Electronic licensing advantages

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Electronic licensing was originally developed to deter piracy, but is being adapted to improve software accountability, argues Simon Mehlman of Macrovision. Electronic licensing is a great example of fulfilling big business demands by using simple, scalable systems; it cuts across a broad range of vertical markets, from chip developers to car manufacturers, from petrochemical companies to games developers. In essence, electronic licensing creates and enforces a simple business ethic: you get what you pay for. Electronic licensing has its roots in the counter-offensive against software piracy. It has, however, evolved into a dynamic means for closing the gap between what software customers purchase and what they deploy. It has become a means to provide accountability to both software developers and software users, both stand-alone and networked. Business users of software face a wide range of potential dangers in their use of software. Companies are liable for the actions of their employees, from sending unsuitable emails through to using illegal copies of software (such as ten people using an application for which the company only purchased a licence for five). The Business Software Alliance (BSA) is one of the world’s leading organisations dedicated to promoting a safe and legal online world. Whilst the BSA educates computer users on software copyrights and cyber-security, they are also very actively involved in the fight against software piracy in all its forms. In June 2002, in their seventh annual survey on software piracy, the BSA announced that: The rate of software piracy in the UK has dropped by one per cent to 25 per cent, the same level as in the United States …

Globally, however, software piracy is on the increase for the second year running, growing from 37 per cent in 2000 to 40 per cent in 2001. Global losses reached almost US$11 billion. Piracy rates in Western Europe also increased three per cent on last year and currently stand at 37 per cent, equating to revenue losses of US$2.7 billion (almost 2.9 billion euros) for the software industry. To support the fight against piracy the BSA will anonymously award up to £10,000 for every confidential report they receive that results in a successful prosecution. Software piracy also impacts upon the revenues of both software users and developers. Users who ‘under-license’ their software requirements may experience constrictions in their workflow throughput. However, by over-licensing above their requirements – to be ‘on the safe side’ – companies can waste significant sums of money that could be better spent elsewhere. It is the lack of accountability and the absence of a means to ensure and ultimately enforce licence compliance that threatened the revenues and continued development and growth of many in the software industry towards the end of the late 1980s. However, as economic pressures increased and as the growth in the adoption of software by industry was matched by an increase in the cost and value of software, particularly for networked software users, a means was required to enable developers to embed a simple system to ensure licence compliance in a user-friendly manner that could at the same time allow companies to enforce software licence compliance amongst their employees. An early, and still popular, method is the use of a hardware key or ‘dongle’. Dongles actually date back a lot further than people may imagine; one of their first commercial applications was in the field of 19th-century transport safety. A railway dongle was a large iron key that was used to unlock the points at either end of a stretch of single-track railway. This allowed exclusive use of the track by the train carrying the dongle.

Computer dongles now come in a variety of forms and usually connect to PCs via USB, parallel or serial communications ports. They are more commonly associated with access control rather than licence compliance; however, they can be integrated into an electronic licensing solution by assigning them a unique network ID code. Dongles provide a physical representation of security; however, they can break, they are subject to the same delays in supply and distribution that affect any hardware devices, and they can be lost or stolen, preventing businesses from accessing their software legitimately. Electronic licensing does not now require the presence of dongles, although some manufacturers still prefer to include them in their solution. An example of electronic licensing for stand-alone applications is SafeCast by Macrovision (www.macrovision.com). SafeCast is an exceptionally flexible and highly secure digital rights management system for software. With SafeCast protection in place, developers and vendors can deliver software products securely via any digital medium, and still retain complete control over how and when they can be ‘unlocked’ (via an electronic licence) and used. SafeCast can accept payments and unlock products via the Internet and/or by phone, fax or email; it can even offer products as time-limited trials (with or without ‘click here to buy’ options) or on a subscription or rental basis and require users to register their product as part of the product activation. Whilst this system of electronic licensing is suitable for stand-alone applications, it would be impractical for commercial software use by multiple users in a business network environment as it lacks true network accountability. Metcalfe’s Law states that: ‘the value of a network grows by the square of the size of the network.’ A network that is twice as large will be four times as valuable because there are four times as many things that can be done, due to the increased number of connections between nodes. An electronic licensing solution for network usage must be scalable, easy to embed and test by developers, easy to install by customers and easy to manage by system administrators – essentially it should be ‘user-friendly’. To provide a user-friendly licence enforcing system may at first appear to be something of a paradox. It is important to remember that any mechanism designed to ensure that users comply with licence terms, which can also supply authenticated usage data, must ensure that it is genuinely easy to use.

When this is achieved, then a solution can be provided to overcome the shortcomings and financial penalties associated with licence abuse, and a whole new realm of possibilities arises for business software users and software developers. To determine the importance of electronic licensing in our use of software, according to recent IDC data, in 2002 about 69 per cent of worldwide software sales – worth US$184 billion – used licences as opposed to ‘shrink-wrapped’ software. Out of all licences in 2002, about 70 per cent used electronic licences, representing US$89 billion in software value. By 2006, IDC projects that 80 per cent of software will use licences, and 80 per cent of the licences, or software valued at US$185B (about twice current levels) will be distributed electronically. Faced with these compelling arguments, the first decision faced by developers looking to incorporate electronic licensing is to determine whether they will generate this solution using internal resources. This can detract from core expertise and prove costly in terms of labour and reliance upon staffing shifts. By using a stable third-party supplier, developers can utilise existing expertise and retain their focus on their core product. Software asset management audit tools for networked software applications can be used to analyse log files and provides companies using networked software a true measure of cost and usage accountability. Usage data enables accountability by allowing companies to analyse where software costs should be allocated, based on who used what and for how long. Peak and sustained demand can also be analysed and licence requirements adjusted accordingly in partnership with the vendor.

Through its evolution as a commercial technology, electronic licensing no longer simply offers business a means to limit the number of users of an application; it can be used to support access to a range of add-on feature sets and modules; it can enable timed trials and subscription-based pricing schedules. Electronic licensing can also be used to support ‘pay-as-you-go’ software use, by setting pricing policies in line with the data recorded within the network log file. By using electronic licensing at the source code level, manufacturers are not only able to help companies enforce their licence agreements, they are able to help build new business models and pricing policies by adopting not just a single electronic licensing policy but, rather, a whole raft of flexible policies that can be easily adapted to the different requirements of varying customers, without the considerable expense of software rebuilds. The implications for a software developer range from minimal to far reaching – from minimising their licensing overheads through to a far greater impact upon the manner in which a company operates and generates its revenues. Macrovision Corporation develops and markets electronic licence management, digital rights management (DRM) and copy protection technologies for the enterprise software, consumer software, home video and music markets. Macrovision is headquartered in Santa Clara, California, with international headquarters in London and Tokyo. The Consumer Software Division provides an integrated suite of tools, such as SafeDisc and SafeCast, that enable developers and publishers to protect, distribute and promote their products securely and effectively, with built-in support for a wide range of robust business models. The Globetrotter Enterprise Software Division’s electronic licence management (ELM) solutions for business software applications, based upon the FLEXlm licensing toolkit, have been licensed to over 2,500 ISVs (independent software vendors) and Global 2000 enterprises worldwide over the last 13 years on over 40 platforms. FLEXlm allows a vendor to set conditions of access within a licence file that sits on a network server; to alter the licence terms, a new licence file can be generated, deployed (via the Internet) and installed at the customer’s site by the network manager.

Access to licensed applications is conditional upon licence file terms, and usage data is compiled within a log file, which can be analysed to assess usage data. For further information contact: Macrovision, Globetrotter Enterprise Software Division, Vision House, Priory Court, Wellfield Road, Preston Brook, Cheshire, WA7 3FR. Tel: +44 (0)870 873 6300; Fax: +44 (0)1928 706 329; Website: www.globetrotter.com or Macrovision, Consumer Software Division, Charlwood House, The Runway, South Ruislip, HA4 6SE. Tel: +44 (0)20 8839 0400; Fax: +44 (0) 20 8839 0409; Website: www.macrovision.com