SOFTWARE PIRACY RATE CUT CAN SEE $3.1 BN RISE IN REVENUES BY 2011

Bangalore
Mint

India could see economic benefits worth $3.1 billion or Rs. 12,555 crore through expanded revenues and better productivity, add $208 million in taxes, and create 44,000 fresh jobs, if it reduces use of pirated software by 10 percentage points by 2011, a lobby group for software firms has said.

The claim by Business Software Alliance or BSA is based on a study it commissioned and was conducted by research firm International Data Corp. in January.

A previous study by BSA had estimated that India lost $1.25 billion in 2006 to software piracy, up from $367 million in 2003.

In 2007, India, a country of more than 1.1 billion people, spent $16.1 billion on information technology or IT—mainly on computers, peripherals, network equipment, packaged software and IT services. That spending accounted for 1.6percent of gross domestic product, supported more than 34,000 IT firms with more than 766,000 software service workers, and helped generate $1.1 billion in IT-related taxes, as per BSA.

Lowering PC software piracy delivers economic benefits because other sectors derive revenue from working with, installing, servicing, and reselling software. “Most of the benefits from lowering piracy stay within the country. The drop in PC software piracy will have ripple effects on the IT services and distribution sectors, besides impacting the Indian software industry,” said Robert W. Holleyman, president and chief executive officer of BSA.

India’s software piracy rate is more than double the global average of 35percent, standing at 71percent at the end of 2006. Holleyman estimates that the piracy rate would have lowered only marginally for 2007. “Going by the trend seen so far, India’s software piracy rate could be 69-70percent in India by the end of 2007,” he said, adding final estimates for 2007 are awaited.

In an earlier study by BSA, India ahead of competing economies in the Asia-Pacific region Vietnam (88percent), Indonesia (85percent), China (82percent), and Thailand (80percent) based on piracy rates of 2006.

But India has been sluggish in lowering its piracy rate from 74percent in 2004 to 71percent in 2006 when compared with China that reduced its piracy rate 90percent in 2004 to 82percent in 2006. This has been a concern for the BSA officials in India who are targeting a 10 percentage point reduction in piracy.

“Given India has world-class software development skill, if the piracy rates were lower, India could have a much more robust local packaged software market,” said Holleyman, adding that it is key for the government and industry to take it up as a national priority.

A recent Union Budget announcement increasing excise duty on packaged software from 8percent to 12percent is seen as a blow to efforts in reducing PC software piracy, according to industry insiders.

Ravi Venkatesan, chairman of Microsoft India Pvt. Ltd said the increase in the levy would raise software prices. “The hike in the excise duty makes it difficult for software manufacturers to maintain a competitive price-point. The increase in price means that illegal software gets an unfair advantage,” he said.

Microsoft, the top PC software vendor in the world by revenues has already taken up cudgels to fight software piracy, by launching several programmes to create awareness about the ill effects of piracy across the country.

“Access to original software is one of the most critical elements to reducing piracy in India and we have undertaken the initiative to provide original software online and telephonically, which helps ensure easy availability of software to consumers and educate discerning consumers about the value of original software,” said Brian Campbell, director of the so-called Original Software Initiative at Microsoft India.