Counting the cost of software piracy

Some very interesting figures have been released by the Business Software Alliance and IDC this month.

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By  Mark Sutton Published  May 3, 2003

Some very interesting figures have been released by the Business Software Alliance and IDC this month. The pair have just completed a joint global study into the benefits of reducing software piracy rates, in terms of the impact on country and regional economies.

If information technology can drive economic prosperity, the BSA argues, and the IT industry is driven by the software sector, then improving the state of the software industry can provide a jumpstart to economies.

Certainly the figures quoted are impressive. Just a 10% drop in software piracy worldwide would result in an extra 1.5 million jobs being created, $64 billion in tax revenues, and $400 billion in additional economic growth over four years.

Cutting software piracy worldwide by 10% might sound like a lot, but considering that the Middle East and Africa region has already cut overall piracy rates by 28% from 1996 to 2001, it is not an unacheivable goal. The benefits to the Middle East would be among some of the greatest gains to be made in the world too.

As one of the worst regions in the world for software piracy, the region has the most to gain—the report estimates the region would gain 11,000 new jobs, $4.7 billion in additional economic growth and over $400 million in tax revenues in the next four years. The reductions made in the past six years have already paid a major dividend with a 46% increase in the software sector in the region, 44,000 new jobs created and $17 billion extra gained in tax revenues.

Identifying the correlation between levels of software piracy and economic growth is not necessarily that straightforward, but broadly speaking, IDC contends that as software and related services drive the IT market, so the more legal software, the more growth the IT market experiences.

While IT is recognised as a driver of economies in the west, it is also perhaps a little bit more difficult to realise the same sort of correlation in developing or struggling regional economies.

However, the tax benefits alone of cutting down on pirated software are highly attractive, amounting to billions of extra dollars for governments to spend as they see fit. The BSA has been arguing for the economic advantages of legitimate software sales for many years now, and while I still think that some of the figures in the report are bit over optimistic, it is definitely a step forward.

Many governments in the region have put laws in place to combat software piracy, but by providing a black and white analysis of what countries stand to gain from enforcing those laws, backed up by one of the most respected analyst companies in the world, the BSA has created an extremely useful tool for goading governments into action on software piracy.

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