Is this also what is used to enforce academic standards (i.e. each student doing individual work)? I've heard CS lodges the most official complaints of any department.
While you could probably catch a lot of cheaters this way, there is a possibility for a large false positive rate. If this is true then I would especially advise against deploying this type of software in a traditional university since the academic dishonesty policies can often cause significant and undue harm on an innocent student.
As an instructor of programming on a university level, I like to think that I have enough sense to know that particularly for "trivial" assignments, some similarity is expected. However, as I've encountered, a great deal of similarity over multiple assignments (and exams) between two students of the same nationality who sit together in class provides additional evidence of plagiarism.
So, yes, I agree a single data point of similarity is insufficient, but a history of similarity, particularly in complex projects, becomes more damning.
So basically what I'm saying here is that I think "for "trivial" assignments, some similarity is expected" isn't always widely understood, to the detriment of students.
I think these sort of systems become most valuable when used to check work against work submitted from previous years to bust frat-house collections of answers, but varying questions year from year probably helps even more in that regard. Similarity between complex projects in the class sizes that were typical at my university (in classes advanced enough to have complex answers) was pretty easy to spot manually. Maybe edit-distance software is useful there to put some weight behind accusations?