Unmasking the Hidden Market

14/11/2012 12:57 GMT | Updated 14/01/2013 10:12 GMT

Sarah Coombes, Managing Director, Anti-Piracy, EMEA, BSA | The Software Alliance argues that the software industry as a whole is currently being undermined by a a few bad apples who are actively promoting the wrong kinds of software licenses in order to secure a deal.

The Exchequer Secretary David Gauke opened up a hornet's nest when he accused homeowners who pay tradesmen in cash as "morally wrong". The ensuing debate has demonstrated the breadth of the domestic 'hidden market'. However, the practice of bending the rules without any real sense of impunity isn't limited to homeowners. This mentality is also impacting business purchasing decisions throughout numerous industries, the buying and selling of software licenses being no exception.

Therefore, it comes as no surprise that BSA l The Software Alliance's most recent study into global software piracy found that more than one in four pieces of software is unlicensed and therefore illegal. The pervasiveness of this particular problem within the software industry is bewildering given business' utter dependence on technology.

The reason behind these kinds of shortcomings do vary; from outgrowing one's licensing allowances and simply forgetting to play catch-up, to wilfully disregarding copyright law by knowingly buying too few licenses to satisfy their software needs.

In some cases, the wrong kinds of volume licenses are being sold. For instance, a business might use an Education or Home licence, which is cheaper than a Professional licence. Regardless of motive and excuse, these activities amount to software piracy and inadvertently expose companies to enforcement activity by BSA, often resulting in companies being forced to pay considerable sums of money to become legally compliant. Indeed the cost to UK businesses caught using unlicensed software was in excess of £3.6 million for the last three years alone (2009-2011).

What's more, any 'off-the-book' activity deprives the economy of much- needed revenue. Just as the Treasury calculated in July that the Government is losing £2 billion each year in lost VAT or income tax as a result of homeowners paying tradesmen in cash, BSA calculates that unlicensed software use is costing the UK economy £1.2bn not to mention underming the UK IT industry's growth prospects. Previous studies have shown that for every dollar spent on pirated software, local distribution and services are losing in the region of $3-4.

Often, businesses that sell the software are also complicit. Their motives may be noble in that they want to help their customers save money, or self-serving in that they recognise they have missold the licences to secure a deal. However, they are exposing customers to significant security, financial and reputational risks.

Regardless of the source of unlicensed software, we need to get to a place where businesses pay for what they use. It may sound blindingly obvious or idealistic but it is the answer to protecting our creative industries which arethe lifeblood of our economy and our ticket for growth. Ultimatley, buying appropriately licensed software ensures businesses receive the right support at the point of sale and the assurance they are operating within the law. Better to be safe than sorry.