Is Software Incidental To Whole

SOP 97-2 does not apply to revenue earned on products that contain software that is incidental to the product as a whole. The following are indicators of whether software is incidental:

1. Whether the software is a significant focus of the marketing efforts or is sold seperately.
2. Whether the vendor is providing postcontract customer support - if upgrades and enhancements for the software component of the product periodically are provided to the existing users of the product, that may indicate that the software is not incidental to the product as a whole.
3. Whether the vendor incurs significant costs. If so, that may indicate that the software is not incidental to the product as a whole.

Additional indicators:

1. Does the right to u se the software remain solely with the vendor or is the right transferred to the customer as part of the product or service offering? If the customer is entitled to use the software after sale of the related product, that may indicate that the software is not incidental to the product as a whole.
2. Does the contractual terms of the arrangement require the customer to provide dedicated information technology support? If the customer must dedicate personnel to maintain and troubleshoot the embedded software, that may indicate that the software is not incidental to the product as a whole.
3. Can the software component of the product be substituted for other software provided by a competitor of the vendor? If the software component of the product is replaceable by software provided by a competitor of the vendor, that may indicate that the software is not incidental to the product as a whole.
4. Is the product sold or distributed along with other software products? If so, that may indicate that the software is not incidental to the product as a whole.