1.1 Introduction
The information age, also known as the digital age is a term that is been used to refer to the present day era. This name alludes to the global economy's shift in focus away from the production of physical goods (the industrial age) and toward the manipulation of information. Advances in internet and other forms of digital technology have opened up new channels and methods for online business. They have also led to a situation where the same channels can be abused and misused. One of these forms of technology abuse, which is becoming increasingly prevalent these days, is the piracy of digital content (Holsapple et al, 2008)
The technological advances in this field have changed life styles around the world and have spawned new industries around the world. The speed at which information travels in the digital age has created avenues for other industries (informat.org).
Every individual comes across Piracy, which makes things easier for them to get, in terms of cost, speed and availability. Many organizations now have now adopted means of piracy because it extends their reach faraway locations reshape jobs and workflows and profoundly change the way they conduct business (siia.net).
The theme of this project is Software Piracy - A Case Study of Microsoft Corporation. In this paper, the author shall take a quick review of the Microsoft Corporation. The History, Structure and Organisation of Microsoft Corporation shall be looked into. Also, the Company size and geographic coverage of Microsoft shall be analyzed. From this, we try to analyze the market size of Microsoft and review its various products. We also highlight the Major Competitors of Microsoft Corporation in the Software Industry.
Also in this paper, the concept of Piracy shall be analyzed. A brief history into the emergence of Piracy shall be looked into, and also how Piracy has affected the software industry. Using Microsoft Corporation as a case study, the effects of piracy on the software industries shall be examined and also the various ways that Microsoft uses to combat software piracy. The researcher shall also try look at how much it has cost Microsoft to solve the issues of Piracy. After considering all these, the author shall try to proffer solutions to the problem of Software Piracy.
For the methodology, Research questions shall be outlined and the data needed to answer the questions shall be analyzed. The various constraints and Limitation of this project shall be analyzed and critically examined. The Risk Analysis of the project shall also be detailed.
1.2 Problem Definition
Computers have brought many benefits to society, but they have also created new social problems such as cyber crime, software theft, computer unpredictability, and invasions of privacy, hacking and the creation of viruses. In turn, these problems pose ethical issues for the youthful career of computing, which has yet to develop solid codes of ethics. This is especially the case with software theft or piracy, a rampant occurrence and a present-day version of the long-standing problem of intellectual property theft (portal.acm.org).
Software is the set of instructions which tell a computer what to do. Without software, a computer is just a useless piece of silicon, metal and plastic. As the cost of computer hardware has declined, the importance of software has increased-software is where the action and money are these days. In fact, the total world market for software is now worth in excess of US$50 billion a year (bsa.org).
Partly as a result, copying computer programs, often referred to as software piracy has become a major growth industry in schools, colleges and computer clubs. Young computer enthusiasts run off duplicate programs for their friends or for re-sale - just as one would make copies of video cassette tapes or an article (portal.acm.org). Software rental agencies have mushroomed, with no questions asked about what customers do with the software once they get it home. In commerce, industry, education and also government departments, there is rising evidence of the mass copying of software packages, often with the collusion of management (bsa.org). There are few individuals who can truthfully say that they have never used a program for which the developer has not been properly rewarded. Software piracy is an endemic social problem which software vendors have rigorously tried to combat (Forester, 1990).
1.3 Microsoft Corporation (Company review)
Microsoft Corporation is a world renowned company that is into development of various kinds of software. Most of Microsoft products have become household products used as standards in different companies. Due to this, Microsoft organizes various certifications which are used to test expertise specifically in their brand (Microsoft.com). We would take a quick look at Microsoft History.
1.3.1 Brief History
Microsoft Corporation was founded on the 4th of April 1975 by Bill Gates and Paul Allen in Albuquerque.
Mission
To help people and businesses throughout the world realize their full potential (microsoft.com).
Values
As a company, and as individuals, Microsoft Corporation values integrity, honesty, openness, personal excellence, constructive self-criticism, continual self-improvement, and mutual respect. They are committed to their customers and partners and have a passion for technology. They also take on big challenges, and pride themselves on seeing them through. Microsoft Corporation hold themselves accountable to their customers, shareholders, partners, and employees by honoring their commitments, providing results, and striving for the highest quality (Microsoft.com).
1.3.2 Board and Organization
1.3.3 Company Size and geographic coverage
1.3.4 Product and Sales (Market size)
Microsoft has five business divisions which are:
Windows and windows live division
Server and tools
Online services division
Microsoft business division
Entertainment and devices division (Microsoft.com)
1.3.5 Competitors
Although Microsoft is a strong force to reckon with, they also have strong competitors which include:
1.4 Aims and Objectives
This project aims at finding out why software piracy exists and the effects of software piracy. The result of this project can therefore be used in answering some of the problems of software piracy. The following have therefore been outlined as the Aims of this project.
In order to achieve those aims, the author intends to carry out the certain steps as the objectives. Therefore, the aims of this project shall be classified into two:
Personal Objectives
Project Aims
2.1 Introduction
This chapter shall look into what is meant by software piracy. A brief history of software piracy shall be discussed and various definitions of software piracy shall be outlined based on different journals and articles.
2.2 What is Piracy?
According to UNESCO, "Piracy includes the reproduction and distribution of copies of copyright-protected material, or the communication to the public and making available of such material on on-line communication networks, without the authorisation of the right owner(s) where such authorisation is required by law. Piracy concerns different types of works, including music, literature, films, software, videogames, broadcasting programs and signals" (portal.unesco.org)
2.3 A brief History into Software Piracy
According to the ehow website, "before 1980 one could freely copy computer programs and pirate without any legal ramifications in a sense. The U.S. Patent Office recognized copyrights on computer software, but only on the compiled version, not the source code. The patent office granted computer programs protection as a "literary" work, but as in a book you could not copyright particular words, only the work as a whole. Testimony and lobbying by Microsoft founder Bill Gates during the late 1970s finally led to legislation that started to protect software integrity" (ehow.com).
2.4 Software Piracy
Although many definitions of software piracy exist, the term usually refers to some form of unauthorized copying of software (Law & Wong, 2005). Piracy is defined as the unlicensed use of software by consumers. It includes unauthorised copying of software, the purchasing of unauthorised software copies and the practice of loading several machines with software licensed for use on one machine only (Prasad & Mahajan, 2003). Software piracy according to Microsoft Corporation is the mis-licensing, unauthorized reproduction and illegal distribution of software, whether for business or personal use (Microsoft.com).
Software piracy is a major segment of the greater digital piracy phenomenon. According to the Business Software Alliance (BSA, 2007), the estimated world piracy rate for business software applications alone was 35% in 2002, leading to losses of nearly $40 billion. While it has been suggested that some of these figures may, in fact, be exaggerated (see, for example, Hayes, 2006), the central argument still holds; software piracy is a big enough problem to be taken seriously (bsa.org).
Software piracy occurs in many ways, including unauthorized burning of CDs, casual sharing among friends, or over networks. The rapidly falling cost of peripherals such as CDs and floppy discs has made this problem all the more prevalent (Hinduja, 2001; Andres, 2006). Another reason for the rapid spread of piracy is the easy access to Internet bandwidth (Peace et al., 2003). While the almost prehistoric 300-bps modem would take over the Internet, and 9600-baud modems would take a little over a month, a 56.6-kbps model would be able to do that in a little under a week. The advent of broadband, however, has made this transfer possible in a matter of a few hours. It comes as no surprise that pirates relish broadband (Craig & Burnett, 2005).
Governments, software companies, and the Business Software Alliance (BSA) are making progress in stopping the illegal use of software products. But piracy remains a serious problem in all countries. These are the key findings of the sixth annual BSA-IDC study of personal computer (PC) software piracy around the world:
2.4.1 Types of Software Piracy
A body that Microsoft Corporation belongs to is called Software and Information Industry Association (SIIA). The SIIA is involved in aggressive campaign against software and content piracy. According to SIIA, the different types of software piracy are:
* Soft-lifting
Soft-lifting occurs when a person or an organization buys a single licensed copy of a software program and installs it onto several computers, in contravention of the terms of the license agreement. Typical examples of soft-lifting include, supposed "sharing" of software with colleagues, friends and family and then installing the software on home computers and laptops if not allowed to do so by the license."In the corporate environment, soft-lifting has become the most common type of software piracy - and perhaps, the easiest to catch" (siia.net)
* Hard-disk Loading
"Hard disk loading occurs when an individual or company sells computers that have been preloaded with illegal copies of software" (siia.net) This is often done by the vendor as a way to encourage the consumer to buy certain hardware.When one buys or rents computers with preloaded software, the purchase documentation and contract with the vendor must show which software is preloaded and that they are legal, licensed copies. If it does not and the vendor is not willing to supply the proper documentation, then software piracy is involved (siia.net).
* OEM Piracy/Unbundling
"OEM (original equipment manufacturer) software is software that is only legally sold with specified hardware" (siia.net)When these programs are copied and sold separately from the hardware, this becomes an infringement of the distribution contract between the vendor and the software manufacturer. (siia.net)
* Unauthorized use of Academic Software
"Many software companies sell academic versions of their software to public schools, universities and other educational institutions" (siia.net)The price of this software is often highly reduced by the publisher in acknowledgment of the educational nature of the institutions. "Using academic software in violation of the software license is a form of software piracy" (siia.net)Acquiring and using academic software hurts not only the software publisher, but also the institution that was the intended receiver of the software (siia.net)
* Counterfeiting
"Counterfeiting is the duplication and sale of unauthorized copies of software in such a manner as to try to pass off the illegal copy as if it were a legitimate copy manufactured or authorized by the software publisher" (siia.net) "Much of the software offered for bargain sale at computer trade shows and on auction and classified advertisement websites is counterfeit software" (siia.net) The price and source are often pointers as to whether the software is counterfeit. For example, if a particular piece of software normally retails for $2399 but is being sold or auctioned for $299 then one must suspect fowl-play. Likewise, if a particular software vendor only sells its products through certain authorized channels, then a purchaser would be wise not to buy the software at a trade show (siia.net)
* CD-R Piracy
CD-ROM piracy is the illegal copying of software using CD-ROM recording technology. This form of piracy occurs when a person obtains a copy of a software program and makes a copy or copies and re-distributes them to friends/family or for re-sale. (siia.net)
* Download Piracy
"Download piracy is the uploading of software onto an Internet website for anyone to download a copy" (siia.net)Anyone who uploads or downloads the software is making an illegal copy and is therefore guilty of software piracy. "Examples of this include the offering of software through a website, P2P network or share-hosting site" (siia.net, 2008)
* Manufacturing Plant Sale of Overruns and 'Scraps'
"Plant piracy occurs when a plant produces more copies of the software than it was authorized to make, and then resells these unauthorised overruns. Piracy also occurs when the plant is ordered by the publisher to destroy any CDs not distributed to its vendors, but the plant, in violation of these orders, resells those CDs that were intended to be scrapped" (siia.net, 2008)"While most plants have compliance procedures in place, there have been several instances of this type of piracy" (siia.net, 2008)
* Renting
Renting software for temporary use, like you would a movie, was made illegal in the United States by the "Software Rental Amendments Act of 1990 and in Canada by a 1993 amendment to the Copyright Act" (siia.net). "As a result, rental of software is rare" (siia.net, 2008)
2.4.2 Effect of Software Piracy on Market
According to the fourth annual Business Software Alliance (BSA) and International Data Corporation (IDC) study in 2006, for every two dollar worth of software purchased legitimately, almost one dollar worth was obtained illegally (portal.acm.org) In fact, the situation is so grim in some countries that the software Publishers Association (SPA) has named them "one-copy countries," which essentially means that the entire country's demand can be met by one single copy of legitimate software. Industry surveys estimate that for every legitimate copy of software, there are between two and ten illegal copies (Conner and Rumelt, 1991). In one study, more than half of those surveyed admitted that they had made unauthorized copies of computer software (Sacco and Zureik, 1990). According to IDC estimates, while the PC software market will grow $50 billion to $70 billion over the next 5 years, the value of the pirated software market will grow to about $40 billion.
Software piracy has many harmful consequences, not just to the creator of the product, but also to the country where the pirated software is sold. The local software industry is crippled by competition from high-quality yet extremely cheap pirated software from overseas. Lost tax revenues and lost jobs result from lack of a legal market (BSA, 2004). These effects are felt intensely up and down the software supply chains. In an April 2003 study funded by the BSA, the IDC concluded that reduction of worldwide piracy by 10% over 4 years would add more that 1 million new jobs and $400 billion in economic growth worldwide. These numbers are based only on the retail value of pirated software, as it has been suggested that the greater share of software piracy occurs because of "casual copying" wherein an individual provides copies of software to family, friends and others (bsa.org)
2.5 Benefits of Lower Piracy
The findings from a study carried out by the International Data Corporation (IDC) on the Impact of Software Piracy in 2008 show that:
More findings from the study carried out by the International Data Corporation showed that:
2.6 Advantages of Software Piracy
2.7 Disadvantages of Software Piracy
3.1 Introduction
A description of the organisation to be studied will commence in this chapter. This chapter will also outline the research approaches and strategies that will be applied to study the organisation selected. The research methods will be the inductive and deductive approaches, with an illustration of the underlying research philosophy they are each based on.
For this dissertation primary and secondary data will be used in the research for this work. Also the limitations and problems encountered in the course of the research will be examined with suggestions on how it may be corrected in the future.
3.2 Research Strategy
There are various strategies involved in the process of any research, these strategies include experiment, experiment is usually regarded as restricted, survey is much wider than experiment, a good example is questionnaires, case study; helps to emphasize on the real life characters of social relation, grounded theory; involves the field work techniques used for participant observation and also action research where the study seeks to correct existing problems. Gill and Johnson (1998) helped categorize the research strategies into four types.
The research will engage a combination of these strategies, important to this research will be case studies and survey. Also it will be essential for the research to adopt an inductive approach to research. With both inductive approach best suites the subject matter because observations can be made from the existing patterns and regularities being made by the organisation at hand.
However there is another research philosophy called the realist approach, this approach is both a combination of both the positivist and the anti positivist approaches. (Saunders et al 2003)
However according to (Walliman, 2001) although they both have their disadvantages and advantages they can all be used for the major purposes of research which are exploration, description and explanation (page228).
The inductive approach which is an important approach method that will be used for this dissertation will rely largely on information from organisations and company websites, including details obtained from organisation annual reports. The inductive approach will be the foundation of this research.
3.3 Case Study Approach
Saunders et al (2003) stated that a case study approach provides the opportunity to investigate the present worthiness of the existing literature and to provide for exploring deeper and creating new theories (page93). For this reason a case study approach has been adopted; this will give the researcher the opportunity to obtain direct answers to direct questions from mediums such as questionnaires, interviews and observation. The case study approach is necessary for the subject matter to be better understood because the effect of Software Piracy ; what better way to pin point the importance of information systems on organisations than case studies on successful organisations.
3.3.1 Difficulties in Collecting Data from Organisations
During the course of this research various obstacles were encountered, one of the major obstacles was getting real time information from Microsoft Corporation. Microsoft Corporation is a global organisation operating in many countries around the world. This served as a difficulty because various branches around the world operating in different societies with different cultures, but how this is achieved varies a lot on the region in which they operate.
Also, getting interviews from managers and officials in Microsoft Corporation was challenging as many of the offers were turned down. Most officials contacted asked the author to access all the information needed online because most information needed to know about Software piracy was online, which of course was not true.
3.3.2 Primary Data
The advantage of primary data is that it can generate results which are accurate representation of the sample.
A phone interview was conducted at the organization; the individual interviewed was a manager that represented Microsoft Corporation in Europe. The phone interview went well but could have been better if granted more time. Messages were sent to officials from SIIA and BCS, but insufficient information was gathered by this approach. Case studies are also an important aspect of this dissertation; case studies will be carried out on Microsoft Corporation to give a better understanding of how effective software piracy is to the system.
Life history of the organisation will also be essential in this research, this will allow for the author to know the past life and origin of the organisation; this will help develop a better understanding of the organisation's development over the past years.
3.3.3 Secondary Data
Secondary data collection will be acquired from articles and journals, printed books. The author will make a lot reference to Middlesex school of Engineering and Information Sciences. Also, the company's annual reports and trusted web sites publications will make up the secondary data that will be used in the course of this research.
3.4 Research Methodology Limitations
3.4.1 Reliability
In other to ensure that the information and data acquired during the course of this research are reliable, it was essential to combine different methods of attaining information so that they could be cross examined. For example it would be better to attain both primary and secondary data; this way they could both be compared hence making the information credible by looking for flaws or inconsistencies. The information and data acquired for the research are quite vast making it essential for them to be cross referenced.
3.4.2 Distance
This is the most common setback students have for researches; for this research the author decided to undertake a case study on one organisation because of the share stress of getting contacts. Software Corporation in London was chosen and with its headquarters located in the United States it would have been better to communicate with a representative from the United State. But because of the distance involved an arrangement for a representative here in Europe was the best option.
3.4.3 Time
A major constraint in this research is the shortage of time. Enough time is required to organize interviews with a representative of Microsoft Corporation. Also, time is required to gather information from questionnaires and other sources. Time is also required to carry out research and look into past papers, journals, articles and relevant books for the information required to make this project excellent.
3.5 Summary
This chapter started with the introduction of the following Software Corporation organisation; this is the organisation that will be studied in other to give more insight to the subject matter. Software is the strong hold of technology, a lot of investments have been made on it, over a billion was invested in the past decade.
The chapter also highlighted the limitation encountered during the research. Also the methods that will be adopted in the data collection of information for the research which include primary and secondary data collection methods were mentioned.
4.1 Survey Design and Data Collection
4.1.1 Questionnaire
A questionnaire can be said to be a "prepared set of questions designed to generate data necessary for accomplishing the objectives of the research project" (glencoe.com, 2008). Also simply put, a questionnaire is "a form containing a set of questions; submitted to people to gain statistical information" (Princeton.edu).
4.1.1.1 Advantages of Questionnaires
4.1.1.2 Disadvantages of Questionnaires
4.1.2 Telephone Interview
A telephone interview is one conducted by making a call through to the interviewee after arranging the date and time for the interview. Questions are asked and answers are given without the need for close contact.
4.1.2.1 Advantages of Telephone Interview
4.1.2.2 Disadvantages of Telephone Interview
Data Analysis
5.1 Microsoft and Software Piracy
A major software vendor that has been immensely affected by software theft is Microsoft Corporation. "The software vendor is daily plagued by rogue traders who sell bootlegged software to consumers who in turn buy them and make copies for friends or other reasons.
Microsoft has taken legal action against more than 100 high street computer shops over the last 18 months, and with the UK piracy rate currently standing at 27%, it is clear this is not a limited problem that occurs only rarely" (computerweekly.com)
In a further 10 separate cases, the following computer shops each faced court action and admitted to selling unlawful software.
The software vendor also faces the problems posed by unethical employees. An example is the case of a former employee of Microsoft who admits £3.8m software theft. "The 36-year-old former employee, described as an assistant at the Seattle company, was accused of stealing software worth a total £3.8m" (computerweekly.com). "He has admitted ordering software through the company's internal system after pretending that it was for corporate use" (computer weekly)
The latest employee to have been caught resigned from Microsoft early last year (2008). Other employees who worked with him are expected to face theft charges at a later date (Computer weekly).
5.2 Microsoft Corporation's Data
From tables 4.0 and 5.0, it is clear that positive changes in terms of revenue and income took place in 2008 for Microsoft Corporation. As earlier stated, one of the reasons for these changes is the anti-piracy tactics employed by the software vendor. The tables further show the effect piracy can have on the company's income and revenue.
5.3 Research Instrument and Data
As mentioned earlier, some of the data used for this research were obtained by means of a questionnaire. There two types of questionnaire. The two questionnaires were labeled A and B. Questionnaire A and B contained the same set of questions. The questionnaires labeled A were served to the 3rd British students in Middlesex University's school of Engineering and Information Sciences, while the questionnaires labeled B were served to the Asian (especially Chinese) students of the institution mentioned above. All the students were unemployed at the time the questionnaires were served. Hence, they cannot be regarded as people with high income. Also, all the students served were between the ages of 21 and 30 at the time the questionnaires were served.
Individuals' attitudes and behaviours are influenced by factors such as age, gender, income, experience and type of education (Jaeger, 2003) and Rahim et al (1999, 2000). Against this, I propose the following hypothesis:
H1: Demographic parameters have impact on the use of pirated software
The level of use of pirated software depends on factors such as pricing strategies, availability of original software and existence and knowledge of software copyright law (Lau, 2003). The existence of software copyright law varies from region to region (Mishra, 2008). It is from this that I propose the following hypothesis:
H2: Region and culture have impact on the use of pirated software
Discussions
From the findings, the effect of demographic factors, region and culture on software piracy shall be discussed.
Gender:
The study has revealed that gender has no impact on software piracy. Although other findings have shown that male computer professionals (18%) use more pirated software than female computer professionals (14%), but the difference between the genders have not been found to be statistically significant. One explanation for this is that people who have the same background exhibit the same ethical behaviours, regardless of gender (Mishra, 2008). These findings are consistent with the ones made by Sacco and Zureik (1990) who claim that gender have negligible effects on software piracy. Conversely, Lau (2003) claims that females have fewer tendencies towards software piracy than males. Following this, Ruegger and King (1992) claim that females have been found to be stricter in their ethical behaviours in business situations, but this cannot be said to be always true (Fallan, 1999).
Age:
Age has significant impact on software piracy. As earlier mentioned, the age-group of respondents was between 21 and 30. Studies have shown that younger people (16%) are more likely to use pirated software than older people (11%) (Mishra, 2008). Similar results were given by Gopal and Sanders (1997) who concluded that older people were less likely to engage in software piracy than younger people. Kini et al (2000) also reported that there is an "attitudinal tendency among younger people" to hold less moral behaviour towards software piracy.
Region/Culture:
The effect of cultural, economic and social circumstances on software piracy in different countries as mentioned by Cagiltay (1999) and Cakir et al (2002) cannot be over-emphasized. The survey questionnaires A and B used in this research were served to two groups of people (British and Asians-especially Chinese respectively). One thing to note from the responses was that all the Chinese people responded the same way. Responses from questionnaire A showed low inclination to software piracy whereas responses from questionnaire B showed very high inclination towards software piracy. While answering the questionnaire, a Chinese student exclaimed "why would I bother buying pirated software if the original version is as cheap as the pirated one?" This shows that pricing is a major factor that affects software piracy. However, Microsoft Corporation reported that software piracy is one of the reasons for the high price of software i.e. losses incurred from software piracy are retrieved back from the consumers of software (Microsoft.com). It is also important to note that knowledge of software copyright laws also affect the level of software piracy. A female Nigerian student that was interviewed explained that in her country she could use pirated software because there are no known laws that are against such. And even if there were, she would not get caught because of the low technological advancement in her country. She however noted that in the UK where she is presently studying, she would never use pirated software because she knows that there are laws that protect software copyright in the UK.
6.1 Conclusion
The 21st century as we know relies heavily on information, information at the click of a button. Many industries have risen at high speed. Organizations now depend greatly on fast means to run their various business operations. People are ready to get information at a cheap cost. Software piracy is rapidly increasing, if any anti-software piracy is to be effective at reducing the level of piracy, the social, legal and economic consequences of stealing software must be clearly communicated to the target audience. The ethical nature of software piracy is confirmed with a significant impact of subjective norms on behavior. Perceived behavior control appears not to play a role, perhaps the ease of copying software is not an issue, if people believe piracy is wrong.
Figures have shown the benefits of anti-piracy on a software vendor's income and revenue figures. Software Piracy has great impact on the company's revenue and this reduces the funds meant for further research to bring about better products and services for the consumers. Software vendors are thereby forced to increase the price of their products and services in order to regulate their finances. This method however further increases people's tendency to use pirated software, as the more expensive the software is, the less likely it is for consumers to buy-except for other companies who have great need of the software.
Software piracy does more harm than good to both the software vendors and the consumers of the pirated software as shown in the study. Pirated software clearly has limitations and does not perform as good as the licensed copy. Also, users are exposed to malware when they use pirated software, especially when it is downloaded from the internet.
The factors included in this study were age, gender, and region/culture. The analysis showed that gender had no significant effect on the use of pirated software. However, age and region/culture have significant effects on the use of pirated software. Software pricing also and the knowledge of software copyright laws have been shown to have impacts on the use of pirated software.
Finally, larger samples which may lead to have more insight into the reasons for software piracy are recommended. Extension of the content of survey might also be of interest to the reader. Microsoft Corporation and other software vendors can review their pricing as this has great effect in the use of pirated software. Governments in different countries could put laws in place to protect software copyright. Lastly, the comparison of people from other regions apart from the ones used in the research would be of great value since the comparison above between students from the United Kingdom and students from Asia (especially China) has shown the differences in moral attitude towards software piracy.
