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Electronic Design

Electronic Licensing Systems Thwart Piracy

The software market seems to be virtually bulletproof, invulnerable to the slackening in other sectors of the U.S. economy. Software sales are expected to surge from $200 billion in 2001 to $235 billion in 2002 (see the figure). But what isn't so bulletproof is protecting software from piracy. The Software and Information Industry Association estimates that losses due to unauthorized software use exceeded $59 billion over the last five years.

Coming on quite strong, though, is a potent antidote known as electronic licensing. This software technology controls or monitors customer compliance with license terms, and it records license usage in report logs. It supports a broad range of environments, from standalone notebooks to WANs and the Internet.

Electronic licensing already has proven itself as a remedy for what ails software merchandising. GLOBEtrotter Software Inc. of San Jose, Calif., and others are engaged in this seldom heralded technique, enabling software developers to realize all kinds of benefits simply by integrating licensing into their products. By using licensing, software vendors have learned that both unlicensed use and piracy plummet, while sales rise anywhere from 15% to 25%.

Not all software losses stem from deliberate fraud. Software licensed to a single user is frequently borrowed. Borrowers may have every intention of writing a purchase order, but somehow, it never happens. Electronic licensing shouldn't be confused with software copy protection, either. Licensing is a way of controlling execution, not copying.

What may seem surprising is that electronic licensing benefits users as well as vendors. In a decentralized organization, for instance, a department purchases a $25,000 software package but later abandons its use. Unwittingly, another department in the same organization purchases the same software package, unaware that it could have used the previously acquired package for nothing. Licensing could have alerted the second department to the prior ownership.

Compared to most physical assets, software has some inherent peculiarities. For instance, software doesn't wear out. People just cease using it. Software is invisible, so it's harder to manage than virtually any physical asset, too.

The early concepts of software licensing developed in the days of nonnetworked, million-dollar computers. However, the rapid evolution and market acceptance of networked computing in the late 1980s forced a rethinking of what software licensing means on a network of workstations, diskless workstations, servers, and the like.

Licensing today takes many forms. In "node-locking," programs are licensed to particular computers. In "user-based" licensing, usage is assigned to a specific user ID. "Try and buy" is a natural procedure for licensing. The software is shipped, and if the potential customer tries it and decides to buy it, a license is issued. Already in the hands of the customer, the trial version is unlocked with a licensing code, converting it instantly into a purchased product. Such samples are sometimes called "try and die," since the evaluation period can be programmed to expire after some predetermined time interval.

Licenses are often negotiated by people other than the person who will actually administer it. If there is no control, then it's likely the terms of the licenses may not be complied with, or the customer may exceed licensed usage. But these issues can be readily addressed by usage reports that trigger e-mails, call pagers, post-use billing, or perhaps the use of other software.

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