Software producers need more flexibility

Software developers may be losing as much as half of their potential revenues, but piracy is not the root cause of the loss, poor packaging and licensing is to blame

Tags: SafeNet IncorporatedSoftware licensingSoftware piracy
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Software producers need more flexibility Braojos: Software producers need to better manage licensing options and compliance.
By  Miguel Barojos Published  June 13, 2013

Software developers may be losing as much as half of their potential revenues, but piracy is not the root cause of the loss, poor packaging and licensing is to blame, says Miguel Braojos, VP Sales SEMEA, SafeNet.

Our recent survey, in partnership with the Software & Information Industry Association (SIIA), into the potential of software monetisation, revealed some startling results. Software producers admit that they are losing nearly 50% of potential revenues. What are they losing it to? History may tempt you to say piracy, especially when considering last year’s report from the Business Software Alliance that found 58% of computer users in the Middle East and Africa region are running pirated software.

Although the piracy rate in the UAE is one of the lowest in the region at only 37%, a staggering 84% of the respondents in the UAE admit to pirating software, which results in a loss of $208 million to software companies, while in Saudi Arabia that figure rises to $449 milion. But is piracy the real reason? Not according to the 600-plus software producers who responded to the State of Software Monetisation survey.

Changing times

Software Intellectual Property (IP) theft is not new — software companies have been dealing with this for decades. Software companies are used to employing techniques to combat these challenges. Many companies feel as though they need to make a choice between security and business efficiency. But a simple way to combat this and develop a delicate balance is through a tailored software monetisation strategy and a licensing and entitlement management strategy that will be flexible enough to meet customers’ emerging business and security needs while providing robust IP protection.

The survey has clearly highlighted that software producers need solutions that deal with the four key elements of software monetisation, which are effective packaging, access and compliance control, back-office automation and management, and usage monitoring.

As software producers deal with the maturation of the market, a redefined customer expectation around their experience, and open source threats, the loss of potential revenues is the real Achilles heel for many. As such, it can be argued that the number one issue isn’t piracy, rather it is the inertia associated with how software producers package and license their products. And the irony is software producers know it too. Nearly 84% of respondents believe that better software packaging techniques specifically could yield higher revenue.

Pick your battles

To put this into stark perspective, you can either spend years fighting over piracy, via legal and technical means, or you can focus on what you actually control and boost your revenues the right way: by enabling your customers to license your software the way they want. A customer once told me how upset their CEO was when he found out that their software was being liberally pirated in an Eastern European country.

However, once he calmed down, he realised that the revenue they were losing was not necessarily revenue they would have ever had. Their software was popular with university students but at their current licensing prices, there was no way for those students to actually afford the software. Instead, they had to think about free trialware for them first, which would convert them from ‘pirates’ to legitimate users, and then allow them to continue using software at modest prices once they graduated. Take that same logic and apply it to smaller start-up organisations. They have a need, but they certainly don’t have a lot of disposable budget, so would you rather ‘land and expand’ that account, or miss the opportunity altogether?

Develop effective business models

It’s clear that software producers are in dire need of flexible licensing models. However despite knowing this, 61% of the respondents admitted that they struggle with the ability to flexibly price and package their applications, and 54% reported considerable revenue loss due to this. In order to develop effective business models, ensure customer satisfaction and enhance revenue, flexible licensing models need to be put in place now. Annual renewable license models with a maintenance element are still a popular offering across the Middle East for many ISVs, particularly traditional on-premise vendors who rely on customers to make an annual subscription towards point releases and major version upgrades. The perpetual license is also common, typically linked to the number of users.

Moving on from the issues around flexible licensing models, access and compliance control can also be an important area of concern. Lack of control over software is a major cause of revenue loss — nearly half of the respondents thought that competitive IP theft had a significant impact on their business and just over 40% thought that lost revenue due to software piracy had a major impact on their business. This apprehension over the impact of software misuse is justified, as many organisations reported unlicensed software in use within their companies. However, although producers are recognising that their software may become compromised, there are many that are failing to license compliance enforcement mechanisms and IP protection tools.

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