A Deal a Software Pirate Can't Pass Up

According to the annual global PC software piracy study from the Business Software Alliance (BSA), conducted by IDC, "Pirated software accounted for over a third of all packaged software installed on PCs worldwide in 2005." The report goes on to state that "global losses from software piracy were estimated at $34 billion in 2005, an increase of $1.6 billion over the previous year."1

Years ago, I worked at a large software vendor that long sold their software with no copy protection. This was before the rise of the Internet where online registration and security mechanisms have become commonplace; it was back when hardware "dongles" that you plugged into a serial or parallel port on your PC were common. Does anyone remember having a machine with four or five dongles connected in a long chain sticking out from the back of you PC? I was an application engineer (AE) (a.k.a. demo jock) back then, so maybe my setup was unusual. The company was Autodesk, and their product was AutoCAD. Autodesk had initially chosen not to protect the software this way and it had the interesting, albeit not totally planned, affect of helping to proliferate the software very widely. As an AE, I often traveled to other countries and recall seeing a stack of 5 ¼" floppies lying on a desk in a Thai software shop next to some AutoCAD manuals, floppy disks and an IBM PC with a screen full of prompts from the old DOS DISKCOPY command, "Copy another diskette (Y/N)?" Or there was the time I went to Taiwan when there were less than a few hundred registered users and an absurdly large crowd showed up, all very accomplished at using the product.

Autodesk introduced a hardware lock in an early release, known internally as a "`WIDGET," an acronym standing for Walker,s Inline Device Guaranteeing Elimination of Theft. The outcry and vitriol was so great that they buckled under the strain and removed it. Then, in 1990, there was a proposal to reintroduce it by the management team. Little did they know what they were in for; their proposal initiated one of John Walker's, the megalomaniacal co-founder of Autodesk, infamous tirades to stop it. The full rant can be read at >www.fourmilab.ch/autofile/www/chapter2_80.html. It's an interesting read giving an historical perspective on software piracy and copy protection. As an aside, I enjoy looking back on it because it reminds me how Walker almost single-handedly created an e-mail "flame" culture that reveled in skewering people in public via e-mail or "Information Letters" rather than just walking down the hall and telling them he disagreed with something. Autodesk, in those days, could easily and quickly act like the mob going after Frankenstein with pitchforks and torches, although Frankenstein in this case was really just some poor employee who inadvertently incurred his wrath. I confess that I sometimes took some twisted pleasure in it, especially if I disliked the Frankenstein of the day or week, but I was younger and less mature then. It was ultimately destructive for sure, but I digress.

The point I was trying to make is that, ironically, Autodesk clearly benefited from the piracy. From a Walker quote, in his missive against the reintroduction of a hardware lock in AutoCAD R11 back in 1990, "rampant piracy has substantially contributed to our current dominance of the market." There was probably 10 times the number of illegal copies as legal, creating a huge base of knowledge centered on the product. Trained users, third-party applications developed to run with the software, training centers and so on.

Although there are some extreme cases like this, in general, software piracy is almost always a bad thing. It costs vendors huge amounts of money, and the direct impact on the bottom line resulting in less investment in R&D, which ultimately impacts product quality and innovation. Moreover, it often causes management to divert resources into increasingly draconian and complex protection schemes that unfortunately end up hurting the honest customers by making products hard to install and license, or difficult to move to a new computer should the customer upgrade or have to replace a failing system.

Unfortunately, even in the past with hardware locks, it was clear that in a very short time there would be a method of defeating the lock available on the market for less than $100. Today, in the market in which Alibre competes, the mechanical CAD software market, one can buy a CD for $5 in China that has a cracked version of every CAD application on the market, from the most expensive and complex to the most accessible and easy to use. I regularly get SPAM emails or see newsgroup postings offering illegal versions of products of all types for virtually nothing.

In the end, no matter how sophisticated the protection scheme, there are hackers and pirates who will defeat it, so unfortunately the ones who get hurt are the honest customers we want since they have to jump through more hoops to use their legally purchased software in the manner we intended. It brings to mind the old anti-gun control tag line, "outlaw guns and only outlaws will have guns."

Interestingly, I saw a recent post in Ralph Grabowski,s blog - >www.worldcadaccess.typepad.com - titled, "CAD Enables Piracy." Ralph basically points out that CAD helps those who counterfeit physical products by reverse engineering them with the latest CAD software, 3D scanners and rapid prototyping technology. Add vendors to task for indignantly complaining about piracy when it is their software, but looking the other way when their software is used to counterfeit someone else's product. Touché. We all lick our chops at the Chinese market when we know that our software will be used to bootleg any number of other products.

Indeed, countries with rampant piracy like China, Russia, etc. need to do their part and start enforcing the law, but in the end, the only thing that will really reduce software piracy is when there is more value in being legal than being illegal. Software vendors need to think about how they improve the value of being a legal member of their customer community to the level that piracy does not make economic sense.

I find parallels in our current debate about illegal immigration. Lest I be misunderstood, first let me say I am a supporter of securing our borders. Just like I want China, Russia and the others to enforce their laws on piracy, I want the U.S. government to enforce our immigration laws. The solution to illegal immigration is making it desirable to stay in the country form which one is illegally immigrating. Yes, that's a harder solution that policing the border, but in the end, it is the only one that will change the situation.

At Alibre, our approach consists of providing a mix of products and services, many of which require an active online subscription. The Internet has created a whole new playing field for offering connected services in conjunction with a product that can add value to being a paying customer. In addition, and possibly most importantly, Alibre makes production 3D CAD truly affordable by following the principle of price-led costing, rather than cost-led pricing. In other words, Alibre is structured so that our costs allow us to set a price that makes 3D technology accessible to anyone, making pirating a questionable proposition. This might be easier in our industry since we believe CAD software has traditionally been dramatically overpriced. Moreover, through an endless cycle of forced "product retirements" and upgrades, CAD products have become cluttered with features most people don't need, making them harder to learn and use. At Alibre, we set a fair price, focus only on the features the majority need and try to make it very easy to do business with us.

So in the end, we need to look beyond the temptation to think we can solve the problem with only better "enforcement" through advanced software protection because it will never be advanced enough. We need to put all our energy and creativity into aligning the business model with the value we can deliver, and clearly communicate and prove, to the customer. In this way, we turn the tables on the pirates; while dishonest, they clearly aren't dumb, and they'll know a deal when they see one.

Greg Milliken is president and CEO of Alibre, Inc. (Richardson, TX). He has more than 20 years of experience in the CAD/CAM/CAE industry and has held a variety of roles in marketing and sales at both established public companies as well as startups, including companies such as Intergraph, Tektronix, Autodesk, AccelGraphics and MSC Software. Greg has a bachelor of science in Mechanical Engineering from the University of Texas at Austin. He can be reached via the Web site at > www.alibre.com .