Feature

The continuing story of software piracy

With recent reports indicating that piracy has increased, India Inc needs to find a remedy soon, says Venkatesh Ganesh.

Here’s a statistic worth noting. According to a BSA IDC study, software piracy in India in 2004 stood at 73 percent. Compare this with the figure in the 2003 financial year, 64 percent, as against 70 percent during 2002.

Or consider the Asia-Pacific region as a whole. In 2003, the global spending on commercial packaged PC software was about $50 billion. However, according to BSA, $80 billion worth was installed. BSA states that for every two dollars spent on genuine software, one dollar is spent on pirated software.

Vendors such as Microsoft, Adobe, Autodesk, Macromedia and Oracle have been hit by piracy. Says Shriram Krishnamachari, Country Manager, Macromedia, “We see piracy levels for Macromedia Flash and Dreamweaver to the extent of 80-85 percent in India.” A similar view is shared by Raman Madan, Regional Manager, Southeast Asia & India, Media & Entertainment Division of Autodesk. “We would put our piracy numbers in the range of 85 percent, and that is more than the BSA figure.”

In end-user piracy, there is a lot of under-licencing where a company does not buy enough licences to cover the number of PCs Shriram Krishnamachari Country Manager Macromedia

The factors that are driving piracy in India are many. Explains Tarun Sawhney, Director of Anti-Piracy, BSA, “A number of factors boost piracy, the most important being software prices. Others include intellectual property protection to the availability of pirated software and cultural differences.” Sawhney points out that prices of software have always been an issue. End-users complain that software is always priced higher than they can afford, and hence they resort to piracy. The problem is compounded when ‘licencing’ issues kick in and a medium-sized organisation cannot afford to pay such high costs.

But vendors say that cost is not an issue. Remarks Sandeep Mehrotra, Channel Account Manager, Adobe Systems India, “We have versions for different enterprises and also have flexible payment mechanisms. The greatest piracy problem faced by software vendors is one of corporate end-user piracy. The increase in piracy rates in India seems to indicate an increase in acts of illegal copying in the workplace.”

However, the most common form of piracy where the end-user does not even realise that he is engaging in piracy is when the dealer pre-loads illegal software onto a PC before sale. Rakesh Bakshi, Director, Law & Corporate Affairs, Microsoft India, says that it has been found that the cheapest and most readily-available software programmes are pirated as much as the most expensive programmes, and cites the example of gaming software.

States Krishnamachari, “It happens at the channel level where the nexus is between hardware vendors and people who create duplicate CDs. In end-user piracy, there is a lot of under-licencing where a company does not buy enough licences to cover the number of PCs. For example, a company may buy one or two copies of original software and then use it on more computers than it has purchased licences for.”

Kiran Karnik of Nasscom disagrees. “One of the most important factors that encourage piracy in India is the high cost of commercial software—the street price of software forms one-sixth the price of acquiring the computer.”

Other reasons include lack of stringent enforcement laws, lack of awareness of IPR laws, easy availability of pirated software, high use of assembled PCs in India (wherein unauthorised bundling of pirated software with hardware takes place), growing availability of illegal software on the Internet, and improper software asset management by organisations.

Economy takes a beating

Considering the role of the software sector in driving the country’s growth, the impact of piracy on the Indian economy is substantial. As India moves towards being a knowledge-based economy, the protection of knowledge capital becomes essential for future growth. With the software industry growing more rapidly, it is a prominent driver of economic growth, so piracy is bound to have an impact on the industry.

Besides financial losses, piracy results in loss of reputation and marketshare for individual software vendors, reduction in growth for the IT industry, and loss of tax revenue for the government.

Waning revenues for vendors because of piracy might make India an unattractive FDI destination for already- affected as well as prospective software vendors. According to one industry observer, vendors are keeping a constant tab on piracy trends across the world, and if they find the Indian market unprofitable, they may shift focus to other markets. While this is unlikely to happen, the piracy is certainly leaving a sour taste in the industry’s mouth.

Mehrotra explains the importance of combating the menace. “If software piracy in a country is not addressed urgently, investments will be affected since the revenues for developing [new] products cannot be seen.”

Affirms Col B F Chaudhari, Chief Executive of the Cyber Cell, Modular Infotech, “Piracy has resulted in a business loss of Rs 54,750 crore and the resultant loss of Rs 2,190 crore in the form of sales tax to the exchequer.”

Hazy days ahead

Unfortunately, there’s no cut-and-dried solution to piracy. It’s a situation that demands initiatives from both user and vendor. Vendors need to realise that pricing their software high and designing a licencing policy to make it like a jigsaw puzzle will not help. Users, on the other hand, need to realise that software cannot come free, and that the price includes R&D efforts and not merely the cost of burning a CD.

Says Bakshi, “We are implementing a three-step process to address this issue.” At the first level, the company reckons that piracy happens because the vendor supplies illegal software with a new PC. For this, it is training people on the de-merits of using an illegal copy. At the second and third levels it is looking to address users who are aware of it and feel that they will never be caught. Here, enforcement of the law and conviction for the crime committed will be carried out in conjunction with cyber crime cells all over India.

Since the IT sector is now an engine of global economic growth, curbing software piracy could lead to benefits in terms of catalysing the industry and sending a positive signal for future investments which can propel the next phase of growth.

venkatesh@expresscomputeronline.com