Pirated software costs SA millions

2013-03-04 10:00

(Glenn Chapman, AFP)

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Cape Town – Companies throughout South Africa continue to act negligently when it comes to software licensing.

This follows on the heels of the rising figures released by BSA | The Software Alliance which revealed that unlicensed software has cost South African business over R5.7m in 2012. Compared to 2011, this is a six-fold increase of R4.9m as more companies are being caught using unlicensed software. 

Using pirated software has cost one offending business R265 142 in South Africa. This included damages paid to BSA member companies as well as the cost for acquiring legal software.

Across Europe, Middle East and Africa (EMEA) the use of pirated software cost businesses more than R140m in 2012.

“According to the 2011 BSA Global Software Piracy Study the global piracy rate for PC software hovers at 42%. The commercial value of this shadow market of pirated software climbed from $58.8bn in 2010 to $63.4bn in 2011,” Drummond Simpson, chair of the BSA South Africa committee, told News24.

“The reasons for using unlicensed software are the same around the world and not specific to South Africa. Companies cut corners to save costs when renewing their software licenses or buying counterfeit software, for example, but they need to understand that software is a valuable asset and many companies and industries are dependent on software for their day-to-day operations making software an important component of economic growth.

“They often cite ignorance as the main reason for using unlicensed software. But despite this ignorance, companies can expect to face stiff financial penalties as a consequence for using unlicensed software. This does not necessarily mean that individuals or businesses deliberately intend to break the law; however, regardless of intent, they could potentially expose themselves to serious legal and financial consequences, as well as operational, reputational and security risks to the company,” he said.

Top offenders

According to BSA companies operating in the engineering, graphics and advertising sectors have been noted as the top offenders, making the most use of unlicensed software in South Africa.

The cost of engineering companies using unlicensed software is estimated at over R1.5m followed by the graphics and advertising industries at just over R700 000 and almost R650 000 respectively. Across the EMEA region, Architectural/Design, Manufacturing and Engineering were the top offenders.

“Software used by companies in the engineering, graphics and advertising sectors tends to be more specialised and can therefore be more expensive. Generally there are many small sized companies in these sectors and they sometimes lack the resources needed to help them focus on software compliance. Using unlicensed software can reduce their costs so giving them an unfair advantage over the competition,” Simpson said.

"The results confirm that the use of unlicensed software continues to be a major challenge and many organisations are failing to capitalise on the benefits that a reduction in software piracy could bring.” 

Simpson highlights that while the use of unlicensed software may not be intentional, the digital era is booming and in 2012, BSA settled with four times as many companies for using pirated software in comparison to 2011. 

“We all need to make use of technology innovation and software advances, but education is the key to ensuring that companies understand that there are far reaching implications of using pirated or unlicensed software.” 

“Not only does it affect the economy of the country but it also makes the company vulnerable to viruses and other security risks as well as financial and reputational damage if caught.”  

"Piracy hampers technology companies’ ability to innovate and create jobs, and in turn diminishes government revenues," said Simpson.

According to BSA, reducing piracy by 10 percentage points would create $142bn in new economic activity globally while adding nearly 500 000 new high-tech jobs and generating $32bn in new tax revenues for governments.

How companies get caught

Reports are often made by disgruntled employees calling the BSA hotline number or reporting via the BSA website. Anonymous tips received are then verified. At times IT suppliers or consultants come forward when they become aware of the use of unlicensed software by someone in that group.

BSA encourages reports of suspected software piracy, whether regarding businesses using unlicensed software, or individuals and organisations selling pirated software over the internet.

A range of information and free tools are available on the BSA website to help businesses better understand and manage their licensing requirements and stay compliant.

The legal representative for BSA in South Africa is Adams & Adams. Companies are approached by Adams & Adams to conduct a self-audit and, where appropriate, legalise their existing products and pay damages for making use of unlicensed software. If they are not co-operative they may be raided by the police and/or face court action. Continued use of unlicensed software may also lead to the company being de-registered.

Action

Companies which have defaulted once are monitored with the help of the BSA member companies. In the case when companies return to their old ways, Adams & Adams can take action against them. It is important that organisations purchase their software from a reputable re-seller, otherwise they might mistakenly purchase unlicensed or counterfeit software.

Education is the key to ensuring that businesses stop using unlicensed software. The use of unlicensed software is risky – it is illegal and can result in civil and criminal penalties.  It exposes consumers and businesses to security threats including malware and viruses; and it leads to decreased efficiencies in organisations.

Informant reports come through frequently and businesses need to be aware that it is easy for employees to blow the whistle on unlicensed software use. When a company acquires authorised software, it has the right to use that program under agreed terms. Companies that lead responsibly help the commercial software market to flourish, helping it to make products, deliver services, run internal operations and conduct business locally and globally.

This brings broader economic benefits to South Africa. BSA holds open seminars where the committee members educate businesses on the drawback of using unlicensed software.

Businesses concerned about their software licensing can visit BSA for more information while confidential reports for those wishing to report suspected software piracy can also be made on the website.

In 2012 there were 243 leads and 229 legal actions in South Africa with regards to people selling unlicensed software online. There is also an incentive programme that offers rewards to individuals prepared to blow the whistle on bad company practice to the tune of 10% of the settlement fee. The maximum reward is capped at R100 000.

– Follow Chantelle on Twitter.

Read more on:    bsa  |  ibm  |  computing
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