Illegal and unlicensed software installations continue to be a major source of revenue loss for IT companies worldwide, according to a recent survey of software company executives by KPMG LLP.
In fact, 55% of the executives estimated their firm’s revenue loss at over 10% of the total revenue. Overall, 87% of the executives claimed revenue loss due to unlicensed users, the study said. About 77% of those surveyed agree with International Data Corporation (IDC) estimate that 35% of software installed is unlicensed, leading to an estimated loss $34 billion for the industry.
The study found that 64% of software publishing executives indicated that their companies have a programme designed to ensure customer compliance with software license agreements. And 36% said that they do not have compliance programmes. “Executives of software companies are struggling to find answers to combat unlicensed software use,” said Arpinder Singh, executive director of KPMG India. “Some firms are either not executing their compliance programmes or need them analysed or overhauled. Effective compliance programmes do help firms recoup revenue and maintain strong customer relationships,” he added.
In fact, 20% of those surveyed said compliance programmes deliver over 5% of their ongoing software revenue streams, and 30% said they derive between 5% and 10% of annual revenue. Nearly 7% respondents said these programs actually contribute 10 % or more to the topline.
When asked if compliance activities resulted in negative outcomes with customers, 94% of those surveyed 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.
“In India too, the picture is quite grim as almost 50% software is pirated. One of the major problems in the country is poor law enforcement and awareness. Though a number of companies have started software compliance programmes, but we still need to go a long way. 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, added Singh. According to the study, software companies could be doing a better job of helping customers understand what they have purchased and what types of usage their license agreements allow.
