Michael Goff (US) - Best Practices for Software License Revenue Recovery

The face of software piracy is in a state of flux; however, its impact on users and independent software vendors (ISVs) remains a significant and costly problem. Research by the Business Software Alliance indicates that global piracy is a $59 billion problem. Many people associate piracy with highly-publicized cases involving individuals and P2P file sharing sites, but piracy by businesses is on the rise. According to the Software and Information Industry Association, the average number of employees at infringing organizations is 550 and average annual sales topped $440 million.

With numbers like these, it's easy to see how pervasive the issue of piracy has become. Efforts to stop piracy to date have been ineffective and likened to a game of Whac-a-Mole. ISVs have increased pressure on internet service providers to block pirated content and have worked laboriously to issue takedown notices for sites promoting pirated content. According to a September 2010 article in the New York Times, Microsoft removes as many as 800,000 links to pirated software per month; however, pirated software continues to spread.

In the interest of trade relations and safe business practices, international governments have cracked down on distributors, yet the problem persists. Clearly, software piracy is a challenging issue and the way in which we approach it must change in order to stop the revenue bleeding.

Some innovative ISVs are already beginning to treat it as an opportunity for revenue growth, using piracy business intelligence tools to proactively address their own individual piracy problem. In many instances, this data-driven approach has paid off. The following best practices are suited for ISVs that have recognized the limitations of traditional reactionary approaches to software piracy and want to proactively turn it into a channel for revenue growth.

1. Quantify the Problem
Although the global cost of piracy has been estimated at $59 billion by the BSA and industry analyst firm IDC (estimate based on intensive worldwide research), this number presents ISVs with only a macroeconomic perspective on piracy. Without knowing how extensive their own piracy problem is, ISVs have no point of reference when establishing their own anti-piracy strategy, nor are they able to measure piracy revenue recovery results.

It's imperative that ISVs have the ability to gather data on the use and misuse of their products so that they can gain actionable insight-data specific to their own products and the impact that piracy is having on their own businesses.

Piracy business intelligence tools integrate with existing customer management tools through and allow ISVs to see a more complete picture of their user base. Existing customers using legally-licensed software will already be in the system. Using tracking tools designed to detect when an act of piracy has occurred, e.g. when the license is cracked or tampered with, ISVs can gain access to information that is otherwise unobtainable. Information such as how and where the pirated applications are being used and the type of computing environments they have been installed in is necessary for ISVs to be able to qualify the data into revenue recovery leads.

2. Qualify the Data
Is the software being used in a business environment, or by a student? If in a business, is that organization already a customer, and could the infringement be a matter of inadvertent piracy? Is the user located in a geographic area with mature anti-piracy and intellectual property protection laws? These are some of the questions that ISVs need to answer as part of the qualification process. Each will shape the overall approach and results in a piracy revenue recovery scenario.

3. Convert Pirates into Paying Customers
After the piracy reports have been qualified, compliance professionals are able to directly contact the infringers and discuss options for becoming legal users. Remember that businesses make up a large portion of infringers many of these organizations are multi-million dollar companies. Additional analysis of aggregate data obtained by ISVs employing piracy business intelligence methodologies shows that as many as half of all infringement reports come from organizations that are already paying customers. In most cases, it's a matter of inadvertent license overuse and the vendor is able to resolve the issue, recover revenue and maintain a positive relationship with the customer. Without the ability to track this type of use, however, that revenue would never be realized and the licensing error would grow until an audit is performed (which can often result in the disruption of business/service for the user).

Software vendors need to take a proactive stance toward piracy or be swept up in fighting a losing battle. In the software industry, piracy is a reality that exists and is growing. Modern license protection measures, reactive takedown notices and legal lobbying are unfortunately ineffective at combatting piracy, and vendors are left looking for a way to make lemonade out of a sour situation. Making data-driven decisions about one's own piracy situation is a good starting point. Piracy business intelligence is a good way for ISVs to collect this data, and, once obtained, it can be qualified and acted upon.

By Michael Goff, Marketing Director at V.I. Labs




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