New Momentum, LLC, a provider of supply chain risk management software, has released a new version of its Brand Protection software that enables high-tech manufacturers to protect their intellectual property (IP) and detect sales through unauthorized channels.
The release uses advanced Web mining and Microsoft .NET 3.0 technology to troll cyberspace's forums, B2B sites, search engines, and other activities for data that might indicate illegitimate sales of technology components -- products may appear in unauthorized companies' solicitations, for instance. The software-as-a-service product, which is priced on a subscription basis, collects and cleanses the data in real time and delivers it in a dashboard to supply chain managers, legal departments, or other corporate IP defenders. The new release is said to let customers adapt and change their search requirements, improving analytics, reporting, and alerting.
Privately held New Momentum, formed in January 2005, targets its software at high-technology manufacturers -- that is, any company that makes high-tech products or products with high-tech components in them. Chris Jensen, vice president of marketing at New Momentum, said the company has "a handful of customers," but declined to name any of them. He said New Momentum is an SAP partner in the governance, risk, and compliance (GRC) area, and hopes to build up its customer roster through that relationship. Supply chain risk management is a "hot area right now," Jensen told Managing Automation. "SAP is targeting both tier 1 and mid-market accounts. Our product works well in either of those."
In a prepared statement, Stu Clifton, CEO at New Momentum, said the new release "protects our customers' revenue stream as well as the goodwill of our customers' valued distributor partners who also suffer lost revenues from illegal actors in the marketplace."
Those illegal actors -- whether counterfeiters or simply unauthorized sellers operating in a so-called "gray market" -- represent a thriving business. A 2005 study on counterfeiting by the Association for Gray Market and Counterfeit Abatement (AGMA) and KPMG stated that "as many as one in 10 IT products sold may be counterfeit," representing an annual loss of about $100 billion of global IT industry revenue. AGMA defines counterfeiting as "the making or selling of unauthorized copies of merchandise." Counterfeit technology products can be "individual components, whole parts, finished product, packaging, documentation, software, and even the cartons and boxes that finished goods are shipped in."
The term "gray market" describes the "unauthorized sale of new, branded products diverted from authorized distribution channels or imported into a country for sale without the consent or knowledge of the manufacturer," according to AGMA's Web site. A 2003 study by KPMG and AGMA reported that gray market sales of IT products account for more than $40 billion in revenue each year, collectively costing IT manufacturers up to $5 billion annually in lost profits.
New Momentum's Jensen cited semiconductor industry estimates of a $40 billion per year gray market.
Manufacturers have more at stake than lost profits from such illicit activities. If parts purchased outside of authorized channels are substandard or have been mishandled or damaged, they can compromise product quality or void a manufacturer's warranty. Further, AGMA says, "gray market and counterfeit products entering the marketplace result in shadow inventory that is not visible to manufacturers, thus making it difficult to forecast accurately."
AGMA is a non-profit organization formed in 2001 by 3Com, Cisco Systems, Hewlett-Packard, and Nortel to address the global impact of the gray marketing and counterfeiting of technology products.