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Publishing House Research - Interviews - Ken Wasch

Steve Greechie's Interview with Ken Wasch
President of the Software and Information Industry Association
November sixth, 2006

SG: How does SIIA define the information industry? Do you define it the way Outsell does?

KW: When you see the way some people - Outsell or Veronis Suhler - describe the industry, it includes all intellectual property. That's too broad. You need an affinity group where people feel as though they're in the same industry. The people in the television industry don't think of themselves as in the same business as you are, providing research reports. If you produce a consumer magazine on flying, you don't think of yourself in the same business as YouTube.

We don't go that far. In our view, the parameters are as follows: digital content that's used by businesses or consumers, and may either be fee-based or free. But it's important to recognize what it does not include for our purposes. We're don't believe that the television industry is part of the information industry. We're not in the entertainment-audio business. Record companies coalesce around a different industry.

Virtually every industry faces this. Let's take the apparel industry. People who make shoes, do they think of themselves as the same business as people who make hats?

SG: To a certain extent, they're in competition. People are going to buy shoes or hats, or they're going to look for their news on television or on the internet.

KW: Yes, and the definition of our information industry has expanded significantly in ten years. Ten years ago, we would have described this industry as B-to-B online information. It's broader than that today because there are a lot of interesting players. For example, digital content - we think of it as print-based digital content, but more and more of it is being delivered in podcasts. So, on one hand, we're including a podcast about business issues, but we're excluding podcasts that are just - you know - U2's latest concert.

SG: What are the highest priorities for the SIIA?

KW: Well, remember, SIIA is an organization with four distinct divisions. Let's review - we have the content division, which is largely the old Information Industry Association and the companies we're thinking of as in the information business.

But we also have three other distinct divisions: the education technology division, which consists of large and small vendors of software and content to the K-through-20 environment - companies like Pearson and Houghton-Mifflin, an lots of smaller vendors.

And we have the software division, which consists of the major software companies of the country - like Oracle and Sun and Red Hat - and they deal with a whole different set of issues.

And then our fourth division is our Financial Information Services Division - FISD. And that consists of three subgroups. They are:
the stock exchanges of the world: everyone from the Jordanian Stock Exchange and the Athens Sock Exchange to NASDAQ are members of our organization;
vendors of financial information - people like Bloomberg and Reuters;
the major users of financial information, or market data information - anybody from Goldman to Lehman to Merrill Lynch - they're all members of that division.

The priorities in each of those divisions are division-specific, but one of those things that ties all those divisions together is our interest in intellectual property. We are an organization of copyright hawks, trying to protect the intellectual property that our members create.

And it's under attack in a lot of different ways. There are efforts afoot to reduce protection for intellectual property… to reopen the DMCA [The Digital Millennium Copyright Act of 1998] - which was carefully negotiated in 1996 - to expand the concept of fair use and to generally reduce the protections afforded to all forms of intellectual property. We have a very long-standing piracy program for the software industry that began 18 years ago. Our content anti-piracy is much newer, and our first few cases have just been filed just this year, as you know.

SG: And how much of the problem is within the United States and how much is foreign?

KW: The domestic piracy program is very different from the international piracy program. The international piracy efforts involve us working with governments around the world to support crackdowns on what would appear to be legitimate businesses selling copyrighted materials without the permission of the copyright-holder. In the United States, we're dealing with auction sites that are auctioning copyrighted materials. We do less today than we did a few years ago with counterfeit software - that's a problem that largely extends only to Microsoft and few of the largest companies.

What is clear is that users are confused about the rules. Enormous volumes of information content come into companies. Individuals working for a large company want to take that information and post it on their website, clip it and put it in a newsletter, or forward the information to friends and colleagues. And the rules for what they can and cannot do with that information are not understood by all users.

There's an enormous difference between sending around a link that sends the recipient of that email to the Wall Street Journal website and grabbing the content of that Wall Street Journal article and sending it around. The former is perfectly legal - the latter is not.

SG: And also… people often have software installed on their computer that they're not licensed to use - isn't that right?

KW: Well, that's the software piracy program, which is a very significant part of the SIIA's anti-piracy efforts. We bring between 150 and 200 software piracy cases every year. They're in the form of what we call cooperative audits, where the target company has been reported by somebody who knows that the company is significantly underlicensed in their use of software. We require the target company to conduct an audit and then pay a penalty equal to three times the manufacturer's suggested retail price of all the illegal software that's found. Large businesses, when they're caught, generally want to do the right thing to avoid litigation. They're happy to conduct the audit, pay the penalty and move on.

SG: How effective have we been?

KW: Oh, very effective. The level of piracy in the Unites States has dropped off dramatically. We no longer get reports about wide-scale piracy at Fortune 1000 Companies. These companies have long ago established procedures that insure that they're fully licensed for the software they use. The cases we get are usually second-tier companies who believe that nobody's watching. The people who report them are disgruntled current and former employees.

SG: SIIA has an education component as well.

KW: Yes. Fifteen years ago we started a program in the software industry called The Certified Software Manager that is now taught around the country. A separate company has been created to teach the course, called License Logic. The course has now been translated into nine or ten languages. In fact, The Certified Software Manager course has been taught in countries as diverse as Columbia, Poland and China. Basically, it's a full-day course on how to manage software assets.

We have just developed a course called The Certified Content Manager that we're test-marketing. We've done our first test, in partnership with The Special Libraries Association and we intend to do a couple of more tests before we roll it out broadly to US cities. The Certified Content Manager Course is a course which teaches major corporate users of licensed information content what the rules of the road really are.

SG: Is the World Trade Organization helpful in combatting piracy?

KW: Yes, yes, because it's the floor for protection. The major governments of the world are committed to curbing software piracy.

SG: If we could talk about the information market globally. In five-to-ten years, where will the largest information markets be? Will they still be in the United States?

KW: Everyone talks about the BRIC countries - Brazil, Russia, India and China. All four of those markets are growing very rapidly and every information content company is focused on having a strategy in each one of those four countries The strategy needs to be different in each of those countries.

SG: Outsell has a huge estimate for the information industry - that it'll be worth $458 billion three years from now. That's about the equivalent of the largest global industries today. Do you think that that's reasonable?

KW: We have chosen to stay out of the projections game. We've stayed out of the projections game in terms of the software industry and we're staying out of the projections game in information content. I have no reason to doubt Outsell's projections. I think their methodology is sound. Outsell certainly does not have a reputation as just being a cheerleader for the industry and I certainly would not second-guess their analysts.

SG: The SIIA's Mission Critical Campaign works for money for enhancing education through technology. As I understand it, that's for classes and for software development. You made a statement recently about level funding for the Enhancing Education through Technology Initiative.What are its goals?

KW: The money that is spent in education technology comes from federal and state sources. What's important is that we maintain those public moneys. We believe that increasing the use of education technology in the classroom enhances student performance. It may sound self-serving to say it, but study after study has shown that to be the case. We can't expect American students to compete in a global environment using pedagogical techniques that were developed in the nineteenth century.

Every school in America today is wired. The question is how extensively users are using education technology in the classroom. We believe that the most successful schools in this country are employing education technology most broadly. Whether it's for assessment, whether it's for drill and practice, whether it's for research or other uses, information technology is an essential element of today's K-through-20 environment.

SG: So will we measure our success, then, by the areas in which technology is integrated, or in terms of the students and their skills?

KW: There are a number of private studies. If you ask students to master a specific subject matter and then you divide the class into two groups - one group using the old-fashioned techniques of books and pen and paper, and the other group integrating the use of the computer and other information technologies into the instructional day - you find the performance of the students demonstrates that the use of technology enhances student performance. The students that used information technology achieved better results

SG: So, ultimately, student achievement is going to be our measure.

KW: Absolutely. But there are people who are skeptical. I mean, Margaret Spellings, who's our Education Secretary, is skeptical about the use of education technology.

There always is the risk that you can oversell what education technology will do for students, and we're careful about that. It's balanced. We're not saying "Use education technology to the exclusion of a teacher, or to the exclusion of a quality physical plant - bricks and mortar. Of course not.

SG: Finally, I'm interested in the lawsuits that were filed this month against defendants who had sold software on eBay.

KW: The eBay situation is a big problem for both our software and our content companies. We have found that there are something called "power sellers" - people who run businesses selling pirated software on eBay. We brought three cases in May and we brought a couple of more cases last week. One seller was generating millions of dollars, trafficking in copyrighted material that they didn't own - that they had no license to. We think we're going to achieve a successful outcome in each of those cases, and some of those cases may result in criminal prosecution.

SG: Do we get cooperation from eBay? Can we work with them?

KW: eBay has been somewhat cooperative. They can always provide better cooperation.

SG: Can we look forward to working with them more in the future?

KW: Yes. They're a necessary partner in curbing piracy, as are Google, Yahoo and Microsoft. We have a similar problem with piracy involving paid search, where somebody pays for keywords and they're providing pirated software. You click on, say, Adobe InDesign, and you get a pirate seller who's perfectly happy to sell you an illegal copy of InDesign. Those kinds of sellers directly impact the revenue stream of Adobe.

SG: And we bring the problem to the attention of the Justice Department - is that right?

KW: We bring private piracy cases against these people, but yes, we want the Justice Department to crack down as well - which they are.

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