Software piracy hits SMBs hard

A recent Ipsos Reid survey, commissioned by Microsoft Canada, found 91 per cent of small business owners oppose software piracy. To further discuss the result and impact software infringement has on Canadian industry, the software company held a small business and piracy roundtable, attended by Symantec Canada, and Royal LePage Performance Realty.
“Software piracy has cost the Canadian economy $1.1 billion in lost sales,” said Susan Harper, license compliance manager at Microsoft Canada.
One of the biggest challenges, she said, has been the improvement in the look and quality of counterfeit product. “Unless small businesses purchase software from known genuine sources, they run the risk of installing pirated software in their business environment,” she said, “which can make for a really unstable atmosphere.”

Lost sales
According to Harper, this is a growing issue that system builders and resellers should look out for. “They run the software from lost sales and revenues. It’s extremely hard for VARs to compete with other resellers that are pirating software,” she added.
William Plante, senior director, global security and brand protection at Symantec, said corporations have a duty and responsibility to protect shareholders since the research and development budget comes from the profit they make.
“Bottom line, no company likes to get ripped off so we’re all going to take reasonable measures to protect ourselves,” said Plante. Like other software companies, Symantec has a digital rights management program that includes an activation key to verify the legitimacy of the software during installation.
Symantec also has a Knock and Talk program to visit small businesses it discovers is selling suspicious product.
To avoid any software complications, when Pierre de Varennes purchased Royal LePage Performance Realty, an Ottawa franchise providing residential real estate services, he called to standardize the computer system.
“The reality was we had a hodge podge of 70 computers networked in different ways. It was a very unstable environment,” said de Varennes.
There was a big disparity between applications de Varennes thought were on the PCs and what was really there, he said.
Chris Ellsay, president of, said the solution was to completely overhaul the system and duplicate it in each of De Varennes’ six offices. “We standardized all the desktops to run on Microsoft small business edition, the thin clients are Windows CE and the server is Microsoft 2003,” said Ellsay.
The $125,000 bill was more than what De Varennes anticipated but the cost of recovery was quick, he said.
“We were able to drop our IT support by $75,000 a year,” said De Varennes. “That came from eliminating some resources on the IT side and we were able to redeploy that money into new services.”
The challenge for small business owners and enterprises, he added, is often seeing and validating the investment that’s needed in order to gain control in the issue.
Although Royal LePage Performance is an example of a software-conscious small business willing to invest in IT standardization, a hefty contribution of Canada’s 36 per cent piracy rate still comes from small business, said IDC analyst Dave Senf.
“The reason why the Canadian software piracy rate is higher than the U.S. (at 21 per cent) is we have a very large SMB space compared to U.S. and that’s really where a lot of the piracy is taking place,” said Senf.

Vendor programs, like Microsoft’s genuine advantage, are doing what they can to combat it, he added. However these companies can only go so far without a backlash from consumers and running into privacy and security issues.
But the onus should not only be on the software companies, according to Jacquie Famulak, president of the Canadian Alliance Against Software Theft (CAAST).
In a phone interview, Famulak addressed the discrepancy between the current legislations in both Canada and the U.S.
“Both countries allow courts to impose statutory damages but in Canada that fine is $20,000 per work infringed, and south of the border that fine is US$150,000 per work infringed,” she said. Tougher regulation is clearly a deterrent and it shows in the U.S. piracy rate, added Famulak.
Approximately 63 per cent of the software Microsoft’s license compliance team sees is pirated, said Harper, and out of that five per cent is counterfeit.
The rest is grey market product, which by definition is legal software purchased outside of Canada.
From a shareholder perspective it’s legal but from Microsoft Canada’s viewpoint Harper said “it effects our partner community because if they purchase grey market, the revenue allocation doesn’t go to Canada. Which means if we don’t get that revenue, than the dollars we spend back to the partner community is lowered.”

Would you recommend this article?


Thanks for taking the time to let us know what you think of this article!
We'd love to hear your opinion about this or any other story you read in our publication.

Jim Love, Chief Content Officer, IT World Canada

Featured Download

Related Tech News

CDN in your inbox

CDN delivers a critical analysis of the competitive landscape detailing both the challenges and opportunities facing solution providers. CDN's email newsletter details the most important news and commentary from the channel.