EXPANDING THE FRONTIERSOF OUR DIGITAL FUTURE:Reducing Software Piracy to Accelerate Global IT Benefits

December 2005

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Executive SummaryFueled by vibrant software sector growth, the information technology (IT) sector is aproven engine for expanding economic growth and opportunity. Reducing software piracycan be a strategic tool that countries use for creating high paying jobs, increasing tax rev-enues, expanding business opportunities, and fueling economic growth.

I. The Economic Impact of the ITSectorThis paper is based upon findings from an IDC analy-sis assessing the IT sector’s economic impact in 70countries around the world and the benefits that canaccrue to countries that reduce software piracy. IDCfinds that the IT sector’s ability to create economicbenefits can not only continue, but accelerate.

• The IT Sector Is a Proven Engine for GlobalEconomic Growth. The global trillion-dollar-a-year IT sector (hardware, software, and IT serv-ices) consists of 1.1 million businesses, support-ing 11 million high-paying IT jobs, generatingnearly $900 billion annually in taxes, andadding $1.7 trillion per year to global econom-ic prosperity. While these numbers testify to theeconomic force of the IT industry, the sector hasyet to achieve its full economic potential.

• Software Is the Key to Accelerating Future ITBenefits. The software industry’s accelerat-ing growth rate, combined with its ability toadd value to other sectors of the economy,has propelled it to a new position of promi-nence as a primary driver of global IT bene-fits. Between 2004 and 2009, the softwarerelated jobs and tax revenues will grow bet-ter than 5% a year.

II. Reducing Software Piracy CanDeliver Vast Economic BenefitsThe continued growth, vitality and innovation ofthe global IT sector—and the benefits it delivers—are increasingly dependent upon reducing soft-ware piracy worldwide.

Five Key Findings:

1. Lower Software Piracy Produces Higher ITBenefits. Not all countries enjoy the same benefitsfrom their IT sectors. A country’s software piracyrate is a key differentiator among countries thatenjoy vast IT economic benefits and those that have

yet to unlock them. In general, countries with thelowest software piracy rates have the largest IT sec-tors as a percentage of GDP—yet they could still seeenormous gains from piracy reductions.

2. Cutting Software Piracy Globally Can GenerateFaster IT Growth. The IT sector, already projected tosee rapid 33 percent growth between 2004 and 2009,instead could grow by 45 percent over the same peri-od, or 12 percentage points faster, with the help of a10-point reduction in software piracy over the nextfour years. In fact, four out of five countries (62 of 70)would see greater than 30 percent IT sector growthwith the help of software piracy cuts. For example,with a 10-point piracy reduction:

• China—China could potentially gain more thanany other country, tripling its already large ITsector and creating as many IT jobs in fouryears as the United States has created in 30.

• Russia—Russia’s IT sector could triple insize—growing from $9.2 billion today to $30billion in just four years.

3. Faster IT Growth Can Increase Global EconomicOutput. Every one point drop in the piracy rate couldresult in a $40 billion increase in global economicoutput. A 10-point drop in piracy could create 2.4million jobs, $400 billion in economic growth, and$67 billion in additional taxes.

4. Countries With the Highest Piracy Rates Havethe Most to Gain Through Reductions. The globalsurvey finds that the top seven highest piracy ratecountries are also among the top seven largest rel-ative beneficiaries from reducing piracy. These bigwinners include China, Russia, Indonesia, Vietnam,Kazakhstan, Ukraine and Serbia-Montenegro.

A 10 point drop in the global 35%piracy rate over four years would add:

• 2.4 million new jobs• $400 billion to economic growth• $67 billion in tax revenues

5. Every Region Benefits. Every country and everyregion of the world stands to gain from softwarepiracy reduction. Regionally, non-European UnionEurope, followed by Asia Pacific, and Latin America,would see the greatest relative benefits from pira-cy reductions.

III. Who Wins & WhyA 10-point reduction in software piracy globallyover four years would help:

• Consumers benefit from more choices andgreater competition

• Workers benefit from 2.4 million new jobs

• Innovators benefit from the financialrewards of their creative spirit

• Entrepreneurs benefit through new opportu-nities to market, package, sell, distribute, cus-tomize, and service software

• Governments benefit from $67 billion in newtax revenues for needed services that couldbe used to provide1:

■ 33 million computers for schools

■ 45 million people with health care

■ 6.6 million people with college educations

■ 11 million children with schooling

■ 435 million people with job training, or

■ 132 million families with services like daycare, maternity, or home help services

Five Concrete Steps for Reducing SoftwarePiracy:

Governments can take practical, proactive steps toprotect intellectual property and reduce softwarepiracy by:

1. creating stronger legal protection for software

2. increasing enforcement

3. targeting resources more effectively

4. improving public education and awareness

5. setting an example through government lead-ership

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1 based on Organization for Economic Co-operation and Development cost estimates for government services

IntroductionIn the last five years, $5 trillion in information tech-nology (IT) investments have unleashed unprece-dented new innovations that have transformedalmost every aspect of our lives. Yet, the IT sector’sgreatest untapped potential lies not only in what itenables individuals to do today but in its ability tofundamentally transform economies for tomorrow.

Fueled by software sector growth, countries aroundthe world are translating IT sector growth into tangi-ble economic benefits. The IT sector employs millionsof people, generates billions of dollars in taxes andadds a trillion dollars a year to global economic pros-perity. While these facts testify to the enormity of theeconomic force that the IT industry yields, the sectorhas yet to achieve its full economic potential.

This paper, based on IDC’s cutting-edge research,analyzes the IT sector’s impact in 70 countriesaround the world. IDC finds that the IT sector’s abil-ity to create economic benefits will not only contin-ue but accelerate. Not all countries enjoy the sameIT benefits. A key differentiator among countriesthat are already enjoying vast IT sector benefits andthose that have yet to unleash them is a country’ssoftware piracy rate. Reducing software piracy is astrategic tool that countries can use to create more

high-paying jobs, increase tax revenues, expandbusiness opportunities and fuel economic growth.

This paper is divided into three sections. First, itexamines the IT sector’s economic impact and whycountries with low software piracy are enjoyingvast IT benefits while others have yet to obtainthem. Second, it explores the additional economicbenefits that could accrue from a 10 percentagepoint reduction in software piracy. Third, it exam-ines the implications of these findings and outlinesconcrete steps countries can take to drive broaderIT-enabled economic benefits.

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Asia PacificAustraliaChinaHong KongIndiaIndonesiaJapanKoreaMalaysiaNew ZealandPhilippinesSingaporeTaiwanThailandVietnam

EuropeanUnionAustriaBelgiumCzech RepublicDenmarkEstoniaFinlandFranceGermanyGreeceHungaryIrelandItalyLatviaLithuaniaLuxembourgNetherlandsPoland

PortugalSlovakiaSloveniaSpainSwedenUnited Kingdom

Non-EU EuropeAlbaniaBosniaBulgariaCroatiaKazakhstanMacedoniaNorwayRomaniaRussiaSerbia-Montenegro

SwitzerlandUkraine

Middle East /AfricaEgyptIsraelKuwaitSaudi ArabiaSouth AfricaTurkeyUAE

North AmericaCanadaUnited StatesPuerto Rico

Latin AmericaArgentinaBrazilChileColombiaCosta RicaDominicanRepublicMexicoPanamaPeruUruguayVenezuela

Analysis of 70 Countries in Six Regions Around the World

Expanding the Frontiers of Our Digital Future:Reducing Software Piracy to Accelerate Global IT Benefits

Software piracy cuts canbe a strategic tool for:

• Increasing jobs for workers• Expanding choices for consumers• Growing taxes for governments• Improving productivity for businesses• Promoting opportunities for

entrepreneurs• Unleashing creativity for innovators• Increasing potential for economies, and • Raising standards of living for everyone

I. The Economic Impact of theIT SectorThe IT Sector Is a Proven Engine for GlobalEconomic Growth. IDC’s economic impact modelreveals the sheer magnitude of the IT sector’s glob-al economic impact. The IT sector supports 1.1 mil-lion IT businesses, employing 11 million IT workers,pumping $1.7 trillion per year into global econom-ic prosperity and generating nearly $900 billionannually in taxes for governments.

Creating Jobs The IT sector directly employs 11million IT workers in jobs that generally paymore than other private sector jobs. Because ofthe IT sector’s dynamic ability to grow quickly,few other sectors can create jobs as quickly. Injust the last four years, despite a global eco-nomic downturn that stalled IT job growth insome sectors, the overall IT sector nonethelesscreated 1.4 million more IT jobs—fueled entire-ly by software-driven job growth. And becauseIT growth has ripple effects throughout theeconomy, the IT sector also supports another18 million IT professionals in a range of indus-tries from consulting to transportation.

Generating Taxes As the IT sector grows, thebenefits to governments grow too. The IT sec-tor generates nearly $900 billion annually intaxes to pay for needed government benefitsand services. These tax benefits are helping tokeep children in school, workers trained,mothers healthy, transportation systems run-ning and the public secure. In fact since 2000,the IT sector has generated more than $4 tril-lion in taxes for needed government services.

Boosting Economic Potential The IT sectormakes an enormous contribution to theglobal economy, adding $1.7 trillion per yearto global economic prosperity. The IT sectornow accounts for a full 2.5 percent of theglobal economy. If the global IT sector wereits own country, its GDP contribution wouldrepresent the 10th largest economy in theworld—larger than the Brazilian, Canadian,or even Russian economies.

The IT sector is unique. It can grow faster, createhigher paying jobs, boost economic productivity,lift standards of living, and multiply its impactthroughout the entire economy in ways that othersectors do not. The faster the IT sector grows, thefaster it creates businesses, taxes, jobs, and othereconomic opportunities.

Software Is the Key To Accelerating Future ITBenefits

The software industry’s accelerating growth rate,combined with its ability to add value to other sec-tors of the economy, has propelled it to a positionof prominence as a primary driver of global IT ben-efits. Globally, businesses and consumers will spendmore than $1 trillion on software over the next fouryears—or roughly one out of five IT dollars. As theworld’s economies become more interconnected,software has become a key driver of the digital rev-olution’s benefits. As information goes digital, soft-ware benefits go global.

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Three Key IT Sector Findings:1.The IT sector is a proven engine for

global economic growth2.Software will fuel future IT sector

growth3.Lower piracy produces higher IT

benefits

The IT Sector Has An Enormous Impact onthe Global Economy:

• Supporting 1.1million IT businesses• Employing 11 million IT industry workers• Adding $1.7 trillion a year to global

economic prosperity• Generating nearly $900 billion a year in

taxes

Software & Services Now Accountfor Most IT Spending

70%

60%

50%

40%

30%

20%

10%

0%2000 2004 2009

47.1%

52.9%

38.2%

61.8%

37.6%

62.4%

■ Hardware ■ Software and Services

Figure 1: Source IDC Data

PER

CEN

TO

FTO

TAL

ITSP

END

ING

Software is the fuel that drives the IT sector’s growthengine. Software helps extend IT sector benefits fur-ther and faster—further into new sectors of the econ-omy and at a faster rate than it otherwise could. Withthe help of the related IT services sector, softwaregrowth helps stimulate growth throughout thebroader economy.

The software and IT services sectors comprise morethan 60 percent of all IT sector spending (see figure1). In fact, in the last four years, software-relatedjob growth accounted for all IT job growth—creat-ing 2.8 million jobs overall. Between 2004 and 2009,the software sector will create new jobs and newcompanies at a faster rate than any other segmentof the IT sector (see Figures 2 and 3).

Led by software advances, the IT industry appearsto be entering a new phase of both growth andopportunity. New software applications havegiven people the power to create, communicateand collaborate in ways previously unimaginable.The benefits from these innovations are amplifiedthroughout the economy as software tools trans-form traditional industries—from publishing totelecommunications.

The fusion of software and computing is helpingtraditional industries become more productive andeffective too. Thus as the software sector grows, itseffects ripple throughout the rest of the economy—helping drive local retail outlet growth, increasingdemand for local software customization by IT pro-fessionals and boosting overall spending through-out the IT sector.

II. Reducing Software Piracy CanDeliver Vast Economic BenefitsIt is clear that the IT sector is a powerful driver ofeconomic benefits around the globe. Yet these ben-efits represent a small fraction of the economicpotential the IT sector has yet to deliver. It promptsa fundamental question: what can countries do tomaximize the IT sector’s potential and harness rapidgrowth to the benefit of consumers, workers, treas-uries and economies?

To answer this question, IDC combined its cutting-edge IT research with the results of piracy impactdata from 70 countries around the world. IDC ana-lyzed the economic benefits that countries couldachieve by reducing software piracy. The results areextraordinary. IDC finds that continued growth, vital-ity and innovation in the global IT sector—and thebenefits it delivers—are increasingly dependent upona country’s software piracy rate.

This new data not only finds that reducing piracycan boost IT growth, it also offers insight into thedirect economic benefits that countries couldachieve by lowering their software piracy rate. Amodest and achievable 10-point reduction in soft-ware piracy can be a potent tool for deliveringenormous economic benefits—accelerating IT sec-tor growth, creating jobs, generating taxes andexpanding economies. Thus, the study providesinsights into the positive steps that a country cantake to generate quantifiable yet tangible eco-nomic benefits.

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Software & IT Services Will LeadIT Sector Growth

37%

36%

35%

34%

33%

32%

31%

30%

29%

28%2004–2009 Growth

IT Services33%

■ Hardware ■ Software ■ IT Services

Figure 2: Source IDC Data

Hardware31%

Software36%

Software Will Create Jobs &Businesses Faster

8.0%

7.0%

6.0%

5.0%

4.0%

3.0%

2.0%

1.0%

0.0%IT Hardware Software IT Services Channels

■ Companies ■ Employment

Figure 3: Source IDC Data

Sector Growth Rates 2004–2009 (CAGR)

Software piracy is a global phenomenon. TheBSA/IDC Global Software Piracy Study found that in2004, the world spent more than $59 billion forcommercial packaged computer software. Yet, soft-ware worth over $90 billion was actually installed.For every two dollars worth of software purchasedlegitimately, one dollar was obtained illegally.Piracy rates in individual countries range from 21percent to 92 percent – yet the IDC data finds thatall countries could gain from piracy reductions. Infact, countries with the highest software piracyrates would achieve some of the largest relativebenefits from piracy reductions.

FIve Key Findings:

Analysis of IDC’s data reveals five key findingsregarding the economic impact of reducing theworldwide software piracy rate by 10-points—from35 percent to 25 percent over four years.

1. Lower Software Piracy ProducesHigher IT Benefits Not all countries enjoy the vast benefits of a largeor fast-growing IT sector. The countries that havegrown their IT sector’s faster and larger see thebenefit of more IT jobs, more IT businesses andmore IT taxes. In contrast, IT-related benefits are amuch smaller share of GDP in many countries. Inanalyzing the differences between countries enjoy-ing small versus large IT benefits, one finding isclear: A country’s software piracy rate is a key dif-ferentiator among countries that enjoy vast IT eco-nomic benefits and those that have yet to unlockthem (see Figure 4).

In general, there is an inverse relationship between acountry’s software piracy rate and the size of its ITsector as a percentage of GDP. Thus, the lower thesoftware piracy rate, the higher the IT related bene-fits, including IT-generated taxes. By contrast, thelarger the software piracy rate, the smaller the IT sec-tor and the jobs, taxes, and businesses that come withit. For example, the 11 countries in the global surveywith the smallest IT sectors (comprising less than onepercent of their country’s GDP) have an average 70percent piracy rate—twice the weighted global aver-age. These 11 countries include: Venezuela, Kuwait,

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Five Key Findings of The Economic Impactof a 10-Point Reduction in Global SoftwarePiracy:

1.Lower software piracy produces higherIT benefits

2.Cutting piracy can generate faster ITgrowth

3.Faster IT growth can increase globaleconomic output

4.Countries with the highest piracy couldsee the largest economic gains

5.Every country and region in the worldcould benefit from software piracyreductions

Countries With Lowest Piracy Rates Receive Greatest IT Tax Benefits8%

7%

6%

5%

4%

3%

2%

1%

0%10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Average Annual Piracy Rate, 2000–2004

Figure 4: Source IDC Data

Countries with high piracy ratesreceive virtually nothing back from

their IT sectors in tax revenues

Sweden

Switzerland

Denmark

FinlandBelgium

NetherlandsAustria

CanadaUnited States

France

LuxembourgGermany Israel

Norway

Japan

United Kingdom

New ZealandAustralia

South Africa

Czech Republic

UAEPuerto Rico

IrelandSpain

PortugalTaiwan

Saudi ArabiaColumbia

Singapore

ItalyKorea

Malaysia

HungarySloveniaSlovakia

EstoniaPoland

Hong KongLithuania

Chile

Costa RicaGreeceBrazil

Latvia

PanamaBosnia

MacedoniaCroatiaArgentinaUruguay

MexicoTurkey

EgyptBulgaria

Kuwait PeruRomania

Venezuela

PhilippinesIndia Albania KazakhstanThailand Ukraine

Dominican RepublicChinaSerbia-MontenegroRussia IndonesiaVietnam

Saudi Arabia, the Dominican Republic, Peru, Turkey,Puerto Rico, Egypt, Albania, Indonesia andKazakhstan. By contrast, the 11 countries with thelargest IT sectors in the global survey (topping threepercent of their respective GDPs) average only 29 per-cent piracy—six points less than the global 35 percentweighted average. These countries include:Singapore, Sweden, the United States, the UnitedKingdom, Switzerland, Denmark, South Africa,Luxembourg, Finland, Australia and New Zealand.

Countries that have lowered their piracy rates havegained more jobs, more taxes and more economicgrowth. Even with low piracy, the impact of cuttingpiracy further is not inconsequential. For example,even in the United States where software piracy isthe lowest in the world at 21 percent, more thanone in every five copies of PC software in use is ille-gitimate. Low piracy rate countries, with generallylarge IT sectors, could see enormous gains frompiracy reductions because the impact will ripplethrough their already large IT sectors.

• United States The world’s lowest softwarepiracy rate has already helped the UnitedStates develop the world’s largest softwareindustry. Yet, because its IT sector is so bigthe United States would gain more than anyother nation in the global survey from a 10-point piracy cut over four years—boosting itseconomy by $125 billion.

• United Kingdom The United Kingdom haslong benefited from the high softwaredemand and low piracy. Still, the UnitedKingdom could see the European Union’s(EU) largest benefits from piracy cuts—adding nearly $19 billion to its economy

• Japan With one of the lowest piracy rates inthe Asia Pacific region, Japan enjoys thelargest IT sector in that region. Nonetheless,a 10-point cut in piracy would add roughly$24 billion to the economy—the third largestbenefit among the countries included in theglobal survey.

• Singapore Buoyed by large software demand,Singapore now enjoys the benefits of havingthe world’s largest IT sector as a percentage ofits GDP. Singapore is primed for further reduc-tions in software piracy given its new copyrightlegislation effective January 1, 2005 and thegovernment’s efforts with industry to increasepublic awareness about the benefits of soft-ware management. A 10 point reduction overfour years would help increase the size ofSingapore’s IT sector by nearly $1 billion andadd an additional 3,700 jobs.

2. Cutting Piracy Can Generate FasterIT GrowthSoftware piracy cuts are one key to achieving fasterIT growth and benefits. The faster the IT sectorgrows, the faster it can generate new jobs, taxes,and economic benefits. The IT sector is already pro-jected to see rapid 33 percent growth between2004 and 2009, according to IDC. However the sec-tor could instead grow 45 percent larger over thesame period with the help of a 10-point reductionin software piracy (see Figure 5). Countries couldgenerate an average 12 points of additional growthbetween 2004 and 2009 with a 10-point reductionin piracy.

Four Out of Five Countries Could See Greater Than30 Percent IT Growth

Every country in the survey that cuts piracy can growits IT sector faster—adding jobs and other benefitsfaster too. Better than four out of five countries (62of 70) would see greater than 30 percent combinedIT sector growth. Individually, country growth rateswould range from 16 percent for Panama to 349percent for Kazakhstan (see Table 1).

Faster growth can mean expansive growth:

• China Faster IT growth from piracy cuts couldhelp China triple the size of its IT sector togain more than any other country in theglobal survey (growing 209 percent largerrather than 85 percent without piracy reduc-tions). As a result, China could create 2.6 mil-lion new IT jobs by 2009—as many IT jobs as

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IT Growth Accelerates WithSoftware Piracy Reductions

50%

45%

40%

35%

30%

25%

20%5 Year IT Growth

■ 2004–2009 Projected Growth■ 2004–2009 Projected Growth With

Piracy Reductions

Figure 5: Source IDC Data

Next 5 Years32.7%

Faster IT GrowthWith 10-Point

Piracy Reduction45.4%

the United States has been able to createthrough 30 years of IT leadership.

• Russia Russia’s IT sector could grow 230 per-cent instead of 136 percent and see theworld’s fourth largest benefits from softwarepiracy cuts—more than tripling the size of itsIT sector.

• India India enjoys a dynamic, export-led soft-ware and software services industry that haspositioned it to achieve the second fastestgrowing IT sector in the global surveybetween 2004 and 2009. A 10 point drop inthe piracy rate over from 74% to 64% wouldhave a tremendous impact on the domesticfront, enabling the IT sector (excluding soft-ware and services exports) to grow from $7.4billion to $19.5 billion.

3. Faster IT Growth Can IncreaseGlobal Economic OutputFaster IT growth from piracy reductions meansincreased contributions to the global economy.

Reducing software piracy from the global weightedaverage of 35 percent to 25 percent over four yearscould create an additional 2.4 million IT jobs, addmore than $400 billion to economies, and pump anadditional $67 billion into government tax coffers.Every one-point drop in the piracy rate correspondsroughly to a $40 billion increase in economic output.The greater the piracy reduction, the greater theeconomic benefit.

IT growth due to piracy reduction would help everycountry create more jobs for its workforce, createmore opportunities for entrepreneurs, create morevalue for consumers and add more governmentservices with an expanded tax base. As the softwareindustry becomes bigger (helped by piracy ratereductions), those benefits increase (see Figure 6).

4. Countries With the Highest PiracyRates Have the Most to GainCountries with the highest piracy rates today canunleash the greatest economic benefits tomorrowfrom piracy reductions. A country’s relative gainsfrom piracy reductions can be ranked by comparingthe percentage gain in the size of a country’s IT sec-tor from software piracy cuts, to what it wouldachieve without the cuts by 2009. The results showthat, in general, countries with the highest piracyrates could enjoy the greatest relative benefits frompiracy reductions (see Figure 7). Because of their highpiracy rates, even a 10% drop in piracy would have a

Top 15 Projected Fastest GrowingIT Sector Can Grow Faster

Table 1

With 10-Point Piracy Reductions2004–2009 Growth Rate

Growth GrowthWithout With Piracy Growth

Reduction Reduction Differential

A 10-point drop in the global piracy rate of35% over 4 years would add:

• 2.4 million new jobs• $400 billion to economic growth• $67 billion in tax revenues

IT Job Growth Accelerates With10-Point Reduction in Piracy

Figure 6: Source IDC Data

18,000,000

16,000,000

14,000,000

12,000,000

10,000,000

8,000,000

6,000,000

4,000,000

2,000,000

02000 2002 2004 2006 2008

ITJO

BS

WO

RLD

WID

E

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Kazakhstan 292% 349% 57%Russia 136% 230% 94%China 85% 209% 124%Vietnam 108% 169% 62%India 137% 164% 28%Ukraine 101% 158% 57%Indonesia 79% 152% 73%Argentina 106% 137% 31%Albania 108% 137% 29%Serbia-Montenegro 88% 125% 37%Turkey 106% 119% 13%Bulgaria 80% 103% 23%Philippines 81% 95% 14%Kuwait 65% 92% 27%Malaysia 78% 91% 14%

major impact on the legitimate software market. Forexample, the top seven highest piracy rate countriesworldwide are also among the top seven greatestpotential beneficiaries in the global survey (see Table2). Countries like China, Russia, Indonesia, Vietnam,Kazakhstan, Ukraine and Serbia-Montenegro gainthe largest relative benefits in the global survey (seeTable 2). On a relative basis, these high-piracy ratecountries could create the most jobs, most new

opportunities, and most tax revenues—and could seethe greatest IT sector growth.

5. Every Region BenefitsEvery country and every region of the world wouldgain substantial new benefits from software piracyreduction (see Table 3). Non-EU Europe, followedby Asia Pacific and Latin America, would see thegreatest relative benefits from piracy reductions.

European Union. With the largest IT sector in theworld behind North America, the European Unioncould add $88 billion to its combined economiesfrom a 10-point cut in software piracy. TheEuropean Union saw demand for software increasein the region by 12 percent between 2000 and2004, producing the third fastest regional softwaregrowth rate over the same period. While theEuropean Union already enjoys the world’s secondlowest piracy rate, it could still realize the thirdlargest benefit from further software piracy reduc-tions, after the Asia Pacific and North Americaregions. The European Union is also home to coun-tries with a tradition of low piracy rates which havenurtured larger IT sectors. For example, Sweden,Luxembourg, the United Kingdom, and Denmarkare among the five lowest piracy rate countries and

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7 Highest Piracy Rate CountriesGain 7 Largest Relative Benefits

Table 2 Ranked in order of country with largest relativeglobal benefit, compared to global piracy ranking and2004 piracy rate

Piracy 2004 PiracyCountry Rank Rate

Countries With the Highest Rates of Piracy Benefit Most fromPiracy Reductions

250%

200%

150%

100%

50%

0%60% 65% 70% 75% 80% 85% 90% 95%

2004 Piracy Rate

Figure 7

China 3 90%

Russia 5 87%

Indonesia 4 87%

Vietnam 1 92%

Kazakhstan 6 85%

Ukraine 2 91%

Serbia-Montenegro 7 81%

Sweden

Saudi ArabiaGreece

Brazil

Macedonia

Argentina

UruguayMexico

Bulgaria

Peru

Romania

VenezuelaPhilippines

India

Albania

Kazakhstan

Thailand

Ukraine

Dominican Republic

China

Serbia-Montenegro

Russia

IndonesiaVietnam

KuwaitCosta Rica

Egypt

TurkeyChile

Bosnia

are also among the five countries with the largest ITsectors as a percentage of their overall economies.However France, Greece and Italy—long stymied byhigh piracy rates—could see tremendous growthfrom piracy reductions.

Non-EU Europe. Non-EU Europe stands to gain thelargest relative benefit of all regions from a 10-point reduction in piracy. The region’s IT sectorcould double in size and generate nearly 210,000additional IT jobs. Non-EU Europe’s software sectorgrew faster than all other regions over the last fouryears and is projected to grow faster than any otherregion’s software sector over the next four years.With the help of piracy cuts, the region couldachieve the fastest IT sector growth of all regions inthe world—growing 104 percent instead of 67 per-cent between 2004 and 2009. Non-EU Europe alsoincludes five of the 10 countries globally that wouldgain the biggest relative benefits from a 10-pointcut in software piracy—Ukraine, Russia,Kazakhstan, Serbia-Montenegro, and Albania. Thethree countries in non-EU Europe with the lowestpiracy rates—Switzerland, Norway, and Croatia—are also the three countries with the largest IT sec-tors as a percentage of their economies.

Asia Pacific. Asia Pacific’s IT sector could pumpanother $100 billion into its economies—in dollarterms, gaining more benefits than any other regionfrom piracy reductions. A piracy rate 18 points high-er than the world average has limited the region’ssoftware sector to the smallest software sector as apercentage of its IT sector in the world. The soft-ware sector is poised to see unprecedentedgrowth—growing three times faster over the nextfour years as it did in the last four. With the help ofpiracy reductions, the region’s IT sector is poised togenerate 3.5 million more jobs within the next four

years—more than every other region of the worldcombined. The three countries within the AsiaPacific region with the highest piracy rates—Vietnam, China, and Indonesia—are also the largestrelative beneficiaries of piracy reductions.

Latin America. With the highest software piracyrate of any region, Latin America’s IT sector is alsothe smallest as a percentage of the economy in anyregion. Latin America’s IT sector has nonethelessgrown into a $25 billion per year industry support-ing 48,000 businesses, employing nearly 600,000workers, and generating $6.9 billion a year in taxes.Yet, those countries in the region with lower piracyrates enjoy the benefits of expanding IT sectors. Forexample, Colombia, Chile, and Mexico are amongthe five lowest piracy rate countries in the regionand are also among the five countries with thefastest software sector growth between 2000 and2004. Countries with the highest piracy rates in theregion—like Venezuela, Argentina, and Peru—stand to benefit most from further piracy reduc-tions.

Middle East and Africa. The Middle East and Africa’ssmall but growing IT sector could see tremendousbenefits from piracy reductions. Countries in theregion with a history of low piracy have nurturedlarger IT sectors. For example, Israel, the UnitedArab Emirates, and South Africa have the threelowest software piracy rates and enjoy the threelargest IT sectors as a percentage of their overalleconomies. Countries with the highest piracy rates,like Kuwait and Egypt, are poised to see some ofthe greatest benefits from piracy reductions.

North America. North America’s $423 billion-a-year ITsector—the largest in the world—consists of 325,000businesses, employing 3 million people, and generat-ing $425 billion a year in taxes. North America

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Every Region Benefits from GDP, Tax, Job Benefits, andFaster Economic Growth

Benefit of 10-Point Reduction in Software Piracy2004–2009

2004 Contribution Additional Relative 2004– Growth W/ ITPiracy to GDP New Tax Economic 2009 Piracy

Region Rate ($M) Jobs Revenue ($M) IT Benefit Growth Reduction

Asia-Pacific 53% $135,118 2,010,019 $13,833 47% 34% 59%

European Union 35% 87,683 155,541 24,848 19% 30% 38%

Latin America 66% 11,621 43,623 1,207 33% 46% 61%

Middle East & Africa 58% 5,393 13,245 669 24% 54% 64%

Non-EU Europe 44% 32,085 58,106 2,869 77% 67% 104%

North America 22% 131,666 119,991 23,170 15% 30% 39%

World 35% 403,565 2,400,525 66,597 24% 33% 45%

Table 3: Source IDC Data

already benefits from the lowest piracy rate, thelargest software sector and the largest IT sector in theworld. In fact, Canada and the United States todayaccount for half of the world’s software sector.Despite the lowest piracy rate, because of its size, theregion still stands to realize the second largest bene-fit in contribution to GDO from piracy reductions inthe world—$132 billion. Overall, a 10-point drop inNorth America’s piracy rate could also create 120,000IT jobs and generate $23 billion in additional tax rev-enues for government benefits and services.

III. How to Achieve These Benefits

Who Wins & Why

Reducing piracy delivers both direct and indirectbenefits. When software piracy is lowered, con-sumers, entrepreneurs, workers, governments andeconomies win. Lower software piracy can result inmore jobs for workers, expanded choice for con-sumers, productivity gains for business, and risingstandards of living around the globe. Reducing therate of software piracy can boost economies andcreate new jobs and business opportunities thatgenerate spending and new tax revenues.

• Consumers Consumers benefit from morechoices and greater competition when piracy isreduced. By using legal rather than illegal soft-ware, consumers gain customer support servic-es, more reliable products, software upgradecapabilities and access to patches that protectusers against malicious attacks. Less piracy canalso mean faster improvements in productsand more choices in the marketplace.

• Workers Workers benefit from more higher-paying jobs when piracy is reduced. A 10-pointreduction in piracy between 2004 and 2009could create 2.4 million more IT industry jobsfor workers. IT jobs generally pay better thanother private sector jobs.

• Innovators Innovators benefit because theircreative spirit can be financially rewarded.They gain more freedom to create withoutfear of theft. Software innovators invest hun-dreds of millions of dollars every year andimmeasurable amounts of creativity indesigning, writing and bringing new prod-ucts to market. They depend upon the rev-enue received from those products to obtaina return on their investment and to funddevelopment of the next new things.

• Entrepreneurs A multitude of different busi-nesses benefit, beyond those that create soft-ware. When piracy is reduced, new opportuni-

ties are created in packaging, marketing, sales,distribution, customization and servicing ofproducts. IDC’s data shows between 2000 and2004, more than 50,000 IT businesses were cre-ated around the globe. Further piracy reduc-tions can build upon the expected 100,000new IT businesses which are projected to becreated between 2004 and 2009. Every stepforward in reducing piracy creates more localcompanies, which in turn hire more workers,who pay more taxes, and drive greater eco-nomic growth.

• Governments Governments benefit too fromnew revenues for needed services. Each sin-gle-point reduction in the global piracy rateraises more than $6 billion in additional taxdollars. A 10-point drop in piracy over fouryears would create $67 billion in additionaltax benefits for governments which could beused to provide an additional:2

■ 33 million computers for schools

■ 45 million people with health care

■ 6.6 million people with college educations

■ 11 million children with schooling

■ 435 million people with job training ben-efits, or

■ 132 million families with services like daycare, maternity, or home help services

Steps Governments Can Take to TakeAdvantage of These Benefits

Ultimately, it is the intellectual power of a work-force—and the ideas produced—that propels IT sec-tor growth. When their works are not fully protect-ed, the creative ability of the workforce can be sti-fled, and the IT sector cannot realize its full prom-ise and potential. Software pirates not only stealsoftware, they steal the jobs and tax revenues andeconomic growth that accompany a vibrant soft-ware sector. Thus, in order to unlock the vast newjobs, business opportunities, revenues and econom-ic growth that IT sectors can produce, governmentsneed to take tangible steps to protect intellectualproperty and reduce software piracy.

The shadowy network that brings pirated softwareto market is elaborate. In countries rich and poor,the rewards to pirates are often balanced by mini-mal risks. Even small-time bootleggers can findclever ways to market their illegitimate wares. Toooften, laws are insufficient to crack down on theseunscrupulous vendors. And, when anti-piracy lawsare enforced, the punishment can often be lesssevere than that needed to be an effective deter-

:9:2 based on Organisation for Economic Co-operation and Development cost estimates for government services.

rent. The use of unlicensed software within organi-zations is also a widespread problem and in fact isresponsible for the majority of losses to the indus-try. Software piracy on the Internet is perhaps themost rapidly growing form of software piracy.Effective legal remedies for these forms of piracyare also necessary but are often not sufficiently con-tained in national legislation.

Software piracy will not diminish if nothing is doneabout it. The key to stemming piracy comes from edu-cation and proactive, government-led efforts. Piracyrates can be reduced by creating stronger legal pro-tection for software, increasing the effectiveness ofenforcement, targeting resources more effectively,leading by example, educating and improving publicawareness and partnering with industry.

Five Concrete Steps for ReducingSoftware Piracy

1. Implementing the WIPO Copyright Treaty. In1996, in direct response to the growingthreat of Internet piracy, the WorldIntellectual Property Organization (WIPO)adopted new copyright treaties to enablebetter and more effective enforcementagainst digital and online piracy. An estimat-ed one billion people around the globe haveInternet access—increasing the power andpotential of software but also opening newdoors for pirates to distribute their wares. Inorder to ensure protection of copyrightedworks in the digital age, countries need toupdate national copyright laws to implementthe obligations of the WIPO copyrighttreaties. Among other things, these measuresmake sure that copyrighted software cannotbe pirated by ensuring that protected worksare not made available online without theauthor’s permission, and that copy protec-tion tools are not hacked or circumvented.Many countries have already taken steps toimprove and enforce their laws. However,there is still more progress that can be made.

2. Creating Strong and Workable EnforcementMechanisms as Required by TRIPS. Strongcopyright laws are essential, but meaninglesswithout effective mechanisms to enforcethem. Governments must fulfill their obliga-tions under the World Trade Organization’s(WTO) Trade-Related Aspects of IntellectualProperty Rights Agreement (TRIPs) by adopt-ing and implementing laws that meet inter-national norms for IP rights protection andenforcement.

3. Stepping Up Enforcement With DedicatedResources. Too often, software thieves are nottreated as seriously as other criminals, and thepunishment is too insignificant to be an effec-tive deterrent. Countries can elevate theirenforcement of intellectual property by:

a) creating specialized intellectual propertyenforcement units at the national,rather than local levels, and providingdedicated resources to investigate andprosecute intellectual property theft,

b) increasing cross-border mutual coopera-tion among police and other enforcementagencies to improve coordination amonglaw enforcement in various countries, and

c) supporting training of law enforcementand judiciary officials and providing bettertechnical assistance to ensure the peopleon the front lines of piracy enforcementare equipped with the tools they need todeal with the changing nature of intellec-tual property theft.

4. Increasing Public Education and Awareness.Reducing software piracy often requires afundamental shift in the public’s attitudetoward software piracy. Public education is acritical component of any successful effort.Governments can increase public awarenessof the importance of respecting creativeworks by informing the public about the con-sequences of disobeying the law, expressingtheir intent to strictly enforce those laws andencouraging the use of legitimate software.Some of the most successful efforts stemfrom comprehensive public education cam-paigns launched jointly by government andindustry.

5. Leading by Example. Because governmentsare the largest users of software in theworld, one of the most effective mechanismsfor public persuasion stems from govern-ments themselves sending a strong and clearmessage that the government will not toler-ate piracy, and is actively managing its ownsoftware assets. This can be achieved byimplementing software management poli-cies to set an example the private sectorshould follow. For a government to demon-strate its commitment to enforcing intellec-tual property protections in the private sec-tor, it must demonstrate that it is willing todo so in the public sector as well.

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Proven Policies to Stop, Stall andStifle Software PiracyMany countries have already taken critical steps toreduce their software piracy rates and reap the eco-nomic rewards.

• Ireland: In the 1990s, Ireland had one of theworst piracy rates in the European Union—attributable to the outdated state of Irishcopyright law. In 2001, the Irish governmenttook concrete action by passing a new, mod-ern Copyright Act, regarded by BSA as beingthe paradigm of 21st century copyright law.Since its adoption, enhanced recognition andrespect for copyright, particularly in the soft-ware arena, has developed with demonstra-ble effects on the rates of piracy.

• Italy and Greece: Because Italy and Greecesuffered huge tax losses from revenues thatwould have been earned had unlicensed useof software been properly abated, both theGreek and the Italian governments increasedtheir enforcement efforts with specific initia-tives. Both countries have engaged sophisti-cated economic police units—in Italy, Gardiadi Finanza and in Greece, the Special AuditsAgency—to actively investigate the taxavoidance implications of intellectual proper-ty rights infringement, particularly in unli-censed business software.

• Nordics: Sweden, along with Denmark,Finland and Norway, had no “civil search andseizure” remedy during most of the 1990s.The existence of a civil search and seizure rem-edy is an essential enforcement tool utilizedby intellectual property rights holders—including the software industry—to protecttheir rights. The introduction of a TRIPS–com-pliant civil search and seizure remedy inSweden and across the Nordic region has con-tributed to the ability of intellectual propertyrights holders to conduct effective, targetedand proportionate enforcement actionagainst those who infringe their rights.

• United Kingdom: The United Kingdom’s gov-ernment has increased its focus on softwarepiracy. It created two major initiatives: thePatent Office IP Crime Group, set up to com-bat intellectual property crime, integratingsupport from industry and enforcementorganizations; and the Creative Industries IPForum, established to focus on creativeorganizations impacted by the increase inpiracy levels. The UK government also

endorsed an IP Crime Congress in 2005,which included participation from the PatentOffice, The UK Home Office, the Departmentof Trade and Industry, HM Customs andExcise, the Assets Recovery Agency and theRisk and Security Management Forum.

• Saudi Arabia: To combat the 52% piracy ratein Saudi Arabia, the Ministry of Interior col-laborated with BSA on several communica-tion campaigns targeting businesses, endusers and resellers. The Ministry produced aposter for distribution in computer storesthat warns buyers of the dangers of piratedproducts and highlights the legal conse-quences of using illegal software. TheMinistry also distributed an “InformationGuide to the Copyright Law” which providesbackground on copyright law, the enforce-ment efforts of the Ministry, the dangers ofsoftware piracy, and the rights and responsi-bilities of the end user as a means of raisingawareness about the laws that protect intel-lectual property in Saudi Arabia.

• Taiwan: The Taiwanese government has led aconcerted effort to tackle software piracy. Thegovernment declared 2002 as the “Action Yearfor IPR Protection”—stepping up its enforce-ment efforts against software piracy and join-ing with industry to promote greater aware-ness about software management. In 2003, thegovernment announced the “IPR Three-YearAction Plan,” which included software-relatedpolicy, education and enforcement initiatives.The copyright law was strengthened byamendments in 2003 and again in 2004. In 2004alone, the government, working with industry,launched a software legalization campaignthat included six software asset managementseminars in four cities and sent educationaldirect mailers to 30,000 businesses. On conclu-sion of the educational outreach portion of thecampaign, an enforcement campaign was con-ducted to remind the corporate sector of thegovernment’s resolve to weed out softwarepiracy. The enforcement actions led to a num-ber of successful criminal and civil cases relatingto the use of infringing software in the work-place. The determination of the government topublicly protect intellectual property rights,and the support of the courts and legal system,has been integral to the reduction in the piracyrate in Taiwan. These reductions have helpedfuel a 21 percent increase in the number ofTaiwanese software companies and a 35 per-cent increase in software jobs.

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Project Summary and Methodology

Background

In early 2003, IDC completed its first project for theBusiness Software Alliance (BSA) on the economicimpact of lowering software piracy. That workrelied on a body of work begun in 2002 on the eco-nomic impact of Information Technology on 57individual countries in terms of job creation, com-pany formation, GDP growth and tax revenues. Theresults were distributed across the globe.

This project is an update to that earlier work includ-ing an additional 13 countries.

Since that first project, the IT industry haschanged—IDC's five year forecasts are lower, thedisparity between emerging and developed coun-tries in terms of IT spending growth are higher, andPC software piracy is a point or two lower.

But as with that project, the impact of loweringsoftware piracy is significant in terms of theincrease in jobs, GDP, and tax revenues that wouldresult. As in the previous study, the majority ofbenefits from lowering piracy occur in-country. Thisis because even U.S.-based software is locally deliv-ered, installed, and serviced.

The primary output of the Piracy Impact Model(PIM) is the quantification of the jobs, tax revenues,and economic growth that could be gained by low-ering a country’s software piracy by 10-points overfour years. The objective is to create a uniformmeasure of the benefits that accrue to a countrythat tightens and enforces its intellectual propertylaws and educates its citizens on the benefits ofdoing so.

Economic impact methodology

a. IT Spending—spending by consumers, business-es, governments, or educational institutions oninformation technology, including hardware, soft-ware, services, and data networking, as measuredin the IDC Worldwide IT Spending Trends reports(The “Black Book”). This spending excludes alltelecommunications services revenues and somesmaller emerging technology areas such asvideogames (including PC gaming software).

b. Tax Revenues—potential VAT or sales tax rev-enues from the sale of IT hardware, software, orservices and business and personal income andsocial taxes.

The basic approach was to first take total income,profit, and social taxes within a country and deter-mine what proportion was attributable to IT activi-ties. The country totals for taxes and employment

were gathered from the OECD and other publishedstatistics, the total IT employment or sales weretaken from the IDC Economic Impact Model.Adjustments were made then based on assump-tions that IT employees have higher income thanthe average employee in a country. IT-related VATtaxes were calculated by analyzing the total ITspending in a country and determining what por-tion would be subject to rebate, since VAT taxes arecollected only on final outputs. Since most IT spend-ing is by business, not much VAT is paid on IT. Thenon-rebated portion was derived from IDC data onIT spending by vertical market.

IDC reviewed the data including examining inde-pendent estimates of local IT salaries, with inputfrom local analysts as well as IDC's and IDG's (IDC’sparent company, operating in over 65 countries)Human Resource and Tax departments. These gaveIDC additional sources on salary levels, income taxrates, and corporate income tax rates for variouscountries. IDC looked then at the average percent-age of salary paid in taxes, relative tax percentages(country to country), salary per capita compared toGDP per capita, etc. In this way, the tax revenuemodel was calibrated for the final input to the PIM.

c. IT Employment—the number of peopleemployed (full-time-equivalent) in hardware, soft-ware, services, or channel firms. The definitionexcludes employment in occupations in IT-relatedindustries, such as web graphics design, venturecapital, trade magazine publishing, etc.

Headcounts by category were first modeled basedon estimated IT revenue per employee for hard-ware, software, or services companies based onstandard ratios, and by levels of spending peremployee by technology type for channels employ-ees and IT professionals.

IDC had excellent input for modeled employmentfigures, including published IT headcount figures inEurope, a model created in Asia Pacific, and IDCpublished data in the US from the late 1990s, aswell as the output from the 2003 study, all of whichhad been validated by local government and indus-try officials.

d. Contribution to GDP—end user spending or busi-ness investment in hardware, software, or services—essentially IT spending from all sources, as measuredin IDC’s Worldwide IT Spending Trends reports.Although GDP is a measure of government and con-sumer spending plus business investment plusexports minus imports, for the purposes of this proj-ect IDC did not account for exports or imports. Thus,the term "contribution" does not mean a direct dol-lar input to GDP.

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e. Local Vendor Revenues—revenues to vendors thatare indigenous or headquartered in the country.

In determination of the economic impact of IT, IDCdeveloped an estimate of the percent of IT spend-ing accruing to local vendors. This was based onIDC’s understanding of the local market from in-country research and published reports. It was alsochecked with government statistics on imports andexports of hardware and software, and with theIDC local analysts during calibration and reviewexercises. In most countries, hardware systems wereimported (although local suppliers might providecomponents), software was imported, but mostservices and channels were local.

Piracy impact methodology

a. Piracy—the unauthorized copying, reproduc-tion, usage, or manufacturing of packaged soft-ware. This unauthorized use can run the gamutfrom unauthorized copying or downloading ofsoftware or purchasing software copied illegally, tocorporate overuse (more clients than paid for) oflicensed software.

b. Piracy Rate—the percentage of softwareinstalled in a country without a license, as measuredby the most recent BSA study, conducted by IDC.The piracy rates used were for calendar year 2004.The study is available at www.bsa.org/idcstudy

c. Percent Lower piracy rate—a theoretical futurepiracy rate by taking the current rate and lowering itby X percentage points, e.g., if the piracy rate is 50%,lowering it by 10-points to 40%. Specifically, thestudy focuses on the impact of a 10-point reduction inthe BSA software piracy rate achieved through a 2.5point drop per-year from 2004 to 2009.

d. Piracy Losses—the theoretical losses from piracyin terms of revenue to software vendors, software-related revenues to services firms, and software-related revenues to channel players. Employmentlosses are calculated from revenue losses, and onlyapply to employment in the IT industry, not IT pro-fessionals in end-user organizations (although IDCbelieves there is some impact.) Tax revenue losses

are calculated from revenue losses (VAT and corpo-rate income tax) and employment losses (incomeand social taxes). The software losses are based onthe piracy rate and equal the value of softwareinstalled and not paid for, adjusted by IDC's soft-ware analysts to account for software in a country(such as enterprise and server software, not meas-ured in the annual BSA study).

e. Piracy Benefit—the difference in "losses" fromdifferent piracy rates, with the lesser loss subtract-ed from the larger loss.

f. Piracy Effects—the method by which the studycalculates the impact of piracy on an industry meas-ure. The study calculated different effects frompiracy on software, services, and channel spendingand employment, and tax revenues. In the case ofsoftware, IDC used a linear relationship between afalling piracy rate and growing software spending.(E.g., if a country has a 50% piracy rate and $100million software spending, lowering the rate to 0%would create a theoretical $200 million in softwarespending).)

While not every piece of formerly pirated softwarewill be purchased if piracy rates go down—some willbe substituted, some not used—at the same timelower piracy rates yield more economic activity thatstimulates more software production and purchase.The two countervailing forces seem to cancel eachother out. This is the conventional assumption formost previously published piracy studies.

IDC confirmed this by analyzing the ratio of soft-ware spending to hardware spending for the coun-tries in the study, and found that, in general, coun-tries with higher piracy rates had a lower software-to-hardware ratio. Adding calculated softwaregains from lowering piracy 10 points often led to asoftware-to-hardware ratio that was still lowerthan countries with a piracy rate at the new target.

For software-related services and channels losses,IDC assumed that these firms could still obtain somerevenues on pirated software. The vulnerable por-tion of software-related revenue varied by country.

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FAQs

Q. What is the strength of IDC’s methodology?

A. First, it is based on what IDC knows well—ITspending and IT markets. Second, it is the same foreach country, none of which define the industry thesame way in their own statistics. The ability to com-pare countries enhances IDC’s confidence in accura-cy. Third, IDC has been meticulous in it’s definitionsand description of methodology.

Q. What is not covered in this study?

A. IDC did not look at the productivity impactsfrom the use of IT or software, although usinginternal resources to support pirated softwareclearly has some impact on a using organization.Nor did IDC quantify the economic benefits of tech-nology-driven economic growth, even thoughother studies indicate that a 10% rise in IT spendinggrowth can lead to a 13% rise in GDP growth.

Q. What makes IDC’s project different fromother studies?

A. There are a number of methodology differences,but mostly the use of IDC’s Worldwide IT SpendingTrends report numbers as a basis for the EconomicImpact Model gives IDC an extremely solid basis fordeveloping economic and piracy impact calcula-tions. Also, IDC does not include what economistscall “indirect” economic impacts—such as benefitsto travel or logistics companies serving IT firms.

Q. If piracy rates are lowered, won't userssimply stop using the software that wasonce "free"?

A. Yes, some will not use the previously piratedsoftware, as some will substitute other software.But some will pay for it. However, a lower piracyrate will stimulate more economic activity (whichcan pay for more software), as well as more soft-ware production, more marketing, more R&D, andbetter products, which will spur more demand. IDCbelieves that these effects counter one another,making a linear relationship between lower soft-ware piracy and higher software-related spending,employment, and tax revenue justifiable, especiallysince IDC is working within a narrow range of pira-cy change (10 points). We have confirmed this bylooking at the ratio of software spending to hard-ware spending in the countries in the study.Countries with higher piracy rates tend to havelower software-to-hardware ratios. In many cases,lowering the piracy rate by 10% to that of anothercountry still yields a new level of software spendingthat is below that of the country with the lowercurrent piracy rate.

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Appendix Data

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ConclusionBecause software has moved to the forefront of global growth industries, software piracyreduction can be a strategic tool for unlocking vast economic growth—creating new jobs,taxes and business opportunities. Even a modest and achievable 10-point reduction in soft-ware piracy enables consumers, local entrepreneurs, workers, governments, and economiesto benefit.

With decisive and determined efforts to reduce software piracy, the IT sector’s rapid rateof growth can not only continue but accelerate. More rapid IT growth delivers jobs,taxes and other benefits faster. Continued reductions in software piracy can be a policytool that governments use to unlock the digital economy’s full economic potential intheir market. With the right policy choices, a new era of innovation and opportunity canbe spread around the globe.

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