Nov 2014.


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Page last modified on August 21, 2015, at 11:07 PM by gio