Chief Executive, Rainbow Technologies Inc.
Say goodby to the floppy disk? Walter Straub, chief executive of Rainbow Technologies Inc. in Irvine is prepared for the day when software is distributed electronically. Rainbow Technologies’ newest product allows a software publisher to store multiple programs on a single compact disk, which can hold the equivalent of hundreds of floppies. The product uses a special code to lock or unlock access to programs on the CD to prevent unauthorized use or copying. Straub spoke recently with Times staff writer Dean Takahashi.
How does it work?
What our system does is allow the publisher to remotely activate the software on the compact disk. So in other words, if you bought a CD with a program on it that you wanted, it would include other demonstrations of other programs that complement that product. You may be able to preview other programs, and, from that same disk, you can dial an 800 number to purchase it with a credit card number. The publisher gives you a code over the telephone. Once you key that in, it releases the software for your use. The publisher gets some information about you, who you are, where you are, what company you’re with, what kind of system you have, what’s on that disk you have, and then they can inundate you with additional marketing information. It almost guarantees 100% registration (and payment) of users.
How did this project germinate from an idea to a product?
We have focused primarily on security for the software developer community since the beginning of the company in 1984. And we’ve seen a lot of changes in publishing of personal computer software. About three years ago, we started looking at the CD-ROM (compact disk, read-only memory, the same technology used in music CDs) as a possible vehicle to deliver software. One of our customers was an early adopter of CD technology and through some consulting we found some technology and developed it. So really, customers and changes in the marketplace steered us to this product line.
What is the scope of software piracy?
Some people believe that, in the United States alone, for every product sold there is one pirate copy being used in a business environment in a productive manner. It’s probably higher than one for one.
That’s the fundamental problem that we have addressed. Our customers are software publishers who have not been getting the revenue.
Why would someone use this instead of floppy disks?
Software developers are concerned about revenue protection. The end-user is concerned about convenience. We believe our product is a good balance for the publishers’ requirements to protect revenue and get dollars for every license and for the user’s requirement that it be convenient. The user doesn’t want 14 locks just to get into a house. We provide the key to the house.
What advantage does this product offer for software publishers?
The issue is cost. As software became more complex, operating systems became more powerful, and the programs took up more space. Now developers were looking at a different way to distribute their software. I don’t know if you purchased any software recently, but it can take up to seven diskettes. It’s very expensive to produce those diskettes for the publisher. The compact disk holds the equivalent to 400 to 500 floppy disks. So that medium has significant cost benefits.
Why is it being adopted now?
The technology has been around for a while. Software developers, with all the price wars going on, have become far more conscious of costs. The CD lowers their costs. The typical developer is looking for more product to bundle with their own programs to make them more attractive. This system allows them to bundle their software.
But beyond that, because of the capacity, a publisher could put on a compact disk maybe four to six programs or a whole product line on one compact disk and get it out to the customer all at once. The advantage for that is to entice the customer to look at samples or demos of it. They may be able to get the customer to buy it.
This system obviously depends on the widespread use of compact disks with computers. How is that proceeding?
From a hardware standpoint, multimedia computers and software--those that combine features of CDs such as sound, graphics, text and video--are really starting to take off. You see more and more computers being shipped today with the computer disk reader built into the PC. Companies like Apple will be shipping maybe a third of their PCs with built-in CDs.
What are some benefits to the users of CD software?
They get more choice in their selection of products. Today in software, companies have a large budget for marketing and advertising. Just look at any computer magazine. If you can get that kind of exposure, with people actually using the software before they buy it, the CD is quite a vehicle. Users also won’t have to wait for a local dealer to get a copy of software in stock. One major complaint is that people buy software but leave it on the shelf and never use it. With this system, they get to demo the software before they buy it, as it would actually work on their system.
After the compact disk ends its reign, what will be the next form of electronic software distribution?
Next we will see what all the cable-TV companies come up with. There could be something like a software shopping network, like the home shopping networks now, where you can download the software. I see the life of the CD, however, as being no less than five to seven years. Digital phone lines in the future will eventually take over distribution. But the technology that we have, as far as encoding or decoding, could be applied to the cable TV box in your home. It could lock or unlock the software that you’ve paid for.
On investing in the new system. . .
“It took years of work, with 500,000 lines of software code generated by our engineers.”
On the product’s financial impact on the company. . .
“We think there will be impact on revenues in 1994. This year, we’ve done a lot of missionary marketing. By the end of this year, there will be CDs on the market. One analyst estimated this would account for 10% of our revenue next year.”
On changing software marketing. . .
“The CD allows a new type of advertising and marketing. By marrying multimedia sound, film and video clips, software--it’s a new type of marketing vehicle of the 90s.”
On timing of new products that use Rainbow’s product. . .
“I think in November we’ll see some good applications of our product as a marketing tool.”
