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Thu 18 Dec 2008 04:00 AM

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On high alert

There has been a marked rise in the number of vendors clamping down on software piracy during the past couple of years. Violators have been raided, businesses targeted and governments pressured to catch perpetrators.

There has been a marked rise in the number of vendors clamping down on software piracy during the past couple of years. Violators have been raided, businesses targeted and governments pressured to catch perpetrators.

The UAE, a market firmly in the BSA's sights, has seen an aggressive awareness campaign waged through the media. It is time to take stock of these manoeuvres and ask what the channel can do to help rid the business of this severely detrimental influence.

Margins for the channel in the Middle East software sector are healthy in comparison to other highly commoditised arenas, especially when it comes to systems integrators that offer solutions and services around operating systems and enterprise software. But the margins, and indeed the business, of channel players who count on computer software as a key way of making a living could be even better.

According to figures from research house IDC, the software piracy rate in the UAE currently stands at around 35%. The analyst firm also reveals, quite unequivocally, that was there to be even a minor reduction in the piracy rate, there would be a pronounced impact on the UAE's economy.

Spending on IT would significantly increase and hundreds of jobs would be created. According to IDC, just a 10 percentage point drop in software piracy in the UAE would deliver the emirates an extra 710 new jobs, garner a further US$40m in tax revenues and inspire US$240m in economic growth. More importantly, IDC's findings suggest "services and channel firms" would be the organisations most at benefit from such a reduction.

That is in the UAE, supposedly the most developed or mature market in the region. However, in countries which suffer from under regulation it is highly likely that the benefits of slashing software piracy by even a small amount would be even more extensive.

One problem, as far as IDC sees it, is not just that piracy exists and is severely tainting the IT software and services landscape, but that people are not aware of its extent. It was suggested, only last year, that regionally the market for illegal software is larger than that for legal software. And despite the Business Software Alliance (BSA) and the Arabian Anti-Piracy Alliance's (AAA) persistence, that situation is unlikely to change dramatically.

"The discrepancy between the perceived and actual value of software piracy demonstrates the immense lack of awareness to software usage, responsibility and management," said Julian Swan, director of compliance marketing EMEA for the BSA. "Organisations are encouraged to manage operational risks seriously and this must include the threat of using illegal software," he added.

What is most clear from a channel perspective is that it is the honest and authorised resellers that stand to gain the most from tackling software piracy. The incentives are there, without doubt.

But whose responsibility is it to grapple with software piracy? Is it the vendors who have the funds to launch the concerted efforts needed to cut rates? Or perhaps, it is dedicated authorities such as the BSA and the AAA, who have already been highly influential, that should bear the brunt of the responsibility?

What comes out in the next few pages - as we talk to representatives from all tiers of the software spectrum - is that the channel has an active and influential role to play as well.

Whether it is the distributor whose already highly-pressurised margins are threatened by the supply of illegal software or the reseller that offers the breadth and locality to be so effective at ousting pirates, one thing's for sure: the channel has a duty to take a stand. BSA & Microsoft

The Business Software Alliance (BSA) has been the largest aggressor in the fight to eradicate software piracy, not just around the Middle East, but globally. The non-profit trade organisation lists the largest IT vendors among its members, including Microsoft, Symantec, Adobe, Autodesk and Cisco.

Jawad Al-Redha the vocal co-chairman of BSA in the Gulf region and IPR manager of Microsoft's Gulf operations, says that the channel has a huge role to play in battling piracy. "The channel fully recognises the urgent needs to tackle software piracy as piracy has major detrimental effects on the economy," said Al-Redha.

"Fighting piracy need not always have to involve financial resources; what is needed is a commitment to eliminate piracy by spreading awareness about the impact of piracy and violation of intellectual property rights."

Incentives to fight piracy, according to Al-Redha, are obvious. "One of the biggest threats is loss of revenue to all parties concerned," he said, adding that the battle for channel empathy is slowly being won.

It's encouraging to note that in recent months systems integrators are acting more responsibly and advising the end-user about the importance of original software. However, we believe the channel could play an even more active role to persuade customers from opting for pirated software."

What should a channel partner do if they suspect a peer is involved in illegal software trading?

A channel partner must immediately report such illegal activity to the concerned authorities. It is important for channel partners to realise that they are directly affected by such illicit trading practices through the loss of sale and potential customers. Moreover, helping authorities weed out such illegal traders will help send a clear message to society that software piracy is not tolerated at any level.

Do you think there is any danger of software piracy in this region increasing in the future, or is it falling?

Our concerted efforts have led to a significant improvement in the piracy situation of the society, and we intend to further enhance our drive through a wider network of partners and more innovative methods of combating piracy. As such, we are confident that our efforts will lead to a significant decrease in piracy rates. Autodesk

As a major producer of computer automated design (CAD) software, Autodesk is a firm believer that education is one of the major tools in its arsenal to combat intellectual property rights violators. "It is about educating the market, I'm not sure everybody even realises they are pirating," said Ken Bado, executive VP for worldwide sales and services.

Unlike the AAA, which is adamant that a hard line is the only stance to take with violators, Autodesk suggests there are two approaches to customers and partners that are unknowingly, or even knowingly, involved in software piracy in one form or another. "We will try and work with our customers to become legal. There is a carrot and stick, and I hate the stick, but we will do that if we have to - but it is really a course of last resort."

In terms of its channel partners, Autodesk expects them to be active in challenging software piracy and says it is, in fact, the channel that brings violations to their attention. "They [partners] are actually the ones that are more aware because they are closer to the customer and they will bring the issue to us. We don't mind delivering the tougher message to the customer," declared Bado.

The clear message Autodesk is keen to impart to the channel when it comes to software piracy is that they can act as the vendor's eyes and ears. In essence, the channel offers far more coverage, both geographically and in terms of partner numbers. In collaboration with vendors such as Autodesk, which is willing to play the bad cop if needed, the channel plays an active part in tackling piracy.

What should a channel partner do if they suspect that a peer is involved in illegal software trading?

Our contacts with the channel are very clear and it is not one way. It is a two- way thing where we respect our obligation towards the channel and they respect us. We would not expect any of our channel partners to be involved in illegal software dealing.

If we happen to know they are then we would evaluate it on a case-by-case basis. We have not come across many of our channel partners in the Middle East doing this. We have sensible channel partners and we are selective. That's why we have authorised channels and there's an unauthorised one.

Do you think there is any danger of software piracy in this region increasing in the future, or is it falling?

I can't comment, I don't know. We hope the answer is that it would reduce, but to be honest I am not sure. Arabian Anti-piracy Alliance

The Arabian Anti-Piracy Alliance (AAA) does not just focus on software piracy but all elements of copyright infringement. Although it works closely with the BSA, the AAA's main remit is to interact with governments around the region and aid them in their efforts to tackle and deter would-be intellectual rights violators.

And great progress has been made according to Scott Butler, CEO of the group. "It is decreasing, I'm very sure. Now, it is decreasing a lot more rapidly in those countries that have an efficient regime," explained Butler.

"The UAE is by far the leader in the region, the police are actively and systematically enforcing intellectual property rights and raiding sources of piracy," he added.

Butler is immovable on the fact that the UAE is so successful in fighting piracy due to its "deterrent sentencing", often including hefty incarcerations. Something, he says, that is not being done in Saudi Arabia. "In Saudi Arabia there is no deterrent. There is no imprisonment and thus no fear, so there's much higher piracy rates in KSA," said Butler.

Piracy is such a danger, according to Butler, that it is preventing the region's IT market from developing, directly killing channel business. "The losses are absolutely huge. The losses to the channel and investment in IT as a result in the development of that sector is way behind where it should be," he commented.

What should a channel partner do if they suspect a peer is involved in illegal software trading?

They can alert the BSA via their own hotline. They should report it to the BSA and also, in the UAE, to the Ministry of the Economy itself.

Do you think there is any danger of software piracy in this region increasing in the future, or is it falling?

I am certain that it is decreasing. It is doing so in those countries that have a deterrent sentencing policy, such as the UAE. But in Saudi Arabia, piracy rates remain high and there is no fear in the market. In Saudi Arabia, the investment is actually dwindling, it's entrenching, it is collapsing to pitiful levels where it is a market that is not even worth investing in. They could turn it around, but only if they do something about it. PC Time

Common with what Butler at the AAA has to say regarding the success of tackling piracy in Saudi Arabia, Osama Mallisho, corporate sales manager at IT reseller PC Time, which is headquartered in Jeddah and sells software from Microsoft, Corel and Adobe, is certain that the governing powers are not doing enough to stamp out software piracy.

"The issue is that with a lot of cases problems get solved under the table without the individual having it go to the government. That on its own allows the counterfeit business to increase," complained Mallisho. "If they make sentences harsher, maybe with prison time, and they apply it on everyone, it will definitely work," he insisted.

Piracy, it would seem, is having a severe effect on resellers and retailers in Saudi Arabia and around the region, as there is grounds to suggest that the illegal market outstrips the genuine one.

Whether this is true or not - PC Time suggests the illegal market is worth roughly the same size as the official one - is largely irrelevant, the point being that it is such a serious problem some channel players are conceding huge chunks of business to it.

"Sometimes we lose sales by going against small shops that provide copied software for their clients for free," continued Mallisho. "Most of the time it affects the SMB business, but percentage wise it is worth around 25%."

What particularly exasperates Mallisho is the fact that there are known hot spots for the sale of pirated software that have yet to be shut down. He cites the Madina Centre in Jeddah as one such place. "It is well known for any illegal software," said Mallisho. "I have no idea why authorities have not done anything about it. Maybe they have, but it's too hard to fight."

Is software piracy really enough of a priority for the channel to invest time and money in fighting?

It is a priority for the government to fight, not the channel because it is an endless maze. Most customers until now do not see the value of buying original software since they can get an illegal version for a lot cheaper and it works. We try and help by sending them quarterly newsletters that we get from vendors.

Do you think there is any danger of software piracy in this region increasing in the future, or is it falling?

Lately, in Saudi Arabia, piracy has been getting bigger and it also includes movies as well. Salesmen are walking around with bags of counterfeit products and they will sell it on the street, so you can imagine how bad the software piracy situation is. I just hope the Ministry of Information will do a better job at finding the people responsible for the piracy. Quality Gulf

The Quality Gulf Group of Companies, which encompasses hardware provider Touchmate and Dubai reseller King Computers, is an ardent opponent of software piracy. As a manufacturer of PCs and other devices, Touchmate ensures its computers come fully equipped with operating systems.

Vasant Menghani, managing director at Quality, upholds that larger vendor counterparts offering PCs without operating systems or even open source systems are indirectly encouraging software piracy.

"In that case I am very sad to say that HP, Acer and all of those companies are helping pirates because they are selling their PCs without operating systems," asserted Menghani. "They are giving the chance for the user to take the machines without any OS and load pirated software," he argued.

Turning his attention to shop owners on Computer Street, Menghani insists that despite the competitive trading mentality, the reseller community has a duty to tackle software piracy as and when it arises, especially as it is cuts into the profit margins of the channel. He also claims that the channel would benefit from selling PCs readily equipped with a proprietary OS as the margins are higher.

Although praising the work of the BSA - he says reps often visit Computer Street traders to offer assistance - Menghani says the alliance's approach must include more education to thwart software violators.

What should a channel partner do if they suspect that a peer is involved in illegal software trading?

They have to immediately inform either the software vendor or the BSA, or even us and we will inform the authorities. It is our duty and the BSA should give us an anonymous e-mail address where we can inform it if we find anything out without having to give a name. That would be safer because in the channel chain relations are very important.

I want to ask the BSA one question though: What does it do for the channel apart from closing showrooms? It should also educate the channel about the meaning of piracy and how to control it, as well as showing the benefits of original software. The BSA is taking the simple route of catching the person carrying out piracy, closing their showrooms and putting their names in the public domain. That should only be the final action.

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