Revulytics Blog

"It’s Time to Sell the Yugo," or "Why Software Compliance and Piracy Enforcement Needs a 25 Year Upgrade"

February 1, 2011

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A few weeks ago as I was getting ready to speak at a local HTCIA chapter in California, I started thinking about how little progress has been made in Software Compliance over the last 25 years. Having recovered over $130 million in compliance revenue over the last 20+ years for a number of large and small software vendors, it seems in 2011 that Software Compliance and Piracy Enforcement is still largely a matter of blind luck for many software vendors.

Hit or miss manual audits, whistle blower leads, channel partner tip offs, even mystery dialing are still the main source of overuse and piracy enforcement leads 25 years later, which is like driving in the dark with your headlights off and hoping to find the road. In keeping with the 80s, let’s call it the Yugo strategy of compliance revenue recovery. Why would you wait and hope that these leads come to you, instead of using modern methods of aggressively tracking and pursuing companies illegally using your software?

To quote Rick Page, “Hope is Not a Strategy.” Enterprise Software Compliance and Piracy Enforcement are still the largest untapped revenue sources for many software companies (a $51 billion opportunity according to the BSA/IDC study), yet amazingly software companies struggle to justify the budget to support the effort by adding compliance headcount and tools to identify infringing organizations.

Could you imagine the company treating Marketing expenses the same way? “Don’t spend any money on marketing staff or lead generation; instead just wait until a prospect calls in.” Why shouldn’t the head of Compliance and Piracy Enforcement get the same seat at the CEO table as the Chief Marketing Officer (CMO), and a corresponding budget for staff and tools to do their jobs?

It can’t be because the business case isn’t there: software companies that are Leaders in Software Compliance and Piracy enforcement contribute up to 10% or more of their company’s top line revenue, and millions to the bottom line.

Yet software companies are still squeamish about aggressively pursuing this revenue stream, 25 years later. “We are worried about upsetting our customers,” is a common objection. Really? You are worried about upsetting someone that is stealing from you? What is the point of executing EULAs if you aren’t going to enforce them? Yet I routinely encounter business leaders who get more upset about losing a parking spot in the mall than a business in the United States running pirated copies of their software. Your paying customers want you to enforce Compliance, since they are the ones who have to compete with companies who have a zero cost for software.

“I am worried about privacy,” is another one. If you haven’t heard, the privacy debate is over – properly managed, there good examples of large and small companies successfully navigating privacy concerns in the US and Europe and track how their software is being used and misused in order to make sure they are receiving fair revenue for the value they deliver, as outlined in their EULAs.

It’s time for a change.

Software Leaders need to illuminate the path to revenue by giving Software Compliance and Piracy Enforcement the staff and tools they need to do their job, and treat this like a Marketing Program and begin to track and analyze the use and misuse of their software assets. Leads from tracking misuse are better than any Marketing lead – after all, they don’t need to be convinced to use your software (they already are!). If Marketing delivered leads to sales that closed at a rate of 1 in 4, any enterprise software sales organization would put a statue of the CMO in the building lobby. Yet we see customers routinely turn 50% of the piracy leads they generate into revenue, and close rates of 90% or better in first world countries is not unheard of in top performing software revenue recovery operations.

Or you can continue to drive with your headlights off, and hope you don’t hit something, just like we did in the 1980s. Don’t worry, you can probably still squeeze a few more miles out of that Yugo.

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Jim Nauen

Post written by Jim Nauen

VP, Sales and Operations at Revulytics

Jim Nauen has 20 plus years of enterprise software sales and compliance experience, recovering over $130M in software license compliance revenue