App Developers: SaaS May Thwart iPhone Piracy

A new report claims that Apple and iPhone apps developers have lost $450 million because of software piracy since the App Store opened in July 2008, but some developers feel that such costs may be dramatically decreased in the future.

As more applications take on a Software-as-a-Service model that requires better and more frequent user validation, the notion of piracy could become as distant as peg-legged privateers on the open seas.

The piracy report, by 24/7 Wall Street, notes that Apple, which takes in about 30 percent of App Store revenue, has lost about $130 million, with about another $320 million lost to the apps developers. The lost revenue is due in large part to "jailbroken" iPhones that allow the user to circumvent the limitations put on the phone by Apple.

However, many iPhone app developers already take their cues from traditional PC-based applications and have created SaaS-based models that require regular updates and checks to ensure validation.

For example, many developers now utilize in-app purchases, which require users to download additional content or features after the initial purchase is made, said Sunil Vemuri, co-founder and chief product officer, reQall, a Mountain View, Calif.-based developer of a productivity app for the iPhone.

"Say you make a game and you want to sell 10 new levels to that game. Apple provides an in-app mechanism to do that while you're running the app," Vemuri said. "There are additional opportunities for this type of verification. In that spirit, a pay-for mechanism might help [combat piracy]."

ReQall can receive verification messages on its own servers that it cross-checks and correlates with existing, validated users, he said.

"Developers have been asking about the ability to verify purchases, who they're being made by. There's a strong motivation for Apple and developers to work together," Vemuri said.

Steve Ireland, president of Norada, a Calgary, Alberta-based developer of CRM applications, added that more developers now add more services to their applications to reduce potential piracy.

"Just like in the general IT area, there's a shift from software to services. We've bypassed the whole [App Store] because our users come back to sign up for a recurring fee," Ireland said.

As end users become more accustomed to paying for applications on a recurring revenue model, expect developers to put more energy into that model, Ireland said.

"There's an undercurrent there that the value that's exchanged is no longer an asset that you purchase and now it's yours," Ireland said. "Say [Microsoft] Windows. That's a software product. You buy it, you own the license and it's your responsibility to make it work.

On the other hand, in the SaaS world, it's an ongoing relationship between developer and customer, Ireland said.

"Every month you expect new value and ongoing support," he said. "The App Store has been very successful in software, but the new wave that is evolving is to introduce services. Services has not upset the entire software economy, but it is growing substantially. I don't think it will upset the App Store economy either."

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