Cover Story

Indian Piracy: a progress report

There’s greater awareness regarding the perils of piracy and the corresponding benefits of original software and this is reflected in piracy levels dropping by three points over the past three years. By Faiz Askari

Concerted efforts by the government, judiciary, software vendors and the channel have resulted in a steady growth in customers purchasing original software—even in India. Brian Campbell, Director – Original Software Initiative, Microsoft India says, “It was rewarding to see a three percent reduction in piracy in the last three years and this will have a significant impact on India’s economy. On top of an already impressive growth rate, the drop in piracy will add 115,000 jobs, contribute $5.9 billion to India’s GDP, and add $386 million in taxes and $8.2 billion in revenues to local vendors.”

Software piracy is a far-reaching and serious problem not only for India but also for economies around the world. According to the BSA-IDC Fourth Global Software Piracy study, globally piracy rates were as high as 35 percent amounting to losses to the tune of $40 billion, India itself lost $1,250 million in 2006 to software piracy, a substantial increase from $367 million in 2003.

There are many negative economic consequences: the local software industry is crippled by competition with pirated software from abroad, tax revenues and jobs are lost due to lack of a legitimate market. Nandkumar Saravade, Director of Cyber Security, NASSCOM says, “Software piracy is the most noticeable manifestation of the lack of respect for intellectual property and it is a huge problem that is plaguing many emerging economies. It limits the full potential of the local software industry to a large extent.” These costs reverberate up and down the supply and distribution chains. They also lead to reduced diversity and a depressed offtake of alternative and open-source programs.

Sachin Duggal CEO Nivio believes that software piracy in India is still prevalent. He says, “On the extent to which this is a problem is a highly debatable question as I’ve heard figures as high as 90 percent. I think another indicator of status is the branding that has been setup around India’s piracy issue—a lot of people believe that it is rampant and out of control. NASSCOM is trying with some success to change this.” India based Nivio sells a Windows-based online desktop solution.

The evolution of piracy

Software piracy rates in India have been declining over the last few years, and this is a result of consolidated efforts. The Government has put stringent laws in place to limit this problem and at the same time, software vendors are focusing on limiting the problem through efforts to increase awareness amongst customers, as well as undertaking initiatives to provide greater access to original software.

Brian says, “We believe that India can do better. When compared to countries like China, the drop in India’s piracy rate is slow. Greater support from the partner community in educating customers will help in the fight against software piracy. The government lending visible support will also help drive the message through better.”

Piracy goes up or down in a country and is usually the result of a complex equation that includes education and enforcement, new users coming into the market and easier access to pirated software.

Issues such as culture, institutional effectiveness and even geography have an impact and play an important role in the ability of countries to decrease piracy. It also seems that lowering software piracy is a matter of continual work on multiple fronts. This means providing more education, improving enforcement, and encouraging better asset management for businesses.

Saravade says, “The new trend toward delivering service-based software may offer greater insulation against piracy. Unfortunately, the influx of new users in emerging markets—mostly consumers and small businesses—and the increased availability of pirated software, particularly over the Internet and peer-to-peer (P2P) networks is putting upward pressure on piracy rates. The fastest-growing Internet populations are in emerging markets: between the end of 2005 and the end of 2009, more than 100 million new Internet users will come from China, India and Russia alone.”

Duggal says, “Fundamentally I believe that a number of users consider that a software vendor is delivering something that is not physical or manufactured therefore they do not believe it is stealing to use pirated software since in their view the ISV is looting them –the Robin Hood argument comes into play. These are also the segments that crack applications on trial.”

However, he further pointed out another set of users who are just not aware about the lack of licensing and this is where the grey market is untruthful in what they tell PC buyers. Furthermore the last set are the semi legal bunch usually businesses that buy 20 percent legal and the rest are copies that “they didn’t realize they use”.

Evolving customer mindshare

While large businesses are becoming increasingly aware of the perils of deploying pirated software as well as the benefits of original software, a high number of SMB and home users still use pirated software. Some of them are not aware whether they are purchasing original or pirated software. And even if they are aware that the software is pirated, they are not conscious of the impact that a single purchase could have on their work or business or the economy at large.

Elaborating on Microsoft’s experience in gaining an insight into what today’s customer is thinking about pirated software, Brain Campbell says, “Recently we have noticed that this mindset is changing slowly and a set of consumers have started to appreciate the value of original software, and how its use can make a difference. This is evident in the fact that in 2005 the piracy rate was 74 percent and today it has reduced by three percent to 71 percent.”

Computer software affects every aspect of your life today, but most significantly it changes the way that we communicate. With the touch of a button or the click of a mouse, information is transmitted across the globe. Saravade adds, “With each passing year, software evolves into a faster, more sophisticated, versatile and easy-to-use technology. Computer software allows companies to save time, effort and money. Home software now includes a wide array of programs that enhance the user’s productivity and creativity. The industry thrives on original software packages that are paid for and it is not only the software publishers who stand to benefit from these but the users as well.”

Unfortunately, because most software is valuable, and computers make it easy to create an exact copy of a program in seconds, software piracy is widespread. From individual computer users to professionals who deal wholesale in stolen software, piracy has percolated into homes, schools, businesses and government. Saravade says, “An important implication of pirated software is that it is vulnerable to security attacks and hijacking by cyber criminals.”

Issues that linger on

Given India’s fast growing economy and the importance of the IT sector it is imperative to deal with the issue of software piracy.

Some key elements that need to be tackled while erasing the menace of software piracy are:

• Educating and making people aware of the benefits of legal software and the perils of piracy
• Training and educating users including in the use of specialized tools like software asset management (SAM)
• Enforcement through legal action, though used as a last resort, is an important part of the approach, especially against organized piracy.

Lowering piracy around the world will take work and investment. Saravade adds, “But it is work and investment that can pay off for the countries involved. A strong local software industry can be an incredible economic engine. In order to unlock new jobs, business opportunities, revenues and economic growth that the IT sector can produce, tangible steps need to be taken to protect intellectual property and reduce software piracy.”

Channels: a long suffering lot

One segment that has been the most affected and suffered a lot because of piracy is the channel community. Calling piracy as a nightmare for the channel community, Saket Kapur director of Green Vision Pvt Ltd says, “The IT software channels segment had suffered a lot in this game. I believe that in piracy, channels suffer more than the vendors. There were lot of issues involved in this but one thing is sure that channels community has learnt a lot from last decade and they have now found out ways to tackle the situation.”

Commenting on the status of software piracy from the perspective of the channel, Niraj Davar, director Channel Technologies says, “I think, this segment has suffered the most but they are also widely responsible for the acceptance of piracy in the market.”

Suggesting on how to control things from today’s perspective, Davar adds, “It is extremely important for the industry to work together and take the initiative to promote comprehensive awareness programs for end consumers and channel partners. Reducing software piracy often requires a fundamental shift in the public’s attitude toward software piracy; education and awareness are critical components towards this.”

Online sales to the rescue

E-commerce in India continues to exceed forecasts and predictions. Selling software on the Web has been a great success for companies like Microsoft. It has given these software majors the geographical spread to make original software available to end consumers. Campbell says, “The Microsoft e-store on Indiatimes.com is now one of the largest online stores of Indiatimes.com in terms of monthly revenue. Through this customers can easily order retail packs by accessing www.askfororiginal.com and pay for the software by credit card, check, draft or wallet365.” Moreover, customers buying through a credit card can pay in three to six months equated installments, with no interest. Campbell adds, “In a short span of six months, the Microsoft e-store has delivered revenue equivalent to a large size aggregator and original software is available across 1068 Indian cities.

“We at Microsoft are investing in an e-commerce platform with a third–party service provider which will enable our traditional partners and large Web publishers to participate and be able to sell our products online through their Web sites and portals.”

Duggal says, “I believe that providing software on demand and via the Internet will greatly reduce piracy if the price point and service are right for the market. At Nivio we believe that with ever increasing broadband users it’s the way forward.”

Taking a look at today’s scenario, people are willing to pay for content that they value—if it is priced reasonably and if they see additional benefits in purchasing original content versus pirated content. If customers see value, they will be willing to pay the price. One thing we must remember is that low cost software is not the only response to piracy as even low-priced software can be pirated. A perception must be created that when a consumer uses pirated software, it is morally wrong and illegal.