Software piracy – Where is your revenue going?

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
Written by Michael Goff, V.i. Labs, Contributor
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.

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