Study: Reduce software piracy, increase revenues

Countries with high software piracy levels stand to gain the most economically, if they reduced the use of bootleg software, says IDC.
Written by Aaron Tan, Contributor

SINGAPORE--A 10 percent drop in software piracy rates over the next four years could boost IT industries in the Asia-Pacific region, a survey has found.

Conducted by research firm IDC and commissioned by the Business Software Alliance (BSA), the study concluded that a fall in the region's software piracy rate from its current 53 percent to 43 percent, would add US$135 billion to the region's economies. In addition, local industry revenues will rise by more than US$106 billion and an extra 2 million jobs would be created, according to the survey.

Jeffrey Hardee, vice-president and regional director of BSA Asia-Pacific noted that software is fueling the growth of the technology industry, comprising more than 60 percent of global IT spending. "In the Asia-Pacific region, software is a US$30 billion sector that represents 15 percent of the IT industry," he said, during a media briefing today.

Hardee also noted that every dollar of packaged software revenue generates US$1 in services revenue as well as US$1 to US$2 in local channels revenue from software distribution, installation and support. "There is a ripple effect from the sale of packaged software," he said.

Hardee added that an increase in IT spending would drive more spending in other parts of an economy. It would also create high-paying jobs and generate revenues for governments, he said. Specifically, the IDC study revealed that the cumulative effect of growth in the IT industry would fatten government pockets with US$14 billion in new tax revenues.

Last year, the Asia-Pacific software industry incurred revenue losses totaling US$7.9 billion from software piracy. Piracy rates in Asia-Pacific countries range from 92 percent in Vietnam, to 28 percent in Japan.

The IDC study concluded that countries where software piracy is most rampant, will stand to gain the most from reduced piracy levels.

Vietnam's IT sector, for example, could grow by 169.3 percent in the next four years, if its piracy rate was reduced by 10 percentage points, IDC estimated. In contrast, at its current piracy levels, Vietnam's IT industry would only grow by 107.8 percent during the period.

Globally, the IT industry is set to grow by 33 percent in the next four years, according to IDC. If the worldwide piracy rate of 35 percent is reduced to 25 percent, the industry would grow by 45 percent during the same period, the study suggested.

Marcel Warmerdam, research director of IT markets at IDC, noted that the underground economy from pirated software could generate revenue streams for local channel partners who service bootleg software. But such revenues are only a small fraction of the amount that could be gained from legitimate software, he said.

Warmerdam also debunked the general perception that reductions in software piracy levels only benefit big multinational vendors. "Piracy also hits the local vendors. Local players do not have the option of spreading their risks [from software piracy] like international players," he said, adding that multinationals can always divert their investments elsewhere if 90 percent of what they do in a country, is going to be copied.

He added that lower software piracy rates would stimulate more software production and marketing and research activities, all of which would spur the demand for software. An increase in demand, he said, would outweigh any "drop-out" effect of lower piracy rates where people stop using software which they could previously purchase at bootleg prices.

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