Software Piracy Costs IT Services Providers $200 Billion in 2008

By Lawrence Walsh  |  Print this article Print


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The continued rise in software piracy tops $50 billion in lost sales and will cost local IT solution and service providers another $150 billion to $200 billion in lost service and support opportunities, according to a report by the Business Software Alliance and IDC.

Worldwide software piracy climbed to a record high in 2008 to $50.2 billion in actual losses for illegally distributed and used applications, and cost another $150 billion to $200 billion in value-add technology services, according to a new report by the Business Software Alliance (BSA) and technology research firm IDC.

In their sixth annual report, the two groups report that pirated software, as a percentage of total software in use, rose from 38 percent in 2007 to 41 percent in 2008, mostly due to the increasing PC sales in countries such as China and India that are prone to high piracy rates.

The United States continues to have the lowest software piracy rate in the world, with just 20 percent of the computer applications in use being pirated. However, BSA and IDC report that the total value of pirated software in the United States is $9.1 billion, the highest in the world.

The total worldwide value of pirated software topped the $50 billion mark for the first time since BSA and IDC started measuring the piracy losses in 2003. By comparison, the two groups say legitimate software sales account for $88 billion in global sales and personal computer sales top $244 billion annually.

Worse news for solution providers and value-added resellers is the impact of software piracy on their direct and indirect sales. BSA and IDC report that for every dollar lost to software piracy, another $3 to $4 in value-added services and support is also lost. IDC estimates that a 10 percent drop in software piracy would lead to the creation of more than 600,000 new technology support and services jobs worldwide.

"The bad news is that PC software piracy remains so prevalent in the United States and all over the world," says Robert Holleyman, president and CEO of the Business Software Alliance.  "It undermines local IT service firms, gives illegal software users an unfair advantage in business, and spreads security risks. We should not and cannot tolerate a $9 billion hit on the software industry at a time of economic stress."

The impact on government coffers is equally significant in the form of sales tax revenue. The report states that a 10 percent drop in software piracy would generate more than $24 billion in sales taxes for governments around the world.

 A contributing factor to the increased value and volume of pirated software is the global economic downturn. The decreasing buying power of consumers and businesses is causing many computer users to seek black market or pirated applications.

"Reduced buying power is only one of many factors affecting software piracy," says John Gantz, chief research officer at IDC. "The economic crisis will have an impact—part of it negative, part of it positive—but it may not become fully apparent until the 2009 figures come in."


Lawrence Walsh Lawrence Walsh is editor of Baseline magazine, overseeing print and online editorial content and the strategic direction of the publication. He is also a regular columnist for Ziff Davis Enterprise's Channel Insider. Mr. Walsh is well versed in IT technology and issues, and he is an expert in IT security technologies and policies, managed services, business intelligence software and IT reseller channels. An award-winning journalist, Mr. Walsh has served as editor of CMP Technology's VARBusiness and GovernmentVAR magazines, and TechTarget's Information Security magazine. He has written hundreds of articles, analyses and commentaries on the development of reseller businesses, the IT marketplace and managed services, as well as information security policy, strategy and technology. Prior to his magazine career, Mr. Walsh was a newspaper editor and reporter, having held editorial positions at the Boston Globe, MetroWest Daily News, Brockton Enterprise and Community Newspaper Company.

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