Local software piracy rate decreases by two points to 85%

Jakarta (Tuesday, May 15)—A new study reveals that the software piracy rate in Indonesia decreased to 85% in 2006. However, losses from piracy have gone up from US$280 million in 2005 to US$350 million last year.

These are among the findings of the fourth annual global PC software piracy study released today by the Business Software Alliance (BSA), an international association representing the commercial software industry.  The study was conducted independently by IDC, the information technology (IT) industry’s leading global market research and forecasting firm.

“Indonesia is amongst the countries in the world with a projected fast growing ICT industry. Despite the high piracy rate, the decrease is a good sign that tells us that our campaign is starting to bear fruit,” said Rama Tiwari, Chair of BSA Indonesia Committee. “We are very optimistic that the sustained efforts by the government will ultimately result in lower piracy rates. The BSA will remain cooperative with the relevant government agencies, and will continue with its educational programs such as the promotion of model software asset management (SAM) practices amongst businesses.”

Globally, 35% of the software installed in 2006 on personal computers (PCs) was obtained illegally, amounting to nearly US$40 billion in global losses due to software piracy.  Progress was seen in a number of emerging markets, most notably in China, where the piracy rate dropped ten percentage points in three years, and in Russia, where piracy fell seven percentage points over three years. 

 “The good news is we are making progress, however, we still have a lot of work to do to reduce unacceptable levels of piracy,” said BSA President and CEO Robert Holleyman.  “These significant losses translate into negative impacts on IT industry employment, revenues, and financial resources available for future innovation and the development of new technologies.” 

Worldwide, for every two dollars of software purchased legitimately, one dollar was obtained illegally.  Global losses increased in 2006 by more than US$5 billion (15%) over the previous year.  Of the 102 countries covered in this year’s study, piracy rates dropped moderately in 62 countries, while increasing in 13. 

China’s piracy rate dropped four percentage points for the second consecutive year and has dropped ten percentage points in the last three years, from 92% in 2003 to 82% in 2006.  By reducing China’s piracy rate by ten percentage points over three years, US$864 million in losses was saved, according to IDC.  The reduction in the piracy rate and the savings are the result of government efforts to increase the use of legitimate software within its own departments, vendor arrangements with PC suppliers to use legitimate software, and increasing industry and government education and enforcement efforts.  The legitimate software market in China grew to nearly US$1.2 billion in 2006, an increase of 88% over 2005.  Since 2003, the legitimate software market in China has grown over 358%.  

“Considering the vast PC growth taking place in the Chinese IT market, this continued decline in China’s software piracy rate is quite promising,” said Holleyman.  “BSA is encouraged by the commitment from the Chinese government to ensure legal software use.  We look forward to continued dialogue between the US and China aimed at addressing issues that affect both economies.”

Commenting at the Asia regional launch was Jeffrey Hardee, Vice President and Regional Director for Asia, “Of the 15 individual markets examined in the Asia-Pacific region, the rate of piracy actually dropped in 11 and stayed the same in 4. Despite these results, the average piracy rate for the region increased by 1 point to 55%.  This seems counter intuitive, but China’s and India’s share of the PC market in the Asia Pacific region grew from 42% in 2005 to 46% in 2006 and this has the mathematical effect of dragging the regional average upward toward the China and India average, even though the piracy rates in both countries came down in 2006.” 

The following chart illustrates average piracy rates in the Asia Pacific region:

Hardee added, ”Governments in Asia Pacific have recognized the contribution and vast potential of the IT sector as an economic driver and the corresponding importance of reducing software piracy. Today, more than ever, governments in the region, working with industry, are strengthening IP policies, educating consumers and businesses on the benefits of using legal software, introducing enterprises to ways to manage their software assets, and conducting concerted enforcement actions against the use of illegal and unlicensed software.  As respect for IP in the Asia-Pacific continues to grow and the region’s IT market segments mature, local companies and industries will expand and move up the value chain. In fact we have already seen evidence in the region of an increasing proportion of investment by the private sector being directed towards the development of next-generation technologies and higher-value IT products and services. This reinforces our view that strong protection for intellectual property rights encourages innovation.”

Hardee also noted that, despite the piracy rate reductions in most countries in the region, losses from piracy in the region increased by 44% to US$11.6 billion in 2006.

In addition, the study indicates that even relatively low piracy rates can amount to huge losses in large markets.  For example, while the US had the lowest piracy rate of all countries studied at 21%, it also had the greatest total losses at US$7.3 billion.  China saw the second highest losses at US$5.4 billion with a piracy rate of 82%, followed by France with losses of US$2.7 billion and a piracy rate of 45%.

Other key findings:

• In more than half of the 102 countries studied, the piracy rate exceeded 60%. In approximately one third of the countries, the piracy rate exceeded 75%.
  
  
• Emerging markets in Asia-Pacific, Latin America, Eastern Europe, and the Middle East and Africa accounted for one-third of PC shipments, but only 10% of spending on PC software. 
  
  
• The European Union (EU) and Canada continue to have high losses despite low piracy rates.  The EU had losses of US$11 billion with a 36% piracy rate, while Canada had losses of US$784 million with a 34% piracy rate. 
  
  
• Over the next four years businesses and consumers worldwide will spend US$350 billion on PC software.  If current trends continue, the study predicts more than US$180 billion worth of PC software will be pirated during that period.

The following chart illustrates average piracy rates in 2006 by region: 

“A number of factors contribute to regional differences in piracy:  the strength of intellectual property protection, the availability of pirated software, and cultural differences,” said John Gantz, chief research officer at IDC.  “Reducing software piracy around the world will take much more work and investment, but those efforts will pay off in the form of stronger local IT industries that drive broader economic growth.”

“The critical elements of the global fight against software piracy are education, strong government policy, and enforcement,” said Holleyman.  “Expanded access to the Internet in emerging markets is making piracy more convenient, which makes it all the more imperative to keep up anti-piracy efforts.” 

The BSA-IDC Global Software Piracy Study covers piracy of all packaged software that runs on personal computers, including desktops, laptops and ultra-portables.  The study does not include other types of software such as server- or mainframe-based software.  IDC used proprietary statistics for software and hardware shipments and enlisted IDC analysts in 50 countries to confirm software piracy trends.  

For more details or for a copy of the study, visit www.bsa.org/globalstudy.

(US$1=Php 47)

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Contact Information
Didin Nasirudin
LUCID Communications
(t) +62 21 39835829
(e) didin@lucidcomm.com

About BSA
The Business Software Alliance (www.bsa.org) is the foremost organization dedicated to promoting a safe and legal digital world.  BSA is the voice of the world's commercial software industry and its hardware partners before governments and in the international marketplace.  Its members represent one of the fastest growing industries in the world.  BSA programs foster technology innovation through education and policy initiatives that promote copyright protection, cyber security, trade and e-commerce.  BSA members include Adobe, Altium, Andal Software, Apple, Autodesk, Avid, BEA Systems, Bentley Systems, Borland,Breault Research Organization, CA, Cadence Design Systems, Cisco Systems, CNC Software/Mastercam, Dell, EMC, Entrust, Frontline PCB Solutions - An Orbotech Valor Company, HP, IBM, Intel, INUS Technology, McAfee, Microsoft, Minitab, Monotype Imaging, PTC, SAP, SolidWorks, Sybase, Symantec, Synopsys, Tekla, The MathWorks, Trend Micro and UGS.

About IDC
IDC is the premier global provider of market intelligence, advisory services, and events for the information technology, telecommunications, and consumer technology markets. IDC helps IT professionals, business executives, and the investment community make fact-based decisions on technology purchases and business strategy. Over 850 IDC analysts in 50 countries provide global, regional, and local expertise on technology and industry opportunities and trends. For more than 42 years, IDC has provided strategic insights to help our clients achieve their key business objectives. IDC is a subsidiary of IDG, the world's leading technology media, research, and events company. You can learn more about IDC by visiting www.idc.com.