Of Pirates and CDs

To experience the state of soft ware piracy first-hand, all you need to do is

to take a stroll in Nehru Place, New Delhi. Young boys will come and whisper to

you, "Software CD chahiye kya?" (Do you want software CDs?)

Experiences similar to this are common in cities like Mumbai, Chennai and

elsewhere in India too, where commercial software like Microsoft Exchange

Server, Oracle 9i, Adobe Acrobat, is sold at ridiculous prices of Rs 100-Rs 200

per copy. Most customers buy them without knowing that they are illegal copies

of the original.

On

a different plane, the Internet and the file-sharing software widely available

on it allow illegal downloading of software.

Then, even those who actually purchase software make unauthorized copies and

install it on more machines than the license is intended for. Despite

concentrated efforts on the part of industry organizations like Nasscom and CII,

government, and software companies themselves, the menace of software piracy

continues to flourish in India.

Growing tentacles



A recent Nasscom survey pegs the rate of software piracy in India at 64% for

2001-2002. A similar survey by Business Software Alliance (BSA) and

International Data Corporation (IDC) puts the figure at a whopping 70%, for year

2001. The BSA-IDC survey reports a far gloomier fact that software piracy

levels, having fallen from 79% in 1996 down to 61% in 1999, have risen sharply

to the current 70%. BSA further estimates the total piracy-related losses for

software companies operating in India at over Rs 1,800 crore while the Nasscom

figure for the same is Rs 1,100 crore. It also estimates that over 50% pirated

software finds its way into corporates.

"Corporate end-user piracy is a cause of worry. This is the biggest

threat to our efforts," admits Jeffrey Hardee, Vice President and Regional

Director of BSA, Asia. According to Hardee, ignorance about licensing is

probably a key reason for the high rate of piracy at the corporate level. And

the rest, he says, is casual and partially deliberate piracy. Rampant piracy in

the corporate sector is a big concern for Nasscom too. Says Sangita Gupta, Vice

President, Nasscom, "Over the last year there is a deliberate shift in

Nasscom’s focus on piracy, now it is more towards the corporate audience apart

from targeting consumers".

A battery of losers?



For end users, apart from obvious security issues like viruses and

backdoors, using the pirated software can mean unwanted legal and financial

complications. A lesser-known consequence is eroding of new products coming into

market. Since developing new software usually is a time-consuming effort

involving costly R&D expenditure, high levels of piracy will necessarily

mean that the company would struggle even to recover its R&D expenditure.

Faced with conditions like this, the software industry may lose all incentive to

develop new and better products, which by the way would benefit software users

themselves.

The

IT industry itself loses significantly on account of software piracy. With lower

legal sales, industry growth tends to suffer.

There is a serious impact on employee motivation, as companies struggle to

reward their hardworking and efficient employees.

The government suffers on account of lost tax revenues on software sales. The

IT sector’s contribution to GDP declines too, hitting the economy of a

country. IDC estimates that every dollar of packaged software sales generates an

additional $1 in local service revenues and $1-2 in local channel revenues.

Software piracy eats up those revenues, lowering earnings for entire links in

the value chain.

Efforts under way



Efforts to combat software piracy began in as early as 1986. The government,

industry organizations like CII, Nasscom and BSA, and software vendors

themselves have tried several methods to combat the menace. The government has

played its part by enacting some of the most stringent IPR regulations in the

world. Says Punit Vanvaria, business development manager at Microsoft India,

"India has some of the strongest copyright protection legislation in the

world and the government should be congratulated on this". The Indian

Copyright Act 1957, as amended in 1994, is a powerful instrument to deter

pirates. The Act stipulates seven days of rigorous imprisonment extendable to

three years, plus a fine of Rs 50,000-2 lakh.

Industry organizations including CII, Nasscom and BSA are also instrumental

in bringing the collective force of different companies to the front against

piracy. CII recently partnered with Microsoft for a five-city seminar on

educating corporate users about the benefits of good software asset management

in their organizations. Nasscom and BSA too work closely with software vendors

to generate awareness and enforce anti-piracy laws against culprits.

Many software companies often fight independent battles on their own, though

sometimes out of sheer desperation, as in case of Modular Infotech. "The

IPR regulations cannot be of much help since there is little enforcement from

the government", grumbles Col B F Chaudhari, chief executive of the

anti-piracy cell at Modular Infotech. He further complains that associations

like Nasscom are not very helpful to domestic companies, and as a result

companies like his have no option but to initiate anti-piracy measures.

Educating users on topics like the perils of piracy is one of Microsoft’s

key initiatives, besides collaborating with the police to enforce action against

users of illegal software. "At the same time, we are continually

researching the viability of new anti-piracy technologies, like MS Product

Activation, that discourage casual copying by limiting the number of times a

product can be installed on individual computers", says Vanvaria. Software

major Adobe Systems India is fighting an intense battle against piracy too. The

company is working with State police departments to train policemen on IPR.

"Training sessions for Karnataka Police and Delhi Police have been

conducted, along with other corporate houses", says Sandeep Mehrotra,

Channel Account Manager, Adobe Systems India. The company recently announced an

anti piracy campaign at publishers and creative media shops, which involved

identifying companies using illegal Adobe software, and then educating them, and

prosecuting them, if need be.

Where are we right now?



The collective results of the anti-piracy measures have been positive to a

limited extent, as piracy levels have gone down over a period of time. The

IDC-BSA report says the piracy levels have come down from a high of 79% in 1996

to 70% in 2001.

There have been a few tangible benefits too. "Over the last six years,

reduction in software piracy has contributed to creation of 140,000 additional

jobs", says Harish Krishnan, Director—IT at CII.

Even after years of persistent efforts, the continuing high levels of piracy

are a cause of serious concern. There is need for an even greater push from all

three agencies of government, industry organizations and software vendors

themselves. Companies like Modular-Infotech feel that the government and

industry organizations are still not doing enough to fight the menace. Their

claim is that Nasscom doesn’t help domestic companies as much as it favors big

software MNCs.

According to CII’s Krishnan the reasons why high levels of piracy still

exist, "Some of the most important reasons that encourage piracy are–lack

of awareness, improper software asset management in organizations and lack of

effective enforcement to curb organized software piracy". Opines Mehrotra,

"software is considered as an expense whereas hardware is considered an

investment". But are high prices of commercial software a primary incentive

to piracy? Yes, according to Nasscom, as Gupta adds, "One of the most

important factors that encourages piracy in India is the high cost of commercial

software". She points out that the street price of software forms 1/6th of

the price of acquiring the computer, which encourages consumers to use pirated

software to save costs.

Miles to go…



According to the experts, there are not many new tricks that can be employed

to curb high piracy levels. The effective execution of basics like educating the

users and strict enforcement of IPR laws is the key. Says Vanvaria, "The

only solution to the problem lies in cultivating respect for Intellectual

Property Rights through education and enforcement, where needed".

Vanvaria further argues that though the strong legislative framework and

stringent IPR laws are in place, strict enforcement and compliance of these laws

is missing. Agrees Mehrotra, "The IPR regulation in India is excellent but

unfortunately, the users are not well educated about the laws and there is no

law enforcement from the government". The IDC report also puts the onus of

taking steps to curb piracy on the government. "The key to software piracy

reductions stems from proactive government-led efforts", adds the report.

Realizing the importance of the government’s role in curbing piracy, a

start has already been made by the Karnataka government. It has taken steps

towards becoming a ‘Zero Piracy Organization’ by issuing a government order

urging all its departments to use genuine software and laying down a detailed

process for checking the use of legal software within the government. Apart from

Karnataka, various other state governments have created IPR cells in police

departments that handle piracy-related complaints and assist in anti-piracy

raids across the country. What we need now is simple emulation of all such

initiatives by all other states. The software companies on their part can

probably benefit from innovative licensing policies, like those being adopted by

Adobe India. Adobe’s licensing policies are tailored to different size

enterprises, and often the costs are spread over time to enable customers to

avail the benefits of legal software.

Chaudhari says the other major software companies should also establish ‘Anti-piracy

Cells’ and form an association of such cells to help each other. "Only if

there is a joint and concentrated effort by the industry associations,

Government, and by the vendors themselves, then definitely we will see the

piracy levels coming down in India", says Mehrotra. The IDC-BSA report

projects that if piracy were to drop by 10% in the next four years, it could

lead to 50,000 additional IT jobs and can increase local industry’s revenues

by $ 1.6 billion. The report further says that such reduction is achievable for

most countries. All it takes is concerted efforts by all the parties whose

interests are at stake. After all, the benefits of no software piracy shall be

reaped by all, certainly not the least by the software users themselves.

Team DQ