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Reducing software piracy by just 10 percentage points worldwide would generate 1.5 million jobs and add $400 billion to the world economy, according to a study released Wednesday by the Business Software Alliance and IDC.

The BSA, composed of giant software vendors such as Microsoft, IBM, and Apple Computer, pegs the percentage of software programs pirated globally at 40 percent. The IDC study, commissioned by the BSA, concludes that reducing that rate to 30 percent would enable nations to add a total of $64 billion to their tax coffers.

Assessing the Impact

In the study, IDC assessed the impact of information technology on 57 countries that account for 98 percent of the world's IT market. According to the BSA, about two-thirds of those 57 countries have reduced piracy by 10 percentage points since 1996; the BSA sees a drop of another 10 percentage points as a "realistic and achievable goal." A drop of 1 percentage point would raise $6 billion in new tax revenues, according to the study.

"Strong intellectual property protection spurs creativity, which opens new opportunities for businesses, governments, and workers," Robert Holleyman, president and CEO of the BSA said in a press release sent out before the official announcement. "When local entrepreneurs have a legitimate way to sell their innovations and make a profit from their programming, they can grow their own businesses and hire more people. That, in turn, drives up spending in the local economy and increases tax revenues that help fund important public sectors."

Holleyman, during a press conference, noted that the study says countries with the highest piracy rates could see the biggest benefits from reducing the incidence of piracy by 10 percentage points. The report suggests, he said, that local software and services vendors--not the multinational software vendors that make up BSA's membership--benefit most when piracy declines, and he pointed out that local vendors create high-paying jobs.

"Piracy reductions could help jump-start today's stagnant economy," Holleyman said. "All of this has the effect of speeding up local economies and increasing tax revenues at a time when every government is looking for funding."

Setting an Example

Holleyman called for governments to "lead by example," by speaking out against piracy and creating public awareness campaigns. Most governments, including the United States, need more law enforcement resources dedicated to protecting intellectual property, Holleyman said, but he praised the United States for pushing for free-trade agreements with other nations and including piracy reduction goals as part of those agreements. He predicted that governments across the globe would respond positively to the study.

Based on estimates from the Organization for Economic Cooperation and Development, a full 10-percentage-point drop could provide money for any one of the following:

• More than 30 million computers for schools
  
  
• College degrees for 6.9 million people
  
  
• Primary education for about 4 million children
  
  

The IDC study claims that the size of China's IT sector could quintuple in the space of four years if its current 92 percent piracy rate dropped by 10 percentage points. A 10-percentage-point drop in the United States would add $150 billion to the country's gross domestic product.

John Gantz, chief research officer and senior vice president for IDC, said his group's researchers tested the assumption that reduced piracy encourages more software spending, and found that this happened in places where piracy rates fell.

Users Benefit

The study argues that consumers benefit when piracy is reduced because pirated products may be defective or lack security features. The study doesn't consider any potential negative impact to consumers, such as paying higher prices for nonpirated software. Gantz admitted that no-cost software does offer some economic benefit to users, and that consumers could be affected by law enforcement actions.

According to Gantz, the hidden cost of pirated software is fewer legal software choices for customers, and the benefits of a legitimate software market had a greater impact on the economy than any benefits resulting from consumers' use of pirated software.

"My fear is with children in their teen-age years, there's almost this climate of being able to get music on the Net for free and software on the Net for free," Gantz said. "Pretty soon they'll get intellectual content for free, including their [school] papers. There's a sociological negative impact to piracy."

The study doesn't address the costs of piracy enforcement efforts, Gantz said; but some benefits that it doesn't track, including increased productivity from workers using nonpirated software, would outweigh the costs of enforcement, he asserted.

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