Ironically, one of the key indicators of the importance of software is the extent to which it is pirated. Broadly speaking, software piracy is the illegal reproduction and distribution of software applications, whether for business or personal use.
According to the latest BSA Global Piracy study, the Indian piracy rate in 2004 was 74%. This means that three out of every four copies of software in use in India was not licensed! The 74% piracy rate resulted in a loss of revenue to software vendors of a staggering $519 million, a 41% increase over the previous year. Given the low penetration of computers amongst individuals in India, it is reasonable to assume that most computers in India are installed in businesses. The numbers speak for themselves. There can be no serious doubt that corporations contribute significantly to software piracy.
There are serious risks involved for businesses in using pirated software. First, this conduct constitutes a criminal offence. The Copyright Act of India provides that the officers/directors of the organisations using pirated and unlicensed software are liable to be imprisoned for up to three years, and could pay fines of up to Rs 2,00,000. Secondly, pirated software carries with it the risk that the software is defective. Unlike genuine software, there are no quality checks for pirated software. The risks are phenomenal. Not only are computers exposed to bugs and viruses, data and network security of the corporate could be compromised. Thirdly, there is no support with pirated software.
Given the huge increases in productivity and the equally large risks in using pirated software, why are businesses hesitant in investing in genuine software The oft cited answer is that software is expensive. Businesses, especially in emerging markets like India, simply cannot afford it. Some basic analysis will show price is not the key determinant of piracy. It is simply used as an excuse.
The real reason is corporate mind-sets. Let me explain. Firstly, if price was the primary factor, one would reasonably expect that the most expensive software titles would be the ones that are most heavily pirated. This is, however, not true. It is the most popular software that is pirated and not the most expensive.
Secondly, while there could be some sympathy for individuals (this still does not excuse piracy), the affordability argument does not carry much weight when it comes to corporations. Businesses in India have never had it so good. Despite this, the piracy rate in India continues to rise. Thirdly, corporations feel that software piracy is a soft crime. Corporations will not hesitate to dismiss an employee for using say a stolen laptop for office work, yet, when it comes to software, the view is completely different.
How can businesses change their mind sets The best way is to treat software as an asset. In other words, it is important for companies to know what software assets they own, what they need, set aside a budget to purchase software, maintain and maximize these assets. Businesses must implement Software Asset Management (SAM) policies. SAM will not only help businesses comply with the law. In time, it will actually help to reduce their costs of doing business. Efficiencies will rise as there will be less down-time, costs will reduce especially if businesses choose the right types of licenses for their organisations or if they subscribe to software maintenance programs which most software vendors provide. As India develops and its corporations grow, SAM will not be a nice to have, but a must have.
A recent study carried out by the International Data Corporation showed that a 10 point drop in piracy rate by 2009, from 74% to 64%, would add 364,000 new IT jobs, along with a $5.9 billion contribution to the Indian GDP. IT in general and software in particular, has changed the world. India has been one of the greatest beneficiaries and a beacon to the world on what a country can achieve through technology. It is time for Indian corporations to pay for what they use.
The writer is co-chairman, Business Software Alliance, India Committee.