Software Piracy Prick Could Hurt BRIC

Here are some significant statistics for you to savor: the four countries
that form BRIC (Brazil, Russia, India, China)which have little in common other
than their huge market potentialcurrently account for more than 25% of the
worlds land area and more than 40% of the worlds population. By 2050, they
could collectively eclipse the combined economies of the current richest
countries of the world (US, Japan, Germany, France, UK).

If this sounds simplistic, here is some more to mull on: of the installed
base of 4.8 bn mobile phones in the world as at end-May 2010, about 1.7 bn of
those are in the four BRIC countries. According to one estimate, by 2020, of the
roughly 6.7 bn mobile phones worldwide, more than 50% would be in BRIC alone,
given that currently the average cellphone penetration is 50% per capita in
India, and 60% in China.

One final figure thats not quite fictional: This year the largest economy
will be the USA with $14.5 tn in GDP (Gross Domestic Product). The BRIC
countries collectively will be in second place at $8.8 tn. By 2020, the US
economy will reach $18 tn in GDP, but BRIC together will account for $20.3 tn,
clearly overtaking the US.

Statistics aside, how real is BRIC? Is it still an imaginary entity that was
first noted in 2001 by Jim ONeill who was then head of global economic research
at Goldman Sachs? What Goldman Sachs coined is now being mined. On May 16, 2009,
the foreign ministers of the BRIC countries met in the central Russian town of
Yekaterinburg. They prepared the ground for a summit meeting of the leaders of
the BRIC a week later at the same venue.

The meeting was not, as some analysts dubbed it, a summit of losers. In fact,
a week before the summit, Brazil offered $10 bn to the International Monetary
Fund as a loan, the first ever by a developing nation. Brazil had previously
received loans from the IMF, and was declaring to the world that it was now a
lender. Following Brazil, China announced it would invest $50 bnand Russia said
it would invest $10 bnto help boost the world economy.

The fact that BRIC has arrived and will make its voice heard is the good
news. Now for the bad news: BRIC collectively lost $14.5 bn worth of commercial
software revenues in 2009 due to piracycompared to $8.4 bn loss by the
USaccording to the BSA (Business Software Alliance). In fact, BSA alleges that
the largest increase in the value of pirated software in the world came from
China ($3.7 bn), USA ($1.5 bn), Brazil ($1.5 bn), India ($1.4 bn), and Russia
($1 bn), in that order.

"The worldwide piracy rate rose from 41% in 2008 to 43% in 2009, largely a
result of exponential growth in the PC and software markets in higher piracy,
fast growing markets such as Brazil, India and China," BSA says. "This means
that for every $100 worth of legitimate software sold in 2009, an additional $75
worth of unlicensed software also made its way into the market."

In 2009, the three marketsBrazil, India and Chinatogether accounted for 86%
of the growth in PC shipments. This increased penetration of the market means
that even if piracy were to go down in every high-piracy economy, the growing
market share of PCs in Brazil, India and China would drive the global average
rate up. The number of PCs shipped in 2009 grew by 8.4 mn over 2008. Of that
growth, 7.3 mn were shipped into Brazil, India and Chinawith China leading the
way, says IDC Corp (which did the BSA study).

Heres a reality check: Indias software piracy level has dropped from 72% in
2005 to 65% in 2009. However, the market was a lot smaller in 2005 when India
lost $566 mn to piracy, compared to $2 bn that it lost in 2009 with a bigger
market pie. Comparatively, China is a lot higher. In 2005 China lost $3.9 bn to
piracy with 86% software piracy rate; in 2009 it lost a huge $7.6 bn despite
software piracy rates dropping to 79%.

The bottomline: As BRIC becomes a powerhouse and influences the world, it may
have to clean up its house first. All the more because BRIC itself produces a
huge amount of software that it sells to the world, and could be in danger of
getting its own software pirated and used. That might be a prick that could
burst the bubble of BRIC.

Raju Chellam

The writer is a former Dataquest editor & currently MD of TechTrenders
Asia, based in Singapore

maildqindia@cybermedia.co.in