Twenty Percent of U.S. Software is Unlicensed, Says Study

California, Illinois, Nevada, Ohio, have highest rates of unlicensed software.

by / July 22, 2008

The theft and use of illegal personal computer software is well above the national average in some of the nation's largest and fastest-growing states, while the impacts are serious and wide-ranging. These are among the findings of the 2007 State Piracy Study, released last week by the Business Software Alliance (BSA), an international association representing the software industry and its hardware partners.

The national average for software piracy in 2007 was 20 percent, meaning that one in five pieces of PC software in use in the United States was unlicensed. States with piracy rates well above the national average include California, 25 percent; Illinois, 22 percent; Nevada, 25 percent; and Ohio, 27 percent. States closer to or below the national average include Arizona, 21 percent; Florida, 19 percent; New York, 18 percent; and Texas, 20 percent. The study was conducted by IDC.

Software piracy in the eight states studied cost software vendors an estimated $4.2 billion, said BSA in a release, which is higher than the national figure for all other countries in the world except China. Lost revenues to software distributors and service providers were an additional $11.4 billion, for a total tech industry loss of more than $15 billion.

Software piracy also has ripple effects in local communities, continued BSA. The lost revenues to the wider group of software distributors and service providers ($11.4 billion) would have been enough to hire 54,000 high tech industry workers, while the lost state and local tax revenues ($1.7 billion) would have been enough to build 100 middle schools or 10,800 affordable housing units, or hire nearly 25,000 experienced police officers.

"The United States may have the lowest PC software piracy rate in the world, but still, one out of every five pieces of software put into service is unlicensed," said BSA Vice President of Anti-Piracy and General Counsel Neil MacBride. "Not only is this a problem for the software industry, but piracy also creates major legal and security risks for the companies involved."

"The most tragic aspect is that the lost revenues to tech companies and local governments could be supporting thousands of good jobs and much-needed social services in our communities," he said.

State Piracy Highlights

Among the highlights of each state's piracy picture:

  • Arizona has a higher-than-average use of non-brand-name sources for PCS and software plus a high number of consumers in the installed base, pushing the state's piracy rate to 21 percent, one percent above the national average.
  • California has the highest portion of workers in small business and a higher-than-average use of volume licensing, which may lend itself to lax software management. These factors push the state's piracy rate to 25 percent, one-quarter above the national average.
  • Florida had the lowest use of volume licensing and the smallest percentage of PCs and software purchased from non-brand-name sources, resulting in a 19 percent piracy rate, slightly below the national average.
  • In Illinois, 61 percent of consumers said they installed new software on older computers in 2007, compared to a national average of 51 percent. This helped drive the state's piracy rate above the national average, to 22 percent.
  • Nevada has one of the lowest rates of PCs and software bought from non-brand-name sources, but above-average volume licensing and installation of new software on old business computers. These factors pulled the state's piracy rate up to 25 percent.
  • In New York, the large number of financial firms and company headquarters helps reduce the inadvertent misuse of volume licenses, as these are companies are most likely to invest in software asset management (SAM) tools. The state's rate is 18 percent.
  • At 27 percent, Ohio has the highest piracy rate of the eight states studied, which results from its large installed base (5.4 times the number of 2007 PC shipments) and a higher-than average use of volume licensing.
  • After California, Texas has the highest proportion of 2007 PC shipments to ordinary consumers (40 percent), but it has a relatively low rate of installing new software on older computers. These factors balanced each other and left a state piracy rate of 20 percent.

How to Avoid Piracy

"For companies, the first step in avoiding the risks of software piracy is awareness of the problem," MacBride added. "Not only can the use of unlicensed software potentially trigger an external audit or even a lawsuit, it can also create security vulnerabilities, productivity breakdowns and hidden internal support costs."

"To avoid such risks, businesses must create, communicate, and enforce an effective software asset management (SAM) program," MacBride said. Organizations can download a variety of free software asset management (SAM) tools from BSA's Web site.

Individuals have a simpler task, MacBride said. "Just know where your software is coming from," he said. "The old adage that, 'if something seems too good to be true, it probably is' certainly applies when it comes to deeply discounted software from dubious sources. Not even an auction site such as eBay is able to keep its site free of illegitimate software."