Revulytics Blog

Making Sense of the Recent BSA/IDC 2007 Global Piracy Study

May 19, 2008

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The BSA and IDC get a lot of heat on the methodology used to arrive at global piracy trends, but I thought I’d comment on some of the results with respect to our own experience and other external references. In particular, two points within the report are worth expanding: piracy rates in emerging markets and the use of technology to slow piracy.

Impact of emerging markets:

First, emerging economies represent a significant piracy threat to certain software sectors.According to the report, China alone had a piracy rate of 82% -- this is close to the estimated 90% piracy rate cited in a more complete analysis of China and Piracy (see UBS Investment Research Q-Series A Billion Dollar Opportunity?). In addition, piracy increases are proportional to internet user growth (e.g., more PCs, easier software availability, and better bandwidth make it easier to gain access to pirated software). Again, looking at China alone, it had the fastest growing internet user population (210 million according to the China Internet Network Information Center), so this finding makes sense.

Piracy of consumer products (Adobe, anti-virus, etc.) has always been an issue, but what is more noteworthy is the use of high value EDA, CAD, and other software to actually design and build products in these emerging markets. From experience, the EDA community is aware that its pirated software is used to build Printed Circuit Boards (PCB) and chips within emerging markets. The issue here is not just the loss of license revenue, but the advantages these countries have in winning manufacturing business since their software costs are virtually non-existent.

Use of technology:

The report included a minor reference to “software vendors building technical protections like digital rights management directly into their products to prevent illegal use.” Being in the software protection business, this statement is interesting given that we believe that larger software vendors are only starting to deploy or think about adding anti-reverse engineering technology into their software releases.

So where did this reference come from? I believe it’s related to Microsoft’s anti-piracy measures in its Vista release and its relationship with BSA. Microsoft said it recovered $164M in a just one quarter late last year (see my previous blog post, "It Takes Microsoft Clout to See Anti-piracy progress in China"). Microsoft has seen significant revenue gains by using anti-piracy technology including phone home, activation, CD authentication, and anti-reverse engineering techniques.

We are also seeing other ISVs adopting these technology approaches, but implementing technology was not included in the BSA’s “5 steps to reduce piracy” section. I imagine that this omission is most likely due to technology solutions not being aligned with the services that BSA offers.

I also believe the Digital Rights Management (DRM) label is incorrect in this context. DRM and licensing approaches have failed to reduce piracy for years. And for good reason, too: the focus of these technologies is on controlling the purchaser’s use or rights to the software and not on preventing reverse engineering. Software protection, on the other hand, is meant to fortify the DRM or licensing system and to prevent it from being easily circumvented to enable piracy.

Although the methodology used by BSA/IDC to measure the trends for software piracy may have holes, we know the problem exists. The report is useful for highlighting the countries with the highest piracy rates and providing a benchmark or global average for comparison. Technology, legal, and policy-based anti-piracy strategies should all be used in these geographies not just to recover lost license revenue, but to ensure that businesses in these countries do not have an unfair advantage from a software cost perspective when competing globally for services and manufacturing work.

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Michael Goff

Post written by Michael Goff

Marketing Director at Revulytics
Michael is Marketing Director at Revulytics where he is responsible for corporate marketing, content, and social media. He has helped to educate the industry on the benefits of software usage analytics for compliance and product management through the company's blog and contributed articles in trade publications. Michael was previously a marketing programs manager at The MathWorks and principal at Goff Communications. Michael earned a J.D. from Boston University School of Law and a B.A. from Colgate University.