Piracy And The Investment Cost For A Starting Company

1046 words - 5 pages

Whether we like it or not, we are in an era where a company cannot function without an Information System. Regardless the size, a starting company has to evaluate how much will it invest on Information technologies. Different factors modify this budget, among the most important are: size of the business, the industry the business is in, the knowledge on IT of the employees, and of course the price and availability of the software needed.
The main focus of this paper will be the availability of software. Price is definitely a factor that can make software more or less available, but it is not the only one. Another factor is the easiness of getting the same software on an alternative source, I am talking about piracy.
We cannot talk about Software Piracy until we define exactly what it is. It refers to the illegal use of software by end users. There are many ways in which an end user could get access to the software.
With websites like http://thepiratebay.se/, almost everything is available for free. For Software producers this is really a problem because they admit they are losing nearly 50% of potential revenues due to piracy. Approximately 58% of users in the Middle East and Africa region are running pirated software. (Barojos, 2013) With numbers like these, is easy to see why Software producers are worry about piracy. But let’s focus a little more in what drives these users to acquire pirated software.
If we analyze things a little further, the number one issue isn’t piracy. It is how software producers package (distribution channels) and license their products (economic revenue).
Is too hard to fight against pirated software and at the same time focus on develop your product. Instead of focusing on ways of protecting the software, all the efforts show go to find ways of enabling final users to license the software the way they want.
Software developers claim to lost huge amounts of money based on every single time their software is used without a license. What is not considered is that the revenue they were losing was not necessarily revenue they would have ever had.
One example is students. There is no way for students to actually afford the software, so they find alternative ways to use it. If we take this example to the business world we could compare students with small and starting business. They need the software, but they certainly don’t have a lot of disposable budget, so would you rather ‘land and expand’ that account, or miss the opportunity altogether? (Barojos, 2013)
Piracy on a large scale is clearly detrimental to profits; a strategic tolerance towards some piracy may actually increase profits. (Ernan, Vijay, & Ashutosh, 2004) Diffusing the software to its target market increases the size of the user base, resulting in benefits to legal buyers due to network externalities.
“Network effects are among the most powerful strategic resources that can be created by technology based innovation.” (Gallaugher,...

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