Boardroom
Aladdin Knowledge Systems

HALTING THE SOFTWARE PIRACY EPIDEMIC
Yanki Margalit,
Chairman and CEO
Aladdin Knowledge Systems, Ltd. (Nasdaq:ALDN)

Software piracy – it's a sinister name for an atrocious business inhibitor.

Worldwide, the software industry is suffering – according to a May 2005 Business Software Alliance (BSA) survey, 2004 global losses to software piracy reached $33-billion. With software as a digital product being easier to copy than as a physical product, these numbers should come as little surprise.

This same BSA survey also found that in 2004, 35% of the business software in use around the world was pirated. In countries such as China, Ukraine and Vietnam, the software piracy rates topped 90%.

Why Is Getting Illegal Software So Easy?
If a person wants to get their hands on illegal software, they will – which makes it even more imperative that businesses protect their products. In today's software market, the more popular the software title is, the more vulnerable it is to piracy. And it doesn't take a computer expert's knowledge to surf the web and find 'professional' hackers offering thousands of cracked popular software titles, for a fraction of their official price.

In markets with extreme piracy rates, expertise in cracking software protection has grown to such an extent that that there are even software crackers 'for hire,' loaning their services out to paying third-parties. This type of professional pirate is helping fuel the drive for the development of professional and comprehensive software protection. Such protection must move with the times, becoming ever more sophisticated, and being updated ever more frequently, maintaining a technological edge.

Anti-Piracy Solutions: Protect and Enable
Non-tempered piracy puts a limit to the business success of any software company. Anti-piracy solutions are the means to remove the glass roof above the growth potential of the software business, enabling continued, non-hampered growth. Software vendors should also note that those making the effort to protect their software enjoy very low levels of piracy. Likewise, those that don’t protect their product suffer from higher piracy rates than the industry average. 

Who Needs to Protect?
The common paradigm in the software industry is that the enterprise has lower needs for copy protection, and thus lighter protection may suffice. Yet in a market study recently conducted by Aladdin covering 661 software vendors, of those using dongles to protect their software, 71% offered enterprise applications. This majority further emphasizes the importance of a quality anti-piracy solution for the enterprise.  

Aladdin’s market survey went on to show that 28% of the users of software digital rights management solutions are companies that develop embedded software. The solutions are used by these companies predominantly to protect their IP.

Clearly, anti-piracy, together with IP protection, are the capabilities a digital rights management solution must have in order to be truly effective for its users.

The Motivation of Competitive Espionage
A major motivating factor for protecting software is competitive espionage. The IP embedded in a software product is a treasure of sorts, especially in a world where competitive advantage is gained through technological breakthrough. The competition puts major effort into reverse engineering the opposing product, learning its secrets and preparing an immediate response so that the competitor’s advantage will not endure. Modern tools make this reverse engineering effort easy and accessible to everyone.  

The good news is that when examining the leading software digital rights management solutions on the market today, there are several which provide effective tools to conceal software code and protect it against reverse engineering attempts. Protecting the IP embedded in software not only extends the duration of the competitive advantages gained by the software vendor, it also contributes to a durable increase in sales, as well as to a growing market share.

The ABCs of Digital Rights Management Solutions
The category of digital rights management is divided into hardware-based and software-based solutions. With hardware-based solutions, users get stronger protection capabilities, with better license portability. Software-based solutions, on the other hand, are typically cheaper and involve less logistics of shipping hardware.

The leading SW DRM solutions on the market contain a strong security infrastructure, used to provide robust protection against illegal copying or IP exposure. This infrastructure also provides additional services, such as the creation of secure licensing and secure distribution of the software or its licenses, and a variety of tools for protecting the software. These include developer tools (i.e. API) or automatic tools (i.e. an envelope/wrapper) for easy and instantaneous implementation of software protection.

Using a software digital rights management solution with strong anti-piracy capabilities is the smart thing to do – it prevents cracking attempts, ensuring that every used copy of software is paid for.

The Importance of Ease-of-Use
Believe it or not, users of software protection solutions cite ease-of-implementation and end-user ease-of-use (transparency) as being issues of more importance than the protection itself. This interesting fact has been consistently evidenced in Aladdin market surveys, which have found that approximately 80% of software vendors consider ease-of-use before level of protection, when selecting a solution. 

Software Protection as a Business Enabler
Software digital rights management is about more than just protection. More than ever, software vendors are utilizing digital rights management solutions as a means of accelerating their business growth. These solutions enable incremental sales and profits by providing:

  • Effective anti-piracy solutions, preventing illegal copying of software.

  • Protection for IP, achieved by protecting the software against reverse engineering and hiding the code from the prying eyes of the competition.

  • Secure software licensing, enabling the creation of innovative business models in licensing software.

  • Secure distribution of software or software licenses, and secure remote updating of those licenses.

Today, software vendors and their solutions are in prime position to seize the market – especially when the software DRM market is growing faster (at 10% per year) than the growth in the software industry itself (at 6% per year). This is due both to the increasing awareness of software piracy, and to recognition of the potential of software digital rights management solutions to increase sales. 

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Yanki Margalit is the founder, chairman and chief executive officer of Aladdin Knowledge Systems, Ltd. In 1984, he designed and developed several products in the areas of artificial intelligence and software security, founding Aladdin to market them.

Mr. Margalit then introduced HASP, a system offering software protection without inconveniencing legitimate users. In 1993, Mr. Margalit took Aladdin public on the NASDAQ stock exchange, and in 1996 he brought about the merger of Aladdin with FAST Software Security in Germany. Aladdin acquired eSafe Technologies in 1998 and Preview Systems in 2001.

Today, Aladdin is a worldwide industry leader in the field of software Digital Rights Management, with over 35% (and growing), of the global market share. To learn more about how you can use Aladdin's HASP software Digital Rights Management family of solutions to protect yourself and your product, visit our website at: 
www.Aladdin.com.