V.i. Labs Introduces Method for Quantifying Revenue Lost to Software Piracy
“Time to Crack” Enables Software Vendors to Gauge Impact of Anti-Piracy Measures on License Revenues
Waltham, MA — August 29, 2006 — V.i. Laboratories, a provider of software protection
solutions for securing high value and mission critical applications, announced today
a new method for quantifying the amount of revenue that software vendors realize
before and after implementing anti-piracy measures. The method, called
"Time to Crack™,” provides software vendors with a benchmark for measuring changes in software
license revenues in emerging markets with high piracy rates.
Software piracy is a widespread problem for packaged software vendors who sell their
products in emerging markets where intellectual property laws are not as strict.
According to the Third Annual BSA and IDC Global Software Piracy Study, the worldwide
piracy rate for PC software was 35 percent in 2004. In China alone, for example,
the BSA estimates that 90 percent of all software is pirated, representing $3.6
billion in lost revenue for software vendors. UBS AG’s Q-Series research report
entitled A Billion Dollar Opportunity indicates that piracy rates among enterprise
organizations and small medium businesses (SMBs) are as high as 70 and 90 percent,
respectively.
To date, software vendors have taken minimal steps to deter piracy in foreign markets,
for three major reasons:
- It’s difficult for software vendors to quantify piracy in countries where their
presence is minimal and existing global industry metrics for piracy are too broad
to apply to their products.
- There is a common misconception among vendors that current users of pirated software
would not purchase legitimate licenses if pirated versions were unavailable.
- Many organizations focus solely on deterring license overuse or inadvertent piracy
(keeping honest users honest) versus deterring software cracking, which is predominant
in emerging markets.
“There are still many software vendors and providers who believe that deterring
piracy will not recover significant revenue in emerging markets,” said Victor DeMarines,
director of product management, V.i. Labs. “However, recent studies indicate that
rampant piracy exists in enterprise organizations and small businesses where it
is possible to recover revenue. These companies will follow the path of least resistance
to obtain software. If it’s easier to obtain pirated software, enterprises will
take this route. But if a software vendor employs techniques to prevent or slow
down the rate at which new software is pirated, data suggests that these organizations
will purchase legal software copies.”
While it’s difficult to quantify revenue losses resulting from software piracy with
precise accuracy, V.i. Labs’ Time to Crack method can provide a benchmark for measuring
the effectiveness of anti-piracy tactics by comparing the revenue performance of
major product releases. To establish a revenue benchmark, vendors should take the
following steps:
- From the date that a major new software product is launched, determine the amount
of time it takes for a new crack to appear on the Web. Cracks can be in the form
of license key generators or patches that remove license enforcement functions.
These cracks are traditionally made available on Warez web portals or peer-to-peer
services. The organization should designate individuals to monitor these services.
- Once a crack has been discovered, document the creation date and cracking methodology
used. Create a metric that will overlay the Time to Crack point against the revenue
forecast within the specific emerging market. Determine if the license growth trend
within the region of interest changes remarkably at the point when the crack is
made available on the Web. This would indicate a loss in license revenue.
- Prior to the next major software release, invest in anti-piracy technologies
and procedures that best handle the cracks discovered in previous releases. For
example:
- Register software patents and trademarks with the appropriate
agencies and authorities within the target emerging market
- Support foreign government piracy education initiatives
- Implement new measures to secure the sharing and use
of beta software
- Upgrade existing license enforcement mechanisms to defeat
license generation cracks
- Incorporate software protection measures that deter reverse
engineering processes that create license enforcement patches f. Replace weak machine
authentication with additional approaches that can bind the software to an end-user’s
authorized machine
- Once a new product is released, measure the amount of time it takes for a new
crack to appear on the Web. Compare this data point to your original revenue forecast
(before implementing piracy measures) to see the actual revenue gained. Specifically,
analyze penetration within high risks segments such as SMBs. With this approach,
organizations will have a more granular measurement of the success of their anti-piracy
measures on a per software application basis.
About V.i. Laboratories
V.i. Laboratories is a provider of application security solutions that protect against
the misappropriation and theft of intellectual property resident in software applications.
Through V.i. Laboratories’ patent-pending technology, software vendors, enterprise
organizations and government agencies are able to easily secure their applications
against the threat of piracy, tampering and theft, independent of where the applications
are distributed. V.i. Laboratories is privately held and is headquartered in Waltham,
MA. For more information please visit www.vilabs.com.
Contacts:
Victor DeMarines
V.i. Laboratories, Inc.
781.398.3400
vdemarines@vilabs.com
Jeff Dillow/Jason O'Keefe
PAN Communications
978.474.1900
vilaboratories@pancomm.com