For a long time, the software industry was no joke in the fight against pirated software. Unsolicited license violations were prosecuted with the same severity as gangs operating on the black market. But slowly, the realization is growing that once scorched earth does not necessarily promote growth. Why don’t software pirates turn into paying customers? Software usage analytics and compliance intelligence play a vital role in this.
The idea of understanding software piracy as an opportunity rather than a threat is not new. The best example: Microsoft. At the beginning of the 2000s, the Microsoft Office Suite cost up to 650 euros, depending on the version – a price that users in developing and emerging countries could not always afford. There, pirated copies were often the only way to use the Office applications at all. Microsoft was not happy about this, but the illegal copies ensured that the MS products established themselves as the software standard there in the long term and opened the market for future growth.
Bill Gates put this point of view in a nutshell as early as 1998: “If the software is stolen, we want our software to be stolen.” Anyone who was used to a specific program would continue to use it in the future. Microsoft needs to find a way to convert this illegal use into face value in the next few years.
SaaS & Pay-Per-Use: Where The Customer Is King
By and large, this assessment has been confirmed. Over the past twenty years, more and more software vendors have recognized how lost sales can be turned into profits. This is in large part due to new models for the provision and monetization of software. SaaS, for example, is primarily sold as a subscription model, i.e. users pay (monthly or on an annual basis) to use a program. Customer satisfaction and support are criteria for success here. Because only those who continuously improve the service level, adapt features to users’ needs and guarantee a fair price-performance ratio can generate new revenue streams. Pay-per-use (PPU) models are fueling this development as users only pay for what they use. Say:
This is slowly changing the way software providers proceed in the event of compliance violations. Instead of insisting on agreed license conditions and taking action against customers who use too much or taking action against potential new customers, it is now essential to find compromises. At least if the “illegal” use of the software is unintentional. For example, customers miss the end of a software subscription, share login data with colleagues or use an application beyond the agreed usage. Here it is essential to meet the customer and talk about flexible models and additional agreements.
360-Degree View Of Software Usage
Anyone who wants to use compliance violations as an opportunity for inside sales and up-and cross-selling needs, above all, a comprehensive insight into the software and its users. Modern analytics and monetization tools play a crucial role here: They record the use of a software product, aggregate and analyze the data and thus provide a deep insight into the behaviour of users. What do the users do in the software? Which features are used? How well is a new function being accepted? What platform does the application run on? The answers to this can be summarized as “Usage Intelligence”. Often patterns can be recognized here that can turn into sales opportunities in the second step. Is a natural person online 24 hours a day,
At the same time, the analysis also allows a look at the “Compliance Intelligence”. Is there any illegal use? If so, what is the license violation? And how great is the associated damage to the company? Using advanced geolocation functions, it is possible to determine the exact location of the unlicensed use of the software. In addition, the data can be filtered by country and region, product, data type and other criteria.
Data For Effective Enforcement
The comprehensive insight into software products helps compliance and product managers plan and prioritize the next steps. Software providers generally use four methods to enforce license terms: software copy protection (e.g. dongles, serial numbers), integrated licensing technologies, audits and the initiation of legal action. Usage and compliance intelligence help with each of these enforcement methods.
- Software copy protection
All software remains vulnerable, and even the best copy protection can theoretically be hacked. Compliance intelligence cannot prevent this. However, it provides information on whether and when the initial software release was cracked and how effective the protection method was. This granular information can help improve measures and, for example, adapt them to market and product-specific features. In this way, the software can be protected more effectively in subsequent releases, and a balanced cost-benefit ratio can be defined.
- Integrated licensing technologies
Anyone who cracks the software protection of a product usually cares little about the recording or monitoring usage. The crackers are only concerned with getting the program up and running. As a result, vendors who incorporate usage-based licensing technologies into their products can continue to track usage of the pirated software versions. The information gathered can be beneficial – starting with the number of users on each device to the specific ID of the pirate. By enriching the data, comprehensive reports can be created that provide an up-to-date picture of the situation and reveal trends about software piracy, copyright infringements and overexploitation.
- Internal compliance & audits
Extensive data on the use of software speak a clear language and provide valid arguments when negotiating contracts and in the context of audits. Instead of spot checks and imprecise profiling, decisions are based on detailed and comprehensive forensic reports that take into account the specific framework conditions of each customer. Compliance managers gain a differentiated picture of critical funds: Does the overuse of software only affect one department, a particular location or the entire company? The continuous monitoring of usage data replaces time-consuming and costly on-site audits, which customers see as a nuisance anyway and met with a lot of reluctance. Data leave no room for suspicion,
- Legal action
Compliance violations cannot always be resolved amicably. Commercial property rights and IP laws differ from country to country. Working with government agencies can produce results, but it can also become very costly very quickly. Takedown procedures against relevant sales channels and websites can be effective but require patience from the software provider. In some cases, they are better advised to keep an eye on the (semi) illegal sales channels and counteract their sales and marketing initiatives. Many users have unintentionally come across counterfeits and do not even know that they are liable to prosecution. In-app messages that pop up on the desktop when using the software can carefully raise awareness.
Identify Violations, Recover Lost Sales
The example of a supplier of CAD / CAM software shows that these strategies work. The manufacturer struggled with IP theft and increased cybersecurity risks due to pirated copies. The provider integrated compliance intelligence functions into its software to prevent the sale of its product via illegal channels and reduce the resulting loss of income to a minimum. Using the information collected in this way, the compliance team was able to identify 172,010 machines and 3,192 companies that were using the CAD / CAM software unlawfully. In just under 850 cases, after an intensive examination, further steps were taken, which ultimately led to 423 “software pirates” converting to paying customers. In total, the software provider was able to generate more than 5.6 million.
Of course, not every illegal software user can be converted this way. However, it is worthwhile as a software provider to have alternatives. Regional strategies tailored to the market work best. Experience shows that, for example, the “inside sales” approach works well in North America and within the EU. In certain countries in Asia, on the other hand, cooperation with authorities is often more effective. The more usage and compliance intelligence there is, the better and easier it is for software providers to choose the right strategy.