Software Surety Bonds

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Glad to see you joined us BondLaw.

But there have been a few who have taken a close look at the market potential for this type of business and have come to the conclusion that there isn’t much of a market.

I am curious, when the study was done and what the results would be if it were done today.

They find that when a technology company comes looking for a bond, it is usually required because the techies are working on orange crates in their garage and the buyer is more interested in testing their creditworthiness that their savvy.

From my experience, most that are in search of a bond would not qualify for it.

That's...WHOA...$213M in revenue (split by several bonding companies unless a monopoly exists.)

That is only if you assume they need a bond for all projects and that all companies qualify.

What do you think the default rate would be for computer programming contracts?

I'm not sure, but I would assume it would be quite high in comparison to construction contracts. I am a programmer myself and know how often bugs pop up during and after development. The other problem is that software bonds are typically required by the private sector, which in general can be harsher on bonding companies when it comes to claims.

What would the ultimate cost per-default be for the bonding companies?

There is no set amount. Each claim is different.

If half the obligations are met is the bonding company simply making up the differerence?

Correct.