Software Piracy – A Business Development Indicator?

2 minutes

In May 2009, IDC and Business Software Alliance released their sixth annual global software piracy study. It’s a useful insight that offers interesting data about the business development opportunities some countries and regions have.

Here are the major facts that stick out of this report:

  • in 2008, out of the 110 countries studies, the piracy rate has decreased in more than half of them. This effect was mostly seen in Eastern Europe and some APAC countries;
  • when looking at the global picture, the total piracy rate actually rose in 2008, continuing the trend set in the last years. This happened largely due to increasing PC shipments in high-piracy countries;
  • the retail value of unlicensed software increased by 11% in 2008, including the exchange rates effect;
  • the economic recession didn’t have an important effect on software piracy.

If we look at the regions with the lowest piracy rates, we find North America as a leader (21%) and the European Union (35%). These are all mostly mature markets (from the software point of view) and are all under the 41% global average of piracy rate, having a quite constant trend for the software piracy rate in the last years.

When talking about the other regions of the world, it’s important we bring the piracy rate trend into the discussion.

One can easily notice that Eastern Europe, Latin America and Middle East / Africa have high piracy rates (around 60-65%), but compared to 2007, these rates have decreased. For software vendors, this means that big emerging economies like Russia (including CIS), Brazil and Turkey should be marked on the priorities list for sales expansion.

The only region which had an increase of the piracy rate in 2008 is the APAC, reaching 61%. This may make some of you still afraid about the effects of the software piracy on your business, think “Oh, well this wouldn’t be good for my business; I will not expand into this region!” Let’s not jump to quick decisions, because:

  • some of the countries in this region have piracy rates under the global average: Japan, Australia, Singapore and Taiwan. They are all important software markets and guess what? These piracy rates have had a decreasing trend in the last 5 years;
  • China and India, some of the biggest software markets in the world, are also dropping their piracy rates. A 10% decrease in software piracy for the Chinese market since 2004 is really an achievement when thinking about the size of that market.

Some may ask: What about the economic recession? Well, if we’re talking about the big emerging markets (BRIC countries – Brazil, Russia, India and China), I don’t think that an important slowdown will be noticed in the software area. From the numbers and the trends I’ve seen, these economies are sure to continue to rise.

One more thing: if you read the IDC-BSA report [pdf], don’t be alarmed by the high loss rates. Arstechnica, for example, is a little bit skeptical of the BSA’s dollar loss figures. Take into account also the trend of the piracy rate and the fact that the bigger the loss is, the larger the market is for software sales expansion!

I believe that through adequate penetration strategies and a customized approach for each of the countries and regions mentioned above, these markets can be turned into profitable pools for all you software vendors.

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