05/02/2013 09:05 GMT | Updated 05/02/2013 11:12 GMT

More Than Half Of Small Businesses Using Illegal Software And Risking Fraud

Downloading counterfeit software is rampant among small businesses as they try to save money - but is the practice costing them more than they might think?

Just over half of small businesses (51%) have either bought or downloaded illegal software, and of those 41% believe their details were used in identity theft and 28% had their credit card cloned as a result.

The rise in small businesses picking up fake software is being driven by two factors - cutting costs in a difficult economic environment and ignorance of what counterfeit goods look like, according to the BSA | The Software Alliance.

More than one in five admitted to using a software key generator to generate an unauthorised but working registration key or serial number for a piece of software. Repeat downloads of normally-paid-for-software which were illegally downloaded for free from torrent sites (83%) and warez sites (67%) was also evident.

For other businesses however, the buying and downloading of illegal software appeared to be accidental, and upon realising they'd been duped, many took action to remedy the situation; 51% replaced the software with a legitimate copy; 27% paid for a legal software key and 10% uninstalled the software but did not replace it.

Case Study

Angus Woolley, sales manager at retailer Saws Direct, told the Huffington Post UK he had attempted to buy a legitimate copy of Windows Home Edition software through a seller on eBay, but once he put it in the machine he found he'd been sold a fake.

"We'd discussed in the office about places we could look for the software and eventually decided to look at eBay where there appeared to be some genuine bargains. There was one copy which was on offer for £80 - more than £200 cheaper than buying it new, and it looked real," he said.

"When the product arrived it look good. It was in the genuine box and wrapped in cellophane, had the license sticker on the front and the disc itself had the holograms on it. But when we tried to load the disc, we got an error when we tried to activate it. It was then we realised that the hologram on the disc was a sticker which you could peel off."

The first port of call for Woolley was to contact eBay to try and set the wheels in motion to return the faulty item. When he contacted the seller, he noticed the returns address looked odd - and after investigating it by looking the address up on UPS and the Royal Mail's site, he realised it was a tyre and exhaust manufacturer in Birmingham.

"I didn't like the look of it so I kept the dispute open and contacted Microsoft - Microsoft investigated and found that the software was indeed counterfeit," said Woolley.

Despite the confirmation from Microsoft however, it took two months to resolve the situation, during which time Woolley lost 12-14 days of his time in phone calls and emails, a far bigger cost than the initial £200 saving.

"Trying to get through to the decision makers was really hard," he explained. "You need to get hold of the piracy department in England, which was difficult. And eBay wasn't too happy that we'd contacted Microsoft instead of sending the software back.

"The communications we had with eBay were frustrating - they kept coming back with slapdash comments and then they resolved the dispute in favour of the seller. I challenged them and a couple of days later we did get a refund, but a lot of people would've left it at that (the decision eBay arrived at). It's left a bad taste in our mouth about eBay, that's for sure."

Michala Wardell, BSA spokesman and head of Microsoft's piracy department, said the impact of software piracy on the small business sector was "catastrophic".

"The findings of the study are no different to Microsoft's experience," she told the Huffington Post UK. "But the biggest loss is for software resellers; the local reseller who loses out not just on the initial purchase but all of the follow up care and repair services, and other ongoing opportunities."

Sometimes it's the venders who get themselves into trouble though - in April 2012, HuffPost UK reported on Microsoft suing Comet for allegedly selling counterfeit Windows Recovery CDs - the case hasn't been resolved at the time of going to press (which is interesting as Comet is now in administration) but the retailer was accused of allegedly creating and selling more than 94,000 sets of counterfeit Windows Vista and Windows XP recovery CDs to customers who had purchased Windows-loaded PCs and laptops.

In 2011, a BSA study found 27% of computer users in the UK admit they have acquired pirated software, taking the commercial value of this piracy to £1.2 billion.