Studies put monetary value on software piracy

Studies put monetary value on software piracy

Summary: Studies conducted by the Business Software Alliance and International Data Corporation claim the government of India lost taxes of up to $866 Million due to piracy software in 2009 while close to $2.7 Billion worth of software was pirated in the country in 2010.

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Software piracy is a problem for software companies globally. Microsoft CEO Steve Ballmer has talked about the impact of piracy on several forums. Back in 2010, Steve Ballmer had praised India's IP protection efforts. Global organization, Business Software Alliance (BSA) has been working towards increasing awareness about piracy and has released studies in partnership with the International Data Corporation (IDC) on how piracy is affecting the economy.

Two of their latest studies, Value of PC Software Theft in India Totals US$2.7 billion in 2010 (PDF link) and Software Piracy in India: Costing Millions to State Exchequer in Tax Losses (Press release) have put Dollar value to software piracy in India during 2009 and 2010. Some of the key highlights of the studies are:

  • Users purchasing one copy and installing it on multiple PCs is one the most common ways that people indulge in piracy.
  • Pirated packaged software in 2009 - 65%, dropped to 64% in 2010.
  • In 2009, piracy cost the government $866 Million in direct ($313 Million) and indirect taxes ($553 Million). While the study might be legit, the whole indirect tax (media, paper licenses and related services) part should be taken with a pinch of salt.
  • Commercial value of unlicensed software installed - $2.27 Billion in 2009 and $2.7 Billion in 2010.

In an earlier report by Gartner, they said India saw a 6% growth in PC sales (desktop and mobile) during Q1 2011 with nearly 2.6 Million units sold between January and March 2011. According to the BSA-IDC study, emerging economies contribute to 2.5 times that of developed countries towards piracy and this is attributed to the strong PC sales in these regions. The reports mention global losses due to unlicensed software was close to $59 Billion in 2010.

The numbers are attention grabbing and interesting. While piracy is a threat, how the government chooses to implement measure to curb it, is as important. The price conscious user in India isn't one to pay a lot of thought to after-sales support (which is the most cited reason to opt for licensed software) if he can save himself considerable money. Reports of government officials using piracy as a way of extorting money aren't less heard of in the country. The government should work with the private sector and find ways to reduce taxes on software sales which would allow the private companies to sell at an affordable price. After-sales support is a huge industry and has significant contributions towards employment and income, it would be beneficial for the country if ways to improve the software supply chain were developed.

Topics: Software, Banking, Enterprise Software, Government, Government US, Piracy, Security

Manan Kakkar

About Manan Kakkar

Telecommunication engineer with a keen interest in end-user technology and a News junkie, I share my thoughts while preparing for my Master's in Information Management.

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12 comments
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  • Malware is a business

    It is all about generating revenue now. The day of the linux script kiddies with a root kit who just want to see if they can do it is long gone. Now, it is organized crime rings targeting specific people and specific markets. I wonder what the percentage of GDP is related to software hacking in Belarus.
    Your Non Advocate
  • I don't get it

    I agree that piracy costs those who make their living writing/creating bits, money. As for the rest of the claims, most of them are bogus.<br><br>1. If I pirate a piece of SW costing $100, someone is out $100 ASSUMING I would have bought it if I could not pirate it, at times a tenuous assumption.<br><br>2. If I pirate a piece of SW costing $100, I am likely to spend that $100 saved elsewhere in the economy, generating additional tax revenue. Therefore the government is not likely to suffer any revenue loss at all, and my $100 expenditure elsewhere will create employment in another sector, hence there are no job losses. If I spend it on a hamburger, the jobs created may be lower skilled jobs. If I am a business and invest it in plant and equipment, I am creating higher skilled jobs and economic growth potential.<br><br>3. If China pirates 95% of their SW from the US, they immediately have a cost advantage over those who do not pirate. Is using someone else's creation without compensating them right? No. Is it hurting the economy? That is a much trickier question and depends on the economic region under consideration.<br><br>As long as commercial bits to meet the demand are still being written, the overall economy may benefit from piracy. Not only do I get the SW, but I can also get another $100 worth of "stuff", that I could not buy if I paid for the SW.<br><br>The picture may be a bit more complicated when you start to consider marginal propensities etc, and there may be longer term implications for the SW industry, but the fundamental shorter term conclusions remain.
    Economister
    • RE: Studies put monetary value on software piracy

      @Economister

      First time I agree with you E. If someone pirates software, you cannot assume they would have purchased it.
      tonymcs@...
      • Thanks, but ....

        @tonymcs@...

        you will probably not make a habit of it. ;-)
        Economister
    • RE: Studies put monetary value on software piracy

      @Economister

      Absolutely agree! While I do not condone pirating, my guess is that the majority of those that do pirate do so because they can not actually afford to buy the software. While software vendors like to think that if they could come up with the perfect copy protection mechanism all those pirated copies would represent new revenue, the reality is they would see only a small increase in sales. Maybe if the software companies reduced their prices that would spur additional sales?
      7mgte
  • RE: Studies put monetary value on software piracy

    I for one find this to be a little funny. I use only free and open source software and believe that it is just better. To think that someone risked getting caught illegally downloading a piece of software that had a (better) open source counterpart is amusing.
    abryant288
    • RE: Studies put monetary value on software piracy

      @abryant288

      Please name one piece of open source software that is not a clone of last century's proprietary software.

      I didn't think so.
      tonymcs@...
      • RE: Studies put monetary value on software piracy

        @tonymcs@... <br>Firefox, the Linux kernel, GNOME and Blender just to name a few.
        abryant288
  • RE: Studies put monetary value on software piracy

    .
    Alan Smithie
  • RE: Studies put monetary value on software piracy

    Biased trash from the BSA.<br><br>Read this article from Out-Law on what the Hargreaves Report has to say on the issue of overinflated stats.<br><br><a href="http://www.out-law.com/page-11932" target="_blank" rel="nofollow"><a href="http://www.out-law.com/page-11932" target="_blank" rel="nofollow">http://www.out-law.com/page-11932</a></a><br><br>BSA = B*ll SH*T Alliance
    Alan Smithie
  • RE: Studies put monetary value on software piracy

    The ugly truth...<br><br>Software piracy done for the profit of the duplicator/reseller is definitely <br>criminal. Similarly, piracy done by a business or individual that financially <br>profits from the use of the software, IS CRIMINAL.<br><br>However, piracy done by the end user for the most part creates a follower and <br>future purchaser of the next releases. If personal hours are spent to learn the <br>program, it is less likely that the user will switch to another program and will <br>willingly pay for the next enhancement .... if reasonable and will become the <br>flag carrier for the product along with the support to fellow users.<br><br>Bill realized that when he gave out free software at all the PC Clubs. The end <br>users effectively became the unpaid salesmen that would promote the program and <br>saved Bill from paying hefty salesmen commissions. The user learned on their <br>own time, debugged and requested or DEMANDED the programs be purchased at their <br>workplace in order to perform more efficiently.<br><br>On the business side is where the money is made, along with the OS for each <br>machine sold. This is were CPM failed to understand, and Ashton Tate when they <br>got greedy and used ProLock - Foxpro was born, and the rest is history. I fear <br>at time Adobe could be the NEXT Ashton Tate. This is how Word killed <br>Wordperfect and Wordstar, similarly Excel killed Lotus & Symphony.<br><br>Lost tax revenue for India? Yes IF the corporations using the programs do not <br>buy. That is criminal, but if the end user becomes more productive, the gov't <br>will make more money from an educated workforce.<br><br>It's a delicate balance. In any event, legally the software maker HAS TO show a <br>form of enforcement, for fear that the intellectual property may become public <br>domain. It's a fine balancing act.
    SnappyD3
    • RE: Studies put monetary value on software piracy

      @SnappyD3
      Very good and valid points!
      Dukhalion