Personal Computing: Pirates Among Us

Are you a software pirate? Even if you're not aware of using commercial computer programs you haven't paid for, if you work in an office, chances are higher than you might think.

This is according to a recent study by the Business Software Alliance, or BSA, which estimated that fully 20 percent of commercial programs installed in the U.S. last year were unpaid for.

The most common way this happens is when a company with 100 to 500 employees buys a few copies of a program and installs it on hundreds of PCs. As the BSA points out at its Web site, "What a lot of people don't realize ... is that when you purchase software, you are actually purchasing a license to use it, not the actual software. That license is what tells you how many times you can install the software."

Pirated software is also obtained by individuals through a piracy underground where crackers disable copy protections and distribute the software through pirate Web sites, Usenet discussion groups, and peer-to-peer file sharing networks, often for free. Yet another way is through criminal enterprises that copy and sell it, for profit, abroad as well as domestically on eBay.

The heaviest users of pirated software are manufacturing companies, but other companies, nonprofit organizations, government agencies, schools and individuals have all gotten caught pirating, according to the BSA.

Those using pirated programs don't usually look upon themselves as thieves, according to anecdotal reports. Software piracy may be rationalized by the company president or IT manager as utilizing resources most efficiency. With individuals, in the same way that petty shoplifting is rationalized as costing big stores little money, software piracy may be rationalized as costing big software companies relatively little.

In actuality the loss to software companies was an estimated $53 billion worldwide last year, nearly as much as total software sales, which was $88 billion, according to the BSA.

The issue has an interesting nationalistic angle. The U.S. is by far the largest developer of computer software. The U.S. also has the lowest rate of software piracy of the 110 countries examined, followed by Japan, New Zealand, and Luxembourg. The highest piracy rates were in Armenia, Bangladesh, Georgia and Zimbabwe, all countries in which more than 90 percent of software programs were obtained illegally. The regions with the highest rates of software piracy are Central/Eastern Europe (67 percent) and Latin America (65 percent).

Software piracy hurts U.S. interests. "It undermines local IT service firms [and] gives illegal software users an unfair advantage in business," says BSA president and CEO Robert Holleyman.

Lost profits mean lost jobs and tax revenue. A study last year by the market research firm IDC predicted that lowering PC software piracy by 10 percentage points worldwide over four years would create 600,000 new jobs and $24 billion in higher government revenues.

The BSA is funded by the software industry, and some observers have commented that it exaggerates the financial losses. The majority of the people and organizations who obtain pirated software wouldn't have bought it if they couldn't obtain free copies, contends Paul Craig, a computer security specialist from New Zealand and author of the book Software Piracy Exposed. Instead of buying a commercial program, such parties would use free programs, some of which equal commercial programs in quality.

Still, the reality is that software piracy does lead to the loss of some revenue, it's against the law, and organizations and individuals alike can and do get caught. The most common way software pirates are nabbed is through whistle blowing by a disgruntled current or former employee.

The BSA offers a form at its Web site that anyone can use to anonymously report software piracy, with the BSA paying out monetary rewards in successful cases. Last year the BSA paid $136,000 to 42 informants, making the average award nearly $2,000.

The BSA can sue pirates, but it typically settles with them for considerably more than the software would have cost if they had bought it legally. Last year it settled 588 cases for a total of $9.5 million. If the piracy is particularly egregious, the BSA refers the case to the U.S. Department of Justice for criminal prosecution.

To minimize the chances of piracy, the BSA recommends that organizations designate one person to keep track of software purchases, going through normal purchasing channels rather than employee expense reports or petty cash, and that they keep software discs in a secure place.