Software piracy is the issue: Channel

No vendor has a long-term pricing methodology that takes care of the value it
brings to the user and obsolescence

Legal action sets a precedent but can hardly contain rampant software piracy.
Piracy exists because there is a demand for reaso-nably priced software, that is
not being met. While big cha-nnel partners sell to corpo-rates, where the
software is either bundled with the PC or is bought separately in bulk, the
dealers who sell to SMB, SOHO, home segment feel pressurized to meet the
customer need for a rea-sonably priced software. This gives room for piracy to
grow.

However, the threat of commercial software being pirated does not come from
the home segment. This seg-ment does not have the mar-ket potential for high
value licensed software. It is the small, medium and large busi-nesses that make
up the market for licensed software. These companies do not see value for their
money in the software-so it leads to piracy.

Recently, Nasscom teamed up with BSA to launch an anti-piracy hotline but
today, if they were to take stock of pirated software among their members and
contain it, the piracy rate in India will go down-substantially.

Logically, legal software is unaffordable for most vis-a-vis the value it
brings to their business. Why else would even big businesses use pirated
software? At the other end of spectrum-is it reasonable to expect an architect
who has recently graduated and is setting up shop to shell out Rs 1.5 lakh and
buy a licensed version of Autocad?

The key to the solution lies not only in anti-piracy drives but also in the
pricing methodology that these companies follow. Instead of one-time exorbitant
price new methodologies can be explo-red where the cost is spread over depending
on the usage and the financial capability of the user. The price can be ba-sed
on the value the customer derives from it. The effective cost has to come down.
Sub-scription-based model can be considered. About 10 to 20 percent of the
actual cost can be charged every year. Curren-tly, no vendor has a long term
pricing methodology that takes care of the value it brings to the user and
obsolescence. In the current scenario, even big corporates find the soft-ware
cost difficult to bear, as the bulk licensing policy leaves a lot to be desired.

Vendors also need to revise their upgrade policy and need to show the
benefits of upgrade to the latest version by offering at least one year of
upgrades and support free. Lack of good customer support from the vendor side is
one of the big reasons of piracy. For customers to buy licensed software you
have to show them the value. Soft-ware vendors do not invest enough in channel
edu-cation, training and technical support.

All said and done-India market cannot be treated at par with the pricing in
the US market. Software is essentially a service. While in the US the per capita
income of $25000 can enable them to buy a $400 MS office but can an Indian with
a per capita income of $500 do so? Besides, have you ever heard of software
deve-lopers in India working for an US company being paid salary on par with his
counterparts in the US? So, by what logic should the software be priced the same
in US as well as in India. When the vendors can recognize the low cost manpower
in India and move their development centers here then why they cannot recognize
low buying capacity and come up with India pricing strategy.

Take for example, Tally. In the last three months, Tally's latest version
has moved like hotcakes surpassing the numbers they sold in India in the last 10
years. It was not just VAT-implementation it was the reduced prices up to extent
of 80 percent that did it for them. There lies the cue for other vendors.
Anybody listening?

(As told to Nandita Singh)

Vendor

Price differentiates what the customer wants and will pay for, not what will
be pirated and what will not be pirated

Piracy is a big issue across the IP spectrum. However, if someone were to
make a case that a Rs 50 music CD is less pirated than a Rs 500 CD I would
certainly disagree. In the Indian environment, you will find instances of
low-end accounting software and educational software being pirated. How do you
explain that? Piracy is not linked with price in that manner.

According to our study, 40 percent of the customers pirate unknowingly.
Besides, at the operating system level it is difficult to distinguish. The key
here is educating the customer on pirated versus genuine and the benefits of
using genuine.

An important step in this direction for strengthening our genuine channel
partner network is the Microsoft Assurance Circle Pro-gram wherein we are
committed to provide greater incentives to our resellers and creating end user
awareness on where to buy genuine Microsoft software. Today, we have our 'Assurance
Circle' network of over 60 System Builder partners across the country. Under
the 'Assurance Circle' program, when customers buy a genuine Windows XP
license, they are entitled to a plethora of value added services including free
training, support, service guarantees, annual tune up facility to ensure that
their PCs are updated with the latest software and security patches. Under this
program we also engage with our channel partners to educate and train them to
deliver the value and this in turn helps them grow in their business.

We are committed to ensure that software piracy is eliminated and a
responsible PC reseller/ dealer community is created which deals in genuine
software.

While we believe that enforcement is necessary to act as a deterrent to
pirates, we also feel that education of the end users as well as the channel
community is critical for stamping out piracy.

However, containing piracy is about understanding the value of what you are
pirating. An IDC study sponsored by Business Software Alliance estimates that 73
percent of software in India is pirated. Financially, that translates into $367
million of unpaid reven-ues. To understand the impact consider this: A reduction
from the 70 percent level in 2002 to 60 percent by 2006 will add $2 billion to
India's economy, increase local indu-stry revenues by around $1.6 billion,
generate 48,435 new high-tech, high-wage jobs and generate $92.4 million in tax
revenues for the government.

Software piracy hits hard not only the vendors whose IPR is being violated
but the economy as a whole. However, tackling it is a job that has to be handled
at many levels. While the sentiment against highly priced software runs high
among the channels the vendors believe bringing down the prices solely cannot
contain piracy. Subscription-based pricing model has not become a hit elsewhere
in the world. The key here is in understanding that piracy happens at many
levels and has to be tackled at many levels.

Besides, we do understand that price is an issue and is a function of the
value you attach to software. We have different product sets at different price
points. But it differentiates between what the customers want and what they will
pay for, not between what will be pirated and what will not be pirated. However,
we continue to take feedback from the market and are continuously evolving with
it. But there is an external environment that also needs to evolve-unless
there is a culture that respects IP, battle against piracy is a tough one. And
the respect for IP will come only when we realize how much we are hurting
ourselves by letting piracy reign.

(As told to Nandita Singh)