IDC study points to big benefits from software piracy reduction

The results were released by the Business Software Alliance, a software piracy foe

A 10-point drop in the estimated 35% global software piracy rate would create 2.4 million jobs and $400 billion in economic growth over four years, according to a study released today by a software trade group that has fought software piracy for years.

Countries such as China and Russia, with piracy rates hovering around 90%, would receive huge economic benefits from reducing the unauthorized use of software, said the Business Software Alliance (BSA). China could triple its IT economy and create 1.8 million new IT jobs in four years, with a 10-point drop in its estimated piracy rate, said the study, which was conducted by IT industry analysis firm IDC .

U.S. software vendors would benefit from piracy reductions in the rest of the world, said Robert Holleyman, the BSA's president and CEO. But every $1 spent on software in a country generates more money for software services and channel partners such as retailers and resellers, and most businesses providing those services or selling in the channel are local, he said. "The majority of those benefits remain in-country," Holleyman said.

The study, which looked at the benefits of reducing piracy in 70 countries, is a slight change in focus from previous BSA/IDC studies. In the past, their studies have focused on the costs of piracy, with one such report released in May saying losses from piracy totaled $33 billion in 2004 and $29 billion in 2003.

Representatives of the Russian and Chinese embassies in Washington weren't immediately available for comment. However, earlier this year, the Chinese government committed to ending the use of unauthorized software by government agencies by the end of this year, and in May, embassy spokesman Chu Maoming said the Chinese government had investigated more than 9,000 cases of intellectual property rights (IPR) infringement in 2004.

"China has been doing a lot of work in fighting against IPR violations," Maoming said at the time.

China has not updated the U.S. government on its progress toward ending government software piracy, said Chris Israel, international intellectual property rights enforcement coordinator at the U.S. Department of Commerce. "We believe some progress has been made, but that's a very big goal," Israel said at a BSA news conference. "We have very high expectations that those commitments are met."

There's a "growing recognition" among many government leaders that their economies will benefit from strong intellectual property protections, Israel said. "You simply cannot have a sophisticated knowledge-based economy if you do not protect intellectual property," he said.

Asked if 10-point reductions in the percentage of pirated software are achievable, Holleyman pointed to several past examples in the study, including large percentage drops in Italy and Taiwan after those governments stepped up enforcement. "It's imminently achievable," he said.

Not everyone in the IT industry agrees with studies promoting the effects of piracy reductions. Free software advocate Karsten M. Self, a programmer and network administrator, keeps an old essay critiquing a piracy study from the late '90s on his personal Web site. Self argues piracy could have a number of benefits that are difficult to measure, such as keeping the cost of licensed software down.

"There's the question of whether or not piracy is good or bad, for both the software companies and society," Self wrote. "What we need is a cost-benefit analysis of this situation. . . . Presumably, each pirate copy represents some productivity gain for the person using it. I don't know how to quantify the market-efficiency loss, and I don't know that it goes beyond the real . . . lost revenues of the software company."

Holleyman argued that consumers, as well as businesses and governments, would reap the economic benefits of reduced piracy.

According to the study, a 10-point drop would generate $67 billion in worldwide tax revenues in four years, triple the size of Russia's IT sector from $9.2 billion today to $30 billion in four years, and boost the U.S. economy by $125 billion in four years. The study also said it would add $19 billion to the U.K. economy in four years.

The U.S. has the world's lowest rate of software piracy at 21%, according to the BSA.

Copyright © 2005 IDG Communications, Inc.

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