A significant number of software companies – more than half (55%), according to KPMG – lose more that 10% of their total revenue as a direct result of illegal and unlicensed software installations.
Overall, in the KPMG study, 87% of the executives claimed revenue loss due to unlicensed users. What’s more, 77% of those surveyed agree with IDC estimates that 35% of software installed is unlicensed, leading to an estimated $34-billion in lost revenue to the industry.
The KPMG study found that 64% of software publishing executives indicated that their companies have a program designed to ensure customer compliance with software license agreements. But 36% sais that they do not have compliance programs.
“Executives of software companies are struggling to find answers to combat unlicensed software use,” says Tony Wright, a partner at KPMG Intellectual Property & Contract Governance Services in South Africa. “There is a growing recognition of the value of IP in South Africa; over the past ten years we have seen an increasing activity by IP rights holders in the protection of revenues from their IP rights. This has been particularly prevalent in the software industry.”
In fact, 20% of the KPMG survey takers say that their compliance programs deliver over five percent of their ongoing software revenue streams, and 30% say they derive between 5% and 10% of annual revenue. 7% percent of respondents indicate that these programs actually contribute 10% or more to the top line.
When asked if compliance activities resulted in negative outcomes with customers, 94% of survey takers indicated that customer loss is very rare or never occurs. And 50% of those surveyed said customer satisfaction is a key measure used to gauge compliance-program success.
“A systematic approach to managing software license compliance efforts is a low-risk, high-reward endeavour,” says Tony Wright. “Several leading practices were revealed through our survey that can be applied by software publishers to help recover lost revenues, strengthen software license controls, and improve business relationships with major institutional customers.”
According to KPMG’s survey, software companies could be doing a better job of helping their customers understand what they have purchased, and what types of usage their license agreements allow. Only 36% make such information easily accessible by their customers, while 43% say they share such information on a case-by-case basis.
In addition, the information that is made available may not be as comprehensive as necessary. While 45% say their entitlement information is comprehensive, 55% say the data may provide only an average or limited level of understanding.