Finding the ROI in DRM

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Boy, has Digital Rights Management (DRM) technology matured in recent years.

If you are the CEO of a company with high-level corporate data on your laptop at home and you get fired, for example, someone at headquarters simply cancels your rights to the document and that’s the end of that.

How does that work?

Remember the old Star Wars Satellite Defense System? It actually was recently acquired by a DRM vendor so satellite beams can be used to zap those files no matter where you are. Well, maybe not. But the DRM vendors are slowly getting there.

At last week’s DRM Strategies Conference in Los Angeles, companies such as Liquid Machines Inc. of Lexington, Mass., SealedMedia Inc. of Los Gatos, Calif., Adobe System Inc. of San Jose, Calif., and Microsoft Corp. of Redmond, Wa. released a variety of systems that have advanced the state of the DRM art. These advancements includes electronic tethers that can shut down rights to specific documents when you connect to the network, expiring dates on documents, and emails that can’t be printed or forwarded.

”As the line grays between business and personal computing, DRM is becoming more relevant in the enterprise,” says Peter Sargent, senior analyst for Jupiterresearch, a division of Jupitermedia Corp. of New York City.

According to his numbers, the enterprise DRM market reached $36 million in 2003 and should surpass $70 million this year. Sargent predicts it may reach $274 million by 2008. While that represents an impressive rate of expansion, lingering doubts about the ROI remain.

As a result, rollouts are relatively small scale.

”One hundred percent of our implementations have been at a departmental level,” says Ed Gaudet, vice president of product marketing at Liquid Machines.

Adobe confirms a similar trend, while Microsoft and Sealed Media report several enterprise customers. But the question remains — where exactly is the ROI in DRM?

At Corning Inc., based in Corning, N.Y., that question is being answered in a negative way — the reduction of losses due to theft of intellectual property.

”We need to protect important knowledge from loss or disclosure,” says Jim Scott, director of knowledge and information management at Corning. ”We are using DRM to manage access to restricted intellectual property.”

The company is using Liquid Machines software to pilot a new digital rights management process that allows program owners to deny or permit access, review access privileges, and allow granular data access, such as read-only, no email attachments, no printing, time limits… All materials are encrypted so unauthorized access is prevented, even at the system administrator level.

But how do you quantify the value of such a system? According to Forrester Research, an industry analyst firm based in Cambridge, Mass., content owners will be losing $4.6 billion per year by 2005 due to piracy alone. When you factor in corporate losses due to intellectual privacy loss, industrial espionage, press leaks and other so on, that estimate doubles.

”About 80 percent of corporate documents are passed on via email attachments,” says Jude Omeh, a consultant at Capgemini S.A. of Paris, France. ”That opens the door to significant loss potential.”

Mitchell Jamel, CEO of Digital Rights LLC of Boca Raton, Fla., tells of one client that sells research subscription packages worth upwards of $50,000 annually to financial services companies. Four years ago, this data was relayed via fax and email. The amount of leakage was huge, though difficult to quantify. The company built a DRM system for about $1 million, and expects ROI on the package in three years.

”Already, they have been able to detect lots of clients who weren’t paying all they should have,” says Jamel. ”By using DRM, this company has increased its revenues and gained a greater ability to target its research.”

Tony Kalvik, a principal of Capgemini says there is plenty of ROI in DRM, when it comes to preventing law suits. The financial services sector, in particular, is shell shocked by the number of lawsuits over information mismanagement. Kalvik also sees plenty of value in securing the communication channels within organizations and between clients.

”More and more, we hear people telling others not to send them email, but to come and see them instead,” adds Kalvik.

Other cases of clear-cut ROI exist in pharmaceuticals.

Merck, for instance, used DRM to cut expensive couriers out of clinical trials. Instead of couriers needing one day to pass on the data and one day to return it, the information is available almost instantly. That eliminates courier fees and makes for faster time to market.

Outsourcing is another market with big DRM potential.

Many firms are hesitant to hand over intellectual property to foreigners. Even if the relationship goes well, contracts come to an end. How do you safeguard the data you already have handed over?

”If an outsourcing deal fails or a contract ends, you can deprovision document access at the touch of a button,” says Liquid Machines’ Gaudet.

Read more about Digital Rights Management issues at DRM Watch.