24/05/2013 09:39 BST | Updated 23/07/2013 06:12 BST

Increasing the Use of Legal Software Will Drive Economic Growth

In the information age, software is an essential tool of production. It generates value for individual businesses and entire economies by boosting productivity and accelerating output. But does it make a difference whether the software is properly licensed or pirated?

A new study conducted by the global business school INSEAD for BSA | The Software Alliance concludes the answer is a resounding yes; it makes a very big difference, especially in markets where piracy rates today are highest.

The study uses a common macroeconomic model to isolate the value of properly licensed software versus pirated software as a driver of national production. The findings suggest that using properly licensed software is like turbo-charging a car -- you get better performance and more output.

In fact, a 1 percent increase in properly licensed software would add $73 billion (£47 billion) to the global economy, while a similar increase in the use of pirated software would add just $20 billion (£13 billion). This means the world captures a $53 billion (£34 billion) advantage with each percentage-point increase in lawful software use.

Low-income countries reap the greatest returns: an average of $437 (£282) nationally for each dollar that consumers and enterprises invest in properly licensed software. This is nearly four times the still-enviable average return of $117 (£75) in high-income countries.

In the UK, the model predicts a national return of £2 billion for each pound invested in properly licensed software, compared to £470 million for a similar increase in pirated software.

Previous research has shown how software enhances productivity at the enterprise level. Properly licensed software, in particular, lowers costs and increases operational efficiency because it comes with value-added services and support. It reduces exposure to viruses and other security vulnerabilities, thereby cutting down on system malfunctions, downtime, and IT repair expenses. It also includes valuable upgrades and manufacturer support, such as training and problem resolution, which provide additional value.

The BSA-INSEAD study builds on the existing body of firm-level research by contributing a sophisticated analysis of the value that national economies derive from licensed software versus pirated software. The findings provide clear evidence that governments looking to stimulate economic growth can generate huge dividends promoting legal software use instead of allowing piracy to persist.

The software piracy rate in the UK currently stands at 27 percent, according to BSA. That represents £1.2 billion of pounds in GDP that the UK is leaving on the table. But government should view this as an opportunity, too, because curbing piracy and promoting lawful software use will spur growth.