The following text is copyright 2004 by Network World, permission is hearby given for reproduction, as long as attribution is given and this notice is included.

Actual losses or wishful thinking?

By Scott Bradner

The Business Software Alliance is out with its latest guestimate of the loss that software vendors suffered in the past year due to piracy. The study methodology looks reasonable but the message they read into the results and that most of the press accepts is basically flawed.

The Business Software Alliance (BSA) (hrrp://www.bsa.org) is best known for its vigorous enforcement of software licenses by conducting audits of business to be sure that the business has licenses for all of the software that it's using. Based on their press releases, BSA seems to be quite successful in the audit business.

In early July released a "Global Software Piracy Study." (http://www.bsa.org/globalstudy/) Their summary of the study states that: "thirty-six percent of the software installed on computers worldwide was pirated in 2003, representing a loss of nearly $29 billion." The first part of this claim I can believe but I rather doubt the second part.

The study itself was conducted by International Data Corporation (IDC). The report on the BSA web page contains a description of the methodology IDC used to conduct the study. It is not as detailed a methodology description as it could have been but, based on what it does say, IDC approached the problem about as well as one can approach a problem where most of the actual data can only be estimated.

But there is no way the data in the report can support some of the things the report says. In particular, there is no data that supports the assertion that the estimated amount of piracy cost software vendors "nearly $29 billion."

There is no real problem with the BSA trying to figure out how much software is installed on computers around the world nor is there a problem with the BSA trying to figure out how much of that software was legitimately purchased. From these two facts the BSA can figure out what percent of the software has been pirated, and they do so. But they cannot just multiply the estimate of the pirated software by the sales price of that software to come up with an estimate of the amount of money the software vendors would have made if there had been no piracy because they need to also figure out how much of the software would have actually been purchased if the user had to pay the sales price. The BSA does not do this, or if they do, they do not mention doing so in their report. The $29 billion figure looks impressive, but I expect the actual number is a very small fraction of that.

I can understand the BSA purposefully finessing the difference between actual losses and the value of pirated software but I do not understand the lethargy of a press core that blindly repeats the bogus claims. The initial report from Reuters (http://www.reuters.com/newsArticle.jhtml?type=technologyNews&storyID=5603588) even described the problem as "the global trade in pirated software" as if someone was making $29 billion from selling stolen software. I hope that someday the press will stop taking industry pronouncements at face value and actually think before they print.

disclaimer: Even for Harvard, $29 billion would be real money but I did not ask the university's opinion on the reality of the money.