Have Audit Letter, Will Travel (Feb. 25, '15)

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Have Audit Letter, Will Travel

Call it "misuse," "overuse," or "piracy," it all adds up to organizations using your software without paying for it. But not every vendor has the resources to go after that leaking revenue.

Is hiring independent revenue recovery experts a better way to recoup money lost to software misuse?

"There's a choice over who engages in that difficult conversation with the organization that may be overusing your software," says Jason Swan, managing director of the Software Compliance Group, a company offering software vendors revenue recovery and license compliance services. "Asking a customer if they're stealing puts the sales rep in an awkward position, and it can damage long-term relationships with that customers."

For most software sales people, confronting a customer (or even a lead) about misuse is outside of their skillset, says Swan. It takes a different type of personality and a willingness to be doggedly aggressive to turn software pirates into paying customers, he argues. Smaller vendors, especially, rarely have sales reps with the in-depth knowledge of local laws and language necessary to shut down the misuse of their software around the world.

"A lot of American companies only send warning letters in English around the world. But that's extremely unsuccessful," say Swan. "They're already stealing! They're thinking, 'If Big Brother in America wants to come get me, I'll wait right here.'"

So, if pumping letters out from the U.S. doesn't work. What will you try next?

Swan and the Software Compliance Group offer an alternative to an in-house compliance management program that can both recoup the significant amount of money lost to software non-compliance and shield the vendor from any backlash. By recommending one, or a combination of, four different approaches for dealing with non-compliance, Swan can help most vendors manage these customers in a way that fits comfortably into their corporate culture.

No matter the size of the organization, Swan believes that software vendors can train inside sales teams to focus on license management. Typically, these employees are most successful resolving licensing issues in North America and some European countries, he says.

If vendors want or need to be more aggressive, Swan recommends hiring intellectual property attorneys who have a deep understanding of local government and know how to wade through the paperwork necessary to file in court systems around the world.

Lawyers are necessary, too, if you need to escalate your efforts, particularly if you're going after chronic misuse of software by companies in southeast Asia.

Calling his organization's third approach to non-compliance a "blind raid," Swan says, "We show up unannounced with an IT guy and someone from the local government and ask to see invoices for the software on their machines."

Swan is quick to point out that conducting a raid must be monumentally important to the vendor's business to go through the expense and effort of involving the local government so deeply. Yet in most cases, a raid is an effective way to send a message to users across the country that the vendor values their technology and expects payment for it.

Of course, lawyers and raids don't mesh with every corporate culture. Many vendors prefer to take the fourth and less contentious approach of a standard audit or review, conducted either by a carefully trained inside sales team or a services provider focused on recovering lost revenue.

"It all depends on what you want your conversion rates to be. In general, you can close about 60 percent of leads in North America with an inside sales team. You might get ten to 15 percent more with lawyers," says Swan. "You really have to push the envelope to close 80 percent. How aggressive do you want to be?"

To learn more about how to build an inside sales team to handle non-compliance issues, attend Swan's session on March 12 at the 2015 Compliance Manager Summit. He'll discuss the type of professionals to hire, the best ways to train sales people to have difficult conversations, and how to determine the best approach for your organization.

To view the Summit's full agenda and to register to attend, visit IBSMASummit.com.

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