Details

  • Type: Press release
  • Date: 10/1/2013

Unlicensed Software Losses Remain Major Problem, Even As Companies Recover More Revenue, According To KPMG Survey 

Software in the Cloud can both reduce and add to compliance complexity

 

Despite indications that software companies are recovering more revenue, more than half of the industry executives surveyed say losses due to the use of unlicensed software amount to at least 10 percent of their revenue, according to insight from KPMG, the tax, audit, and advisory firm.
In the new report Is unlicensed software hurting your bottom line?, KPMG provides the results and analysis of its 2013 survey of 31 software companies representing more than 50 percent of the revenue in the software industry, where enterprise software revenue is expected to total $301 billion in 2013 according to Gartner Group.

 

Fifty-two percent of the executives surveyed, the same as in the previous survey in 2007, say their company’s revenue loss due to unlicensed software amounts to 10 percent or more.

 

“Unlicensed software continues to be a significant issue for software publishers, even with an increased focus on compliance,” says Rob Pink, National Service Network Leader, KPMG Contract Compliance Services.

 

Today, in contrast to six years ago, significantly more companies have customer compliance programs in place than don’t -- by a 7 to 1 margin in this year’s survey, as compared to a 2 to 1 in 2007.

A greater portion of the total annual software revenue (both licenses and maintenance) now comes from compliance programs, according to the 2013 survey. Almost half of the respondents, more than in the past survey, say that the compliance program in their company produces 4 percent or more of their software revenue. Yet the bulk of the compliance program activity has been focused on two regions.

 

“To date, the vast majority of activity from compliance programs has been focused on North America and Western Europe. Despite the publicity regarding software piracy in the Far East, compliance programs in these regions still account for less than 10 percent of total compliance activity. We expect this to increase in the next few years,” says Paul Baguley, Principal, KPMG Contract Compliance Services.

 

Challenges and Opportunities

The survey indicates the top challenge customers’ face in achieving license compliance is complex and difficult-to-understand metrics, followed closely by virtualized environments that are difficult to track and report on.

“Put together, these represent a real challenge for SAM (Software Asset Management) managers to deal with,” says Baguley.

 

The growing use of employee-owned mobile devices in the workplace, such as smart phones and tablets, and various cloud licensing models will add complexity for SAM. Cloud-based enterprise software can, depending on the deployment scenario, simplify or complicate licensing procedures.

 

“For example, while private clouds and hybrid clouds can make counting software more difficult, public clouds simplify software compliance since the provider operates a pay-per-use software service,” says Vanessa Lo, Partner, KPMG Contract Compliance Services.

 

The survey also identified areas of opportunity for software publishers, among them, web-based tools and SAM assistance. Only 56 percent of the software executives say they give customers web-based tools that provide detailed information on what they own.

 

“A relatively small percentage of those surveyed provide Software Asset Management assistance as part of a compliance settlement for customers found to be non-compliant after an audit,” says KPMG’s Pink. “Two-thirds say they don’t. So we see increasing the use of SAM assistance as a huge opportunity to improve.”

 

Low-risk, high-reward, value-added programs can help

“Our survey finds that software license compliance programs rarely result in negative resolutions such as litigation or loss of a customer, making these revenue-producing programs a low-risk proposition for publishers. Also, the vast majority of software executives in the 2013 survey say programs have a positive or neutral impact on their relationships with channel partners and customers,” says Pink.


And, points out KPMG’s Tom Lamoureux, Global Advisory Leader for the Technology Practice, “making the compliance programs more attractive to customers can make the fight against unlicensed software mutually beneficial.”  

 

Lamoureux says that while the focus of compliance programs remains on comparing deployed software with licensed software, an emerging practice is for software publishers to use the programs to bring additional value to their customers by: 

 

  • Providing training during the compliance review.
  • Helping customers improve their capabilities to manage software.
  • Placing greater focus on future deployments.
  • Emphasizing a positive customer experience and viewing the review as part of the customer life-cycle.

 

About Is unlicensed software hurting your bottom line?
The publication examines the extent of license compliance challenges facing companies today, and leading practices in license compliance management.  The report is available at: http://www.kpmg.com/US/en/IssuesAndInsights/ArticlesPublications/Documents/is-unlicensed-software-hurting.pdf

 

About KPMG LLP

KPMG LLP, the audit, tax and advisory firm (www.kpmg.com/us), is the U.S. member firm of KPMG International Cooperative (“KPMG International”). KPMG International’s member firms have 152,000 professionals, including more than 8,600 partners, in 156 countries.

 

Contact:   

Mike Alva

KPMG LLP

415-963-5426

malva@kpmg.com

Twitter: @michaelalva