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Licensing, not piracy, is the problem in North America

Microsoft and IDC say the channel will benefit from a level playing field where everyone uses fully licensed, legal software

New research conducted for Microsoft Corp. (NASDAQ: MSFT) by research firm IDC claims that, for every dollar Microsoft realizes in North America from lower software piracy, in aggregate, the channel will realize $4.82 through increased revenues and lower costs. However, piracy may not be what you think.

While piracy is generally thought of as the use of illegally copied or counterfeit software, IDC and Microsoft admit that they consider enterprise software license non-compliance, whether intentional or unintentional, to be software piracy as well.

“Any unlicensed use of our software we think of as piracy,” said Keith Beeman, general manager, worldwide anti-piracy at the small and medium-sized business solutions and partner group at Microsoft.

Not that they’d call it piracy in a conversation with a client though, said Beeman.

“With customers we don’t go in and say ‘hey, we think you’re pirating our software,’ we say ‘we think you have issues with license and asset management,’” said Beeman. “People have a very different connotation when you say piracy vs. under-licensing or license mismanagement.”

There is still some pirated software found in large businesses, said Beeman, although often they’re unaware of it. They’ll have paid good money for software from what they thought was a trusted source, only to find-out they’ve been duped.

More often though it’s an issue of poor IT asset management. And Beeman said often these tools discover license under-deployment, meaning companies can often save money through better use of what they have.

“We start with assumption that (any license misuse) is unintentional, and assume that unless they work really, really hard to convince us otherwise,” said Beeman.

As for difficult to understand licensing agreements and regulations, Beeman admitted software licensing is difficult but said it’s not realistic to expect one model for all products, a solution that customers wouldn’t accept anyway. Microsoft is working hard on scenario-based licensing to make it easier for clients, but he said they should rely in their channel partners to help them understand their options.

The recent IDC report examined the impact of software piracy and license misuse on the channel and Darren Bibby, program manager, software sales channels with IDC’s software business strategies group, said their findings show piracy costs partners money.

Partners will usually walk away from a business opportunity where a potential client is using pirated software, said Bibby. The sale and implementation cycles can also be longer, and the opportunity cost is higher. Plus, there’s trying to compete with other businesses taking an unfair advantage.

“If a partner is trying to do business as an upstanding member of the Microsoft channel it’s like running in the Olympics against someone that’s using anabolic steroids and never gets caught,” said Bibby. “It’s unfair, and they’re calling on Microsoft to take action.”

The study shows that 40 per cent of the potential revenue the channel can realize through reduced piracy comes from faster product and service delivery, and 31 per cent from faster sales cycles.

At the same time, Bibby said the channel needs to step-up and take more responsibility for what’s going on around them, whether it’s reporting misuse when they see it or having a conversation with clients about it.

There’s also a business opportunity, he said, for partners to bring customers into compliance and to pitch solutions around software asset management. The problem in North America isn’t really traditional piracy, said Bibby, but rather license misuse.

Bibby paints a scenario where IT is asked to complete a project in a week, and it requires new software licenses. They ask procurement, and are told it will take three weeks. In the mean time, IT substitutes trial and demo software. That’s license misuse, and often the situation is never remedied.

“Partners are finding an opportunity to help customers become legit,” said Bibby. “There are very few companies that are willing to use pirated software.