Software piracy – Where is your revenue going?

Software piracy – Where is your revenue going?

Summary: When you consider the amount of resources dedicated to developing a software product and bringing it to market, the financial impact of unlicensed use could be devastating, says Michael Goff of V.i. Labs


Commentary - Marketers are under constant pressure to do their part to keep the sales funnel full with qualified leads, grow the business and improve ROMI. For sellers and marketers of software, that typically involves selling licenses and renewing maintenance agreements. But are all applications actually in use being captured as revenue? Enter the constant uphill battle against software piracy. In this three-part series, we will explore what the problem of software piracy means to marketers, what can be done about it and how it can be turned into revenue.

Whether software marketers want to believe it or not, their products and intellectual property are continuously at risk of being pirated. With industry groups such as the Business Software Alliance (BSA) claiming $51 billion in software theft globally in 2009, there shouldn’t be an independent software vendor (ISV) without some concern that they have a piracy problem. When you consider the amount of resources dedicated to developing a software product and bringing it to market, the financial impact of unlicensed use could be devastating.

In order for a software vendor to grow its business, it obviously needs to be able to sell its product, but far too often it fails to consider whether that same product is being pirated. The vast majority of marketers are focused on prospects and leads, while overlooking potential funnel leakage due to piracy. Any vendor that is serious about its potential longevity needs to know if it has a software piracy problem.

For ISVs, the extent of their piracy problem can be compared to a flat tire. The loss of air can be from a slow leak or a major blowout. Either way, you probably never see the source. Software piracy impacts revenue the same way: for any given ISV, losses could slowly trickle out or come in the form of massive infringements. The bottom line is that in order for ISVs to successfully grow their business, they need to identify the areas where they are losing money.

If a software vendor is a victim of piracy, it is critical for to know what is being used illegally and the revenue impact of the unlicensed software. Software pirates are often bold, touting their latest thefts on P2P sites and the like, so marketers monitoring these sites may be able to learn if their organization’s products are being cracked. But is this really the best use of their time? More importantly, is it really the most accurate and aggressive approach to identifying their piracy problem? Absolutely not.

You can also take preemptive measures and implement software protection layers into the products, but software protection is not an absolute security measure. It simply makes the underlying code harder to crack. This is by no means a new approach, but one that has proven effective. However, hackers continue to find ways to beat these measures.

Marketing and measurement are practically synonymous. In fact, many marketers believe that it’s not marketing if it’s not measured. In order to get a true sense for the scope of the problem, as well as measuring the amount of revenue that piracy is siphoning out of the pipeline, ISVs need a system that allows them to detect the source and each instance of the problem and track its severity. Too many organizations take a backwards approach to this war – they try to fight the problem before they even have any sense as to how big of a problem they are actually dealing with. Marketers need to step in to ensure the organization takes a new approach, where the ISV first does an internal assessment of its own problem.

Once you determine the problem, then you can begin to act on it. For marketers, that means implementing a system that will enable them to track software pirates, identify their location(s) and recover the lost revenue from stolen licenses. Marketers now know exactly how much of a financial impact this has on their bottom line and are beginning to see the software pirates as a potential source for business growth, rather than a nuisance. The next article will describe what marketers can and should do once they identify and assess their piracy problem and touch on how to begin turning pirates into paying customers.

Michael Goff is the marketing director at V.i. Labs, where he helps oversee the development and promotion of solutions that provide software companies with actionable intelligence on the use and misuse of their products to increase revenue. A fifteen year software marketing veteran, Michael understands how IP theft and piracy impact an organization’s bottom line, as well as how unlicensed users can be converted to recurring revenue.

Topics: Software, CXO, Piracy, Security, IT Employment

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  • Mr Goff there lot more then that to this question

    THere one critical leftout to you comment and it market share .......<br>You can have the best product out there if you have no market share or if your not the standard out there piracy and profit are irrelevant.<br><br>I dont know how old you are but if we go way back . before 1995-1998 it was a open market you add all option offer to you from early windows to mac to OS 2 vr 3 to amiga to other more expensive station .<br>But at that time there was no real standard nor leader in the industry ..... If you remember well in image edition macromedia Xres was way better that the early version of photoshop .<br>Back then try to find a pirate version of xres ( good luck, its was impossible ) but try to find a version of photoshop hahaha that was easy like ....( censored comment )<br><br>What happen macromedia when from top to get buy by adobe in 2005. Why market share back then, if you where a young student and was willing to learn image editing you had 2 option buy macromedia or pirate adobe .... in the end they choose the easy way from there student ask what they knew adobe .<br><br><br>same happen with OS windows 98 key where floating everywhere on the net. and from there the list goes for ever and for everything . <br> <br>take a small exemple cut access to all windows from 98 to win 7 microsoft have the technologies to prevent piracy wga ok .... if they do that people will go toward open source it will lower there market share and one day it will happen the same thing as in early 2000 a change of direction in the habit of consumer if you remember well the imac g3 bue bondi with os 8.6 was a way more powerful machine that nearly anything out there at that time . but a majority of people when with a clone machine with a pirate version of 1998 ........<br><br><br>Piracy is a marketing weapon the industry as the power to stop piracy but it would mean giving opensource a hell of a boost. well like you see when you look at history most of the time you end up with reason why a situation happen . back then it was ok to be pirated. It could have been seen as a investment back then and now in 2010 those same people that let themself get pirated in 1998 for market share scream and cry about piracy.<br><br><br>Edit ----- what do we see at the moment well Apple share is comming up again , other dead os are comming back to life ... Amiga x1000 next years with amiga os 4 with powerpc processor .... history is repeating it self .<br><br><br>Lets never forget that windows is a virus and bug heaven and some people are just waiting for alternative .....

    Also when MS is using mobster tactics against hardware maker (asustek/acer trouble with ms over the use of chrome os on tablet) the industry is going straight in a OS war that will be a hell of a bloodbath.

    If amiga or anybody can or will make a deal with open source /foss or with google. You can be sure that someone somewhere will grab opposition against large OS vendor .

    Because at this moment you have
    MS windows xp-vista-7
    Apple osx ppc and intel
    Oracle with Solaris /sun 10 and it workstation
    in 2011 Amiga with a powerpc and amiga os 4
    And all the open source movement that is in bad term with Oracle and ms .

    We live in interesting time
    • RE: Software piracy Where is your revenue going?


      Thanks for reading and for the feedback - I have a few comments to add:

      1. Piracy is definitely a form of viral marketing (especially given the resilience of the piracy distribution channels and the Pyrrhic (and temporary) victories that come with take downs) - the challenge for software vendors and marketers is to be able to identify which businesses are actually using the unlicensed software, since (in many cases) those companies never "true up" and pay for the licenses they are using.

      2. The software vendors that do identify these infringing businesses look to turn them into customers and develop relationships with them the same way they do with customers they acquire from more traditional methods. This also serves to level the playing field for their customers who were at a disadvantage when their competitors were using unlicensed software and avoiding the associated expenses.

      3. Regarding market share - the availability of cracked software in the piracy distribution channels does tend to act as an indicator for demand for a particular software title, but other high value or vertical applications can have a piracy problem without it being as visible on the piracy scene.


      • Well again

        1 and 2 to turn a business ( and we talk about business ) from pirate to paying a real key generating and registry with a phone ID that would do it but it mean a lose of market share .... Its better to be pirated and abuse that to loose market share and and loose be seen as the default standard .

        As for leveling the playing field who care its capitalism , the puck goes those whos faster and take chances .... it they get caught they should suffer the consequence.

        3. yes but there 2 different thing
        Piracy on a high end program who are standard like Adobe photoshop over the piracy over a other high end app like lets see SQL or catia over mysql ,3dsmax or inventor or maya.

        High end high profile app are about market share and wont be protect until death because of the fear of loose market share and been a standard aka Adobe ,autodesk, ect ect

        High End Low Profile Catia ,SQL,and some many other i tend to believe that a mistake by the maker for not having a good authentication system.