Software piracy rate in Sri Lanka sixth highest in the world

IDC study says 90% rate results in $86 million in retail revenue loss to the local software industry

Software piracy rate of 90% in Sri Lanka is the sixth highest in the world forcing the local industry to lose US$ 86 million (nearly Rs. 9 billion) in retail revenue based on a study by specialist International Data Corp (IDC).

The shocking disclosure was made at a seminar on Business optimisation with good governance and staying compliant with software asset management (SAM) in Colombo, with the patronage of the Business Software Alliance (BSA).

The seminar, which was the first in Sri Lanka, was jointly inaugurated by National Intellectual Property Office, the Ceylon Chambers of Commerce, the ICT Agency of Sri Lanka (ICTA) and the European Chamber of Commerce of Sri Lanka.

A global study on software piracy conducted independently by IDC, the information technology (IT) industry’s leading global market research and forecasting firm, which for the first time, covered Sri Lanka as well, has found Sri Lanka to be the country with the sixth highest piracy rate in the world, and the second highest in the Asia Pacific region.

Sri Lanka was found to have a software piracy rate of 90% in a study conducted as an extension of the IDC’s Global Software Piracy Study 2006. This means that 9 out of 10 software installed on personal computers in 2006 in Sri Lanka was unlicensed or obtained illegally through software theft. The high software piracy rate has resulted in US$86 million in retail revenue losses to the local Sri Lankan software economy according to IDC

The findings of the study have highlighted the need for action against software piracy in Sri Lanka, where it has taken a heavy toll on personal and business users as well as overall economy.

The broader economic impact of software piracy is significantly greater than the retail value of pirated software. Among the many negative consequences of software piracy is the crippling of local software industries because of competition with pirated software, lost tax revenues and jobs from the lack of a legitimate market, and decreased business productivity from using unsupported and unwarranted software.

Stemming the tide of piracy in Sri Lanka can only be achieved though industry education and awareness and proactive government-led enforcement efforts. Roland Chan, BSA’s Director of Marketing for Asia said, “Software piracy is tantamount to software theft, and therefore forbidden by the law of Sri Lanka.

The risks of using pirated software are vast – there is no warranty or support, and users may even run the risk of fraud and identify theft. The world over, the most successful efforts to combat piracy have been 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. Sri Lanka too should draw from the lessons of other countries – the government, industry associations and companies must collectively take responsibility and lead by example by eliminating the usage of pirated products. “

Chan added, “BSA is making a concerted effort through Software Asset Management (SAM) to raise awareness about software piracy”.
Dr. D.M.Karunaratna, Director General of the National Intellectual Property Office of Sri Lanka said, “Consumers can do their part to combat software piracy – by taking a few small measures when buying software. One should always buy from reputed local sellers – and check for a certificate of authenticity (COA) and a code as may be applicable according to your vendor / software supplier. If possible, check online for information on how to tell original software apart from counterfeits, and if in doubt go back to your supplier or contact the manufacturer.

Be careful when purchasing online as there are many dubious sources out there. For businesses, software piracy also occurs when more software is being used/installed than they have purchased licenses for – this is also known as under-licensing. Ensure you have an original license and proof of purchase for every software operating system and application installed on each desktop, notebook and server.”

The costs of piracy affect both up and down the supply and distribution chains. According to IDC, for every $1 in software sold, there is at least another $1.25 in services sold to design, install, customize, and support that software. That software and those additional services then drive approximately another $1 of channel revenue. Most of this additional service or channel revenue goes to local firms. The significant losses due to high piracy translate into negative impacts on IT industry employment, revenues, and financial resources available for future innovation and the development of new, home grown technologies.

While the worldwide weighted average piracy rate is 35%, the median piracy rate was 62%, meaning half of the countries studied have a piracy rate of 62% or higher. In just under a third of the countries, the piracy rate is higher than 75%. Although some high profile countries - China and Russia – saw significant drops in piracy, they also commanded a higher percent of the worldwide market, and this consequently prevented the worldwide average from dropping.

The influx of new users in emerging markets — mostly consumers and small businesses — and the increased availability of pirated software, particularly over the Internet and peer-to-peer (P2P) networks, is pushing piracy rates upward. Not only is Internet access growing, but access to broadband connections also increases consistently.

The IDC Global Software Piracy Study covers piracy of all packaged software that runs on personal computers, including desktops, laptops and ultra-portables.

This includes operating systems, systems software such as databases and security packages, business applications and consumer applications such as PC games, personal finance and reference software. The study does not include other types of software such as that which runs on servers or mainframes or software sold as a service. According to the study, progress was made in 2006 in the fight against software piracy. Of the 102 countries covered in this year’s study, the piracy rate dropped in 62 countries from 2005 to 2006.

The piracy rate increased in 13 countries. However, because the worldwide personal computer market grew much faster in higher piracy countries and regions, the worldwide personal computer (PC) software piracy rate remained at 35% for a third consecutive year. At the same time, because the size of the market grew significantly in 2006, losses from piracy at that rate rose by over US$5 billion, a 15% increase over 2005.

Commenting on the implications of this findings for Sri Lanka, Mr. Jayantha Fernando, Programme Director & Legal Advisor of ICTA said; “ICT Agency of Sri Lanka welcomes BSA’s presence and involvement in capacity building and awareness campaigns of this nature, which will result in greater level of understanding and appreciation of Intellectual Property issues, essential for the growth of intellectual creations in this country and help reduce piracy. Sri Lanka has demonstrated commitment to greater protection of IP rights in software.

This is manifested through enhanced protection measures introduced through the Intellectual Property Act No. 36 of 2003 as well as the recently enacted Computer Crimes Act No. 24 of 2007. Enforcement measures have been further strengthened through the establishment of the Commercial High Court of Colombo, with jurisdiction to hear and determine IPR infringement cases. This has proven to be a very effective and efficient process with several cases of Software infringement being brought before the Commercial High Court.”