Illegal software drains millions from Saudi economy
While the figure for pirated software as a percentage of total software in Saudi Arabia has remained steady since 2004, in reality, due to the massive growth in IT, more local systems than ever before are running unlicensed products. (Photo by Julos)
Published: Mar 17, 2010 16:38 Updated: Mar 17, 2010 16:41
According to research firm IDC, in 2008 the total value of the Saudi IT market reached $5.79 billion and is expected to expand at a compound annual growth rate (CAGR) of 11.4 percent over the 2008–2013 period. Unfortunately, IT spending remains focused on hardware, which is mostly imported, and accounts for more than 65 percent of the total market, whereas software represents just 11 percent and IT services around 24 percent of the nation’s IT spending.
While IDC has determined that investment in information technology drives significant growth in skilled jobs, it is spending on software that could give a further boost to job creation. IDC estimated that the total number of IT-related employees in Saudi Arabia in 2008 amounted to more than 165,000 - with 54,000 in the software industry alone. This number is expected to rise to 255,000 – with 98,000 in the software industry by 2013. Consequently, the IT sector will play a powerful role in creating employment opportunities. IDC estimated that the total number of Saudi employees in the IT sector will increase 9.1 percent in the 2008–2013 period, versus an estimated growth of 5.5 percent in the Middle East and Africa (MEA) region.
Many of these employees will work for new companies, with 1,500 IT start-ups expected to be created between 2008 an 2013. According to IDC, the majority of the 8,500 IT companies operational in the Kingdom by 2013 will be IT services providers and IT channel players. Employment and company creation, coupled with tax generation effects, will have a positive impact on Saudi GDP. The revenue generated by IT activities represented 1.2 percent of Saudi GDP in 2008 and is expected to rise to 1.8 percent in 2013.
But the nation’s IT sector would show much better performance if more were done to reduce the development and distribution of illegal software in the Kingdom. IDC’s White Paper, “How to reduce software piracy in the Middle East and Africa: The case of Saudi Arabia,” focuses on the issue and puts forward recommendations for tackling the problem. According to the latest BSA-IDC Piracy Study, software piracy was at 52 percent in 2008. This figure was one percentage point higher than the prior year and translated into an overall loss of $272 million for the country’s economy in 2008. That was a 60 percent increase in dollar terms with respect to the previous year, due to strong IT growth and creeping use of illegal software in government and business environments.
Local efforts to reduce software piracy must be improved. Saudi Arabia’s software piracy rate, as a percentage, has remained at a similar level since 2004. IDC found that a lack of transparency in the Kingdom’s anti-piracy legislation, weak enforcement actions and insufficient resources in infringement reporting and education activities are to blame for the lack of success in combating illegal software development and distribution. The White Paper noted that while a good number of government initiatives in this area – from new intellectual property rights legislation to a transparent anti-piracy action reporting system - have been launched, they are neither fully developed nor consistently implemented, even when such actions are required by international agreements.
Remember that the discussion here is about controlling an illegal activity. IDC’s analysts believe that if Saudi Arabia’s current software piracy rate were reduced by just 10 percent over the next four years, more than 1,139 new jobs would be created, the total contribution to GDP would exceed $620 million, the local IT industry would benefit from more than $430 million in revenue and the government would collect an additional share of tax revenue of approximately $5 million. All these advantages would accrue simply by shutting down a small portion of the distribution of illegal software.
“If greater anti-piracy efforts were pursued effectively in Saudi Arabia – especially through an improvement in the existing legislation, the creation of special anti-piracy police units and the launch of ad hoc education and awareness campaigns - the Kingdom would easily halt much of the illegal software development and distribution within the country and reach a piracy rate comparable to that which other more virtuous Gulf countries are experiencing today,” IDC advised. “This incremental boost to the economy would add highly skilled jobs to the labor force, support the creation of new companies and fund public services. Because most of the businesses that stand to benefit from such an improvement in the piracy rate are from IT services and IT channel firms, most of the revenue generated would remain in the country.”
Comments
Mar 17, 2010 20:59
Report abuseALAN L. PLASTOW
Mar 22, 2010 20:20
Report abuseThe solution isn't in piracy audits or software industry-sponsored surveys. It's in helping tech consumers take direct control over tech spending. No magic involved. It's as simple as implementing a basic - cost-effective - process for tech life cycle management and it WILL help maximize value while minimizing any potential piracy issues. There is no need to buy more costly tech toys - no software - no hardware - no new consultants dashing around. It's just a simple application of common sense and internal controls.
Want to know more? Without paying anything for the knowledge? You just have to get yourself moving in the right direction.
Mar 23, 2010 18:13
Report abuseThe Ideal is to work together to make sure the software brings benefits that far outweigh the cost of implementation
Alan, I think your argument depends on what you are using software for.. Could you really design a Car without software?