Piracy sinks legal software users

Microsoft says BRIC manufacturing companies using illegal software steal $1.6bn from competitors

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Piracy sinks legal software users Microsoft has revealed that manufacturing companies in Brazil, Russia, India and China (BRIC), which use illegal software, steal more than $1.6 billion from their in-market competitors.
By  Georgina Enzer Published  November 20, 2011

Microsoft has revealed that manufacturing companies in Brazil, Russia, India and China (BRIC), which use illegal software, steal more than $1.6 billion from their in-market competitors that opt to play fair by using genuine software.

These findings came as part of a study, commissioned by Microsoft, which tackles what the financial impact of using illegal software is on the competitive landscape within developing countries.

The findings of the study were released on Play Fair Day, a global initiative started by Microsoft to emphasise the importance of using legitimate software.

"I do like to have a good night's sleep, which I wouldn't be able to do if I was stealing something," said Bharat Somany, a director at Hindusthan National Glass & Industries (HNG). "Transparency is something that starts vanishing pretty quickly when you [pirate]. Not only do you hide from others, but you end up having things in your own company that are hidden from you - there is no accountability when you go in for pirated software."

HNG employs over 4,500 people across India and strives for compliance within its IT. As a major exporter to the US, being able to compete on even ground is vital to the company's success and growth.

For the study, analysts from Keystone Strategy looked at the unfair competitive advantage enjoyed by companies that practice widespread piracy.

In China, for example, manufacturers that "play fair" with legal, licensed software suffer a competitive disadvantage of about $837m compared with companies that illegally slash costs and use pirated software, according to Microsoft.

This disadvantage translates into the opportunity for pirating firms to increase profits or reinvest in their businesses. For example, pirating firms can reinvest the $837m to construct 66 major manufacturing plants, buy 12,700 molding machines for a plastics manufacturer or hire 217,000 additional employees.

In Russia, manufacturers who play fair are disadvantaged by over $575m over the five-year software lifespan, according to Microsoft. Severstal, the second largest steel manufacturer in Russia, has committed itself to choosing legal software.

"Software is critical to our business. Our board believes that it is one of the key differentiators of our business and a source of competitive advantage," said Evgeny Charkin, chief information officer, Severstal. "We are a business with a very good reputation and strong ethics - we want to maintain that reputation. We do not steal. We do much business globally, such as in the US. We hold ourselves to the same standards as the international business community."

For manufacturers in the Latin America, Central and Eastern Europe and Asia-Pacific regions, piracy creates more than $2.9bn of competitive disadvantage per year.

Over a five-year software life cycle, manufacturing companies in BRIC countries will lose more than $8.2 billion to their cheating competitors, according to Microsoft.

"This research quantifies the harm unfair competition causes in emerging markets," said David Finn, associate general counsel for worldwide anti-piracy and anti-counterfeiting at Microsoft. "And this is not just a problem that harms businesses in emerging markets. On 4th November, the National Association of Attorneys General in the United States announced that 39 Attorneys General sent a letter calling for stronger federal enforcement against companies around the world who use stolen information technology to gain an unfair business advantage and who seek to sell their products in the United States. In the same letter, these top prosecutors affirmed their own commitment to use existing state laws to address the anti-competitive harm done when companies - both foreign and domestic - steal information technology."

In the letter, the attorneys general summarised the challenges businesses face in competing with businesses that use illegal software:

"Competition is unfairly distorted when a manufacturer gains a cost advantage by using stolen information technology, whether in its business operation or its manufacturing processes. It offends our sense of fairness when such wrongdoers reap a commercial advantage from their illegal acts."

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