Is your IT department sitting on a gold mine?

Australian firms can now make money out of software developed in-house with the help of a new intellectual property specialist start-up.

AU$1 billion is spent each year on internal software development by Australian companies according to intellectual property (IP) start-up Secret Sauce -- money which IT departments could help recoup by selling on their software. Secret Sauce is hoping to tap into companies' code assets by searching within organisations for internally built "killer applications" which could be worth money on the open market.

Once suitable software is discovered, Secret Sauce finds a vendor to license the software to, with the organisation receiving a cut of the fees.

Companies would not normally capitalise on their in-house software developments, according to Secret Sauce managing director Steve Telburn: "It's not in their interest to get it out and they don't have the skills," he told ZDNet.com.au.

According to Telburn, however, software developed in-house is valuable because the developers are solving a real industry problem. "The software vendors are a little bit removed from the problems in the market," he said, whereas "[in-house development] is approaching the problem from the other way -- 'we've got a problem, we've got to solve this'."

In-house software is attractive to vendors, Telburn continued, because it was developed and deployed within an organisation to solve a real business problem and already has a use case and return on investment calculation.

Secret Sauce says it generally forms an agreement of three years with companies to search for hidden IP, during which time, opportunities to commercialise some code may come to light.

Some work may have to be carried out to "productise" software, but it can then be licensed to a vendor who will take on sales and support functions.

In some cases the software may be so good, Telburn said, that Secret Sauce will create a start-up for it.

For those who may wish to sell on their IP but don't want it falling into the hands of competitors, Secret Sauce allows companies to specify conditions on who can access the software within the licensing agreement.

"The beauty of licensing is you can break it up into fields of use," said Telburn.

Secret Sauce says it focuses on verticals such as the telecommunications industry to ease concern about intellectual property falling into the hands of competition, because such industries rely chiefly on infrastructure for their business, with software less likely to play a differentiating role.