The Scourge Of Software Piracy

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Software piracy is on the rise around the world, costing U.S. software developers $11 billion in lost revenue last year, according to a study released this week.

“Things are not good,” says Bob Kruger, vice president of enforcement for the Business Software Alliance (BSA), a non-profit corporation representing business software publishers in 65 countries. “Two out of every five software programs are pirated. The loss figure understates the economic impact of this problem because it doesn’t include the tens of thousands of jobs that were lost or not created. It doesn’t include the billions of dollars in taxable wages that would have been generated. It impacts software developers but it also impacts the broader economy.”

The seventh annual Global Software Piracy Study, released by the BSA this week, shows for the second year in a row that piracy is escalating — not only in the United States but across the globe. Piracy is the unlawful and unauthorized copying of copyrighted software.

And even though the study doesn’t specifically point to the corporate arena, as opposed to pirating software for personal use, Kruger says, based on his experience, corporate copying accounts for an overwhelming majority of the problem.

“The weakening global economy is putting pressure on IT budgets so we’re facing a lot more challenges than we were a few years ago,” says Kruger. “Businesses aren’t even spending as much on legal software. Using pirated software is becoming a risk that some businesses are willing to take.”

However, Rich Mogull, a research director at the Gartner Group, an analyst firm based in Stamford, Conn., says the sagging economy is not to blame for the surge in software piracy.

“There’s a preponderance of inexpensive CD burners out there now,” says Mogull, who notes that the unstable economy here in the U.S. hasn’t greatly affected some of the countries with the worst piracy rates. “Think about all the people with home computers. There’s just a lot more software out there. I’d be surprised if the economy had anything to do with it. There actually are less workers out there who need their hands on software.”

Cultural Perspectives

Part of the problem, according to Mogull, is that a lot of people, particularly in certain countries, don’t see software piracy as theft.

“Consumers don’t see the harm nearly to the level that enterprises do. If they can get a free copy of it, great,” notes Mogull. “And there’s cultural issues. China is one of the countries that doesn’t recognize copying software as theft, really. If you go into a culture where everything is state property and individual possessions are looked upon differently, you might have a different understanding of it.”

Mogull adds that consumers, and network administrators, have grown tired of digging deep into their pockets for every upgrade that comes around the bend. And in an age when software and hardware are often outdated in a matter of months, upgrading can become a pricey venture.

“Remember the period between 1993 and ’96 or ’97?” asks Mogull. “You saw the shift from 486 computers to Pentium II class computers. People were spending significant amounts of money on upgrades. They don’t see it as theft; just saving themselves some money.”

But software piracy is costing the industry a lot of money, according to the BSA’s Kruger. He points out that the U.S. has the lowest piracy rate but the highest dollar losses, which rang in last year at $1.8 billion. Low piracy rates here add up to enormous losses because of the sheer size of the American software market.

Here are the top 10 countries with the highest piracy rates in 2001:

Vietnam — 94%

China — 92%

Indonesia — 88%

Ukraine — 87%

Russia — 87%

Pakistan — 83%

Lebanon — 79%

Qatar — 78%

Nicaragua — 78%

Bolivia — 77%

Eastern Europe, at 67%, had the highest piracy rate of all the regions, with an increase in dollar losses from $404 million in 2000 to more than $434 million in 2001. For the third year in a row, Latin America continued to see a decline in its piracy rate, which now is at 57%. And, according to the study, North America continued to be the region with the lowest piracy rate at 26%, up one percentage point from 2000.

The BSA’s membership includes companies like Microsoft Corp., Adobe Systems, Inc., and Apple Computer.