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Pirated Software has hidden costs for business
Word Count: 975 Article#: GM-0502  Globe and Mail  (Aug. 18, 2005)


The computer reseller could tell I was hesitating, and he knew my hesitation was based on price.

"Listen," he said conspiratorially, "you won't need to buy any software once you see what's on the hard drive." He was offering to load my hard drive with business software, saving me a lot of money.

Illegally loading personal computer hard drives with software is a common global phenomenon, as is selling pirated copies of software at discount prices.

As one used-computer reseller said, "When a customer lays down $500 for a used computer, he does not want to hear, 'Oh, by the way, that will be another $250 for Windows and $400 for Office.'" As a result, his staff loads "just about anything" customers want.
"We preinstall, same as the big manufacturers. It's a grey area," said the reseller, who wished to remain anonymous.

It's not grey for everyone, though. It's theft, says Jacquie Famulak, manager of legal affairs with Markham, Ont.-based Apple Canada Inc. and president of the Canadian Alliance Against Software Theft (CAAST), a group of software developers that have banded together to fight piracy.

In Canada, 36 per cent of all business and consumer software currently in use is pirated, according to a study that market-watcher International Data Corp. (IDC) conducted for CAAST's U.S. counterpart, the Business Software Alliance. This compares with 20 per cent in the United States, where strict laws, vigorous enforcement and hefty fines of up to $150,000 (U.S.) help protect intellectual property, Ms. Famulak said.

Although changing, Canada's copyright laws "are more lax" than those in the United States: the maximum penalty in Canada for copyright infringement is $20,000, but she says that amount has never been levied.

Not all piracy is premeditated -- some companies accidentally overstep software licence boundaries. They may add employees and roll out applications across networks without checking how many licences they have. Or employees may download applications or upgrades from the Internet without thinking about licences.

CAAST, which has prosecuted companies that have accidentally overstepped the bounds of software licences, is now pushing businesses to set up software inventory systems to help them remain compliant with licences. It says software theft cost the Canadian economy $1.1-billion last year, and global losses due to software theft are estimated to have exceeded $48-billion. Small businesses and consumers are the main culprits, Ms. Famulak said.

Not everyone agrees that the problem is this large. CAAST inflates the figures, according to several small business owners interviewed for this story who did not want to be named. Much of the pirated software would not be purchased in the first place if users had to pay, one unrepentant thief pointed out.

Many small business owners particularly dislike agreements that force them to purchase a software licence for each person in the company who may use an application, no matter how seldom.

Others said the software industry charges too much for applications, while making it too easy to illegally copy software to other machines. While most software manufacturers use some form of anti-piracy protection, it tends to be weak -- it may prevent casual piracy, but not commercial theft. Manufacturers are generally hesitant to increase protection, as it inconveniences customers who have legitimate reasons to re-install applications.

Allan Coganovitch, president of Toronto-based computer reseller and software developer Proven Solutions Inc., says he would "never" load pirated software to a computer. To minimize piracy of applications he develops, he locks software to the hardware on which it is installed. If a registered user wants to copy the software to a new computer, he has to call Proven Solutions for authorization.

While some users consider this a time-consuming pain, Mr. Coganovitch sees it as a way to protect his intellectual property from casual or accidental copying. However, he admitted a professional hacker could probably break his codes.

While business may believe they are saving money by using pirated software, it could cost them more in the long run in terms of down-time and support costs, Ms. Famulak said. These businesses may be putting themselves "at risk," she says, because customer support is not available for pirated applications and the business owner must pay to fix any technical problem.

For example, Microsoft now requires that all customers coming to its website for upgrades and security patches submit their computers to an electronic frisking.

The company scans machines for a variety of information, including product keys, software authorization codes and operating-system details. If it finds indications of pirated software, Microsoft won't allow updates and security patches to be downloaded, leaving the machine vulnerable to things such as the Rbot and Zotob worms that made headlines this week when they hit unpatched business computers running Windows 2000. Microsoft offered a security patch covering the vulnerability exploited by the worms a week ago.

In addition, pirated software that is downloaded from the Internet or obtained on an illegal CD-ROM may contain viruses or spyware.

"I know we all pay more for software because of piracy," said Roger Noble, president of Toronto-based Choice Corp., a company that helps people buy and sell franchises. Mr. Noble's business does not have IT staff and says the software support he gets when he pays for applications is worth the investment. "It's almost like insurance."

Some resellers avoid piracy while still catering to customers on a tight budget by installing "shareware" and "trialware," software that developers offer for free, or that people can test drive at no charge and then pay a small price to keep if they like it.

The Open Source development community offers hundreds of such programs for Linux, Windows and Macs.

Derek Keoughan, president of Finnegan Software Inc. in Brampton, Ont., only loads software that customers purchase. Upon request, he'll add shareware and trialware programs, such as the FireFox Web browser, WinZIP and AdAware.

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