Thoughts

A place for education, information, and insights about the water industry.

Topics: capitalizing software

Accounting for Utility Software Services

July 17, 2018
| By Jeff Lipton
The software vendor business model has evolved rather dramatically in the past decade or so. Traditionally, utility software providers (including SCAD A, customer information systems, work order management, rebate tracking, and other common solutions used by water utilities) would sell a pe rpetual license to their water utility customers who would then install the software on a local computer or server.  Customers would have the option of purchasing annual maintenance and support packages and could upgrade the installed software every few years as new versions with additional functionality became available. This business model allowed customers to 'own' the software which also meant they could budget for the technology expense in a single fiscal period and then decide whether or not to update to a newer version in the future.
 
Unfortunately this model has some inherent disadvantages for the water utility customer: 
  • The utility
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