BUSINESS SOFTWARE

The Problems with Using Pirated Software

Using pirated software in your business could subject you to lawsuits, attorneys’ fees and leave your operating systems without patches or technical
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For entrepreneurs starting a company by the bootstraps, it may be tempting to minimize expenditures by utilizing a pirated copy of Microsoft Office or other popular programs.

Pirates save thousands on licensing fees, avoid hassles like shipping and credit terms, and can produce enough copies of virtual tools on-demand to keep entire states, let alone small companies, running smoothly for decades.

In truth, a whopping 35 percent of all software installed on PCs worldwide last year was illegitimate, according to a study conducted by the Framingham, Mass. research firm IDC for the Business Software Alliance (BSA), a trade group in Washington, D.C. The unauthorized distribution and use of copyrighted computer programs accounts for more than $34 billion in global losses annually, the report says. And while you shouldn't be shooting colleagues sly glances over the boardroom table - America has the lowest piracy rate at 21 percent after all - there's a valuable lesson to be learned here.

Piracy, like any crime, just doesn't pay.

"Businesses face serious risks because of software piracy," explains BSA spokesman Diane Smiroldo. "Apart from associated penalties, there's the improper maintenance of accuracy and security, not to mention ethical problems, to consider. In the end, dealing with these issues will cost you more than purchasing the fully licensed software in the first place."

Here's the problem with using pirated software in your business:

It's Illegal

Guilty parties may be subject to civil litigation, arrest and/or criminal prosecution, with penalties ranging from fines as much as $250,000 to prison sentences of up to five years' length.

Under the law, companies can be held liable for employees' actions as well. If an associate is caught installing unauthorized software or downloading it off the Internet, a lawsuit can be brought against your company for copyright infringement - even if management is unaware of the offense.

What's more, at any given time, the BSA has more than 600 open investigations within the U.S. and Canada. Cautions Smiroldo: "Unless you have no current or former disgruntled employees, you're only one phone call away from becoming the target of an investigation."

Never mind the sky-high legal costs and dips in daily productivity associated with defending against such charges - the damage associated allegations alone can cause to fledging firms' reputations is irreparable. Copyright holders may immediately freeze unauthorized usage of their applications as well, potentially shutting down your entire operation overnight and levying statuary damages of up to $150,000 for each program copied.

No Patches, Fixes or Tech Support

Even those who manage to avoid fines or litigation pay in the end, says Smiroldo, who further cites the following major drawbacks to utilizing illegally-copied content.

Pirated software is unauthorized; its users, unacknowledged. Over the product(s)' lifespan, you'll receive no ongoing bug fixes, improvements or - worse, should show-stopping problems arise - technical support. Unlike manufacturers, cracking groups - teams of bedroom coders who remove copy protection and spread software via the Internet - further make no guarantees. Programs may be functionally crippled, prone to unexpected failure or work improperly, if at all.

Anti-piracy checks hidden by vigilant programmers can also randomly corrupt data, insert embarrassing remarks or secretly report proof of illicit activities to the program's creators.

Freely-issued downloadable patches, or program updates, that correct errors and add bonus options, may not install to boot.

Manuals, training cards and users' guides are generally missing from pirated programs too. Good luck learning to master that new database or accounting package without proper documentation.

Legal ownership of content created using stolen software isn't the easiest thing to argue in court either. Profits generated from the usage of pirated software are additionally subject to seizure.

And clients, should they become aware of such activities, have been known to justifiably pull contracts, cut ties to and even report offending firms to appropriate authorities, e.g. the FBI.

It's Anti-Entrepreneurial

If you've started a business, you have a product that you want people to pay for. Same with Bill Gates. Same with Steve Jobs. If you use illegal copies of their work, what's to prevent someone from using illegal copies of yours?

"You wouldn't drive a new car off the dealer's lot or take a computer from a retail store without paying for it, would you?" asks Smiroldo. "Software developers spend years creating programs, and a portion of every dollar spent purchasing it is reinvested into R&D so newer, more advanced applications can be produced. Piracy harms both consumers and the industry."

To put things in perspective: According to the BSA, dropping piracy rates just 10 percent by 2009 would fuel the creation of 120,000 new IT jobs and $132 billion in additional economic growth - a bounty of commercial opportunity.

In short, the use of pirated software - or other products - can create all sorts of troubles any sensible entrepreneur would smartly avoid. So the next time you look at a program's price tag and blanch, remember this: Initial costs aside, you could be saving millions in hassles - not to mention attorneys' fees -- in the long run.

Last updated: Sep 1, 2006

SCOTT STEINBERG | Columnist | CEO, TechSavvy Global

Scott Steinberg is the CEO of strategic consulting and product testing firm TechSavvy Global and the author of ?The Business Expert?s Guidebook.? A sought-after keynote speaker and expert witness, he?s among the world?s most-quoted high-tech analysts.

The opinions expressed here by Inc.com columnists are their own, not those of Inc.com.



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