Business gets all of the benefit and none of the risk from pirated software
Suppose you were hanging out at the Pentagon, having a coffee at the Ground Zero Cafe, talking with some five star general, and you casually ask "Does the US Military ever use pirated software?"
The general would spit out his latte and laugh so hard that it might induce vomiting. If, after regaining his composure, he could even be bothered to deign the question with a response, he might say "Have you seen our budget? We don't bother with nickel and dime crap like that!"
Most people would agree. No, not merely agree. Most people take this for granted to the degree that to suggest otherwise is just nuts. The idea that the US Military, arguably the largest and most well funded operation in the world, ever uses pirated software is just the insane ravings of someone who has broken with reality.
Here's the thing. I'm not going to tell you that the US Military in any way shape or form has any kind of policy for using pirated software, or even any kind of tolerance for it. The hypothetical general you were talking to almost certainly has no connection whatsoever to software piracy.
On the ground though, it's a different story.
Consider this one email response to my original article on piracy from a guy who was deployed in Iraq with the United States National Guard. He had to install various Microsoft products onto 200 laptops as part of a 30 day project to set up a network for a base.
The problem was that they didn't have the copies of Windows and MS Office that they needed. Naturally, Microsoft provides software to the US Military under some massive contract, and so of course the legitimate copies were available for the asking. However, the reality was that it would take too long for the request to work its way through the bureaucracy. So this National Guardsman and his fellow IT team members got on the 'net via satellite and downloaded pirated copies of what they needed. Just to get things working for now, and then when the licenses became available, they would just validate the existing installed software.
I doubt Microsoft, a company founded in the US and run by Americans, has any problem with US soldiers doing whatever it takes to get their mission accomplished, even if they use pirated copies to fill in the gaps where Microsoft can't deliver on time. But consider how that means that pirated software is keeping Microsoft in business by assisting this way.
You could say that the problem was the military bureaucracy not getting the legal copies to the soldiers in time. True, but at the same time, that problem wouldn't exist with legally free software, since the National Guardsman could have done exactly what he did for the sake of expediency, with the important distinction that it would have been perfectly legal. Not only legal, but an easier and permanent solution, not in need of touching up the serial codes or authentication later.
The question is, would the US military continue to renew their contract with Microsoft if pirated software did not fill that gap? If Microsoft and the military had to face up to those issues, then wouldn't they streamline the process in order to get the job done faster? And if they could, then why aren't they doing so already?
Because they don't have to, so long as there is such a thing as piracy to step in right when the National Guardsman needed it. The necessity of anyone having to sincerely think about the issue has been killed.
Since I've been writing about how pirated software helps paid software like Windows stay competitive against free software like Linux, I've had ample opportunity to talk with people about various aspects of the issue. So far my experience has been that regardless of whether or not people agree with me, so long as we're talking about how piracy affects consumer purchases, it's a civil academic debate. We can agree to disagree if need be.
But the idea that business uses cracked software? I've had responses ranging from "oh be realistic... you must not understand business very well if you think that happens," all the way to "what are you, stupid? Only some kind of moron would think that!"
Separating out the emotion from the reaction, the underlying logic that discounts the possibility of software piracy in the workplace is similar to why the hypothetical general would laugh off the suggestion that there might be cracked software anywhere under his command. Software is too small an expense for companies to expose themselves to the risk of being seen using pirated copies. The danger isn't so much a legal matter as it is an issue of embarrassment. If your company is using cracked software, then that's just lame.
Of those who generally agree that software piracy is a significant issue among consumers, there's a fairly commonly held belief that since of course companies purchase everything they use, then it's actually part of the whole picture of how piracy helps proprietary software. The idea is that if people use pirated software at home, then they develop a comfort level that supports their preference for using the same software in the office. Companies that make software take the loss of revenue in the home market because the business clients are less finicky about money, buy software in more profitable "site licenses," and are more reliable clients anyway. In fact, it's fairly common for some companies to make this model explicit by offering versions of their software free for home use, but ask that companies pay for corporate licenses.
The "pirate at home and legitimate at work" model does have some truth in it, so I'm not disagreeing with it. I just think it's only one fragment in the mosaic of of how software piracy and business relate. Software piracy is alive and well in the corporate world, in many ways, and on a scale equal to or bigger than the consumer market, depending on how you measure it. Even the most upstanding, legitimate, well intentioned companies can, and do, benefit from software piracy.
They're Made From People
I don't think anyone disagrees that there are some sketchy companies that deliberately use cracked software. But I'm with you in thinking that they represent a tiny and largely irrelevant minority not really worth talking about.
The real disagreement, much like some people's opinions about personal software piracy, is about software piracy in otherwise legitimate companies, and to what degree. I would describe it as "controversial" to suggest that piracy is actually fairly common in the workplace, except that to be controversial, it has to be acknowledged.
To start to see that business and piracy are no strangers, let's look at the issue from the other end of the scale from US Military.
We start seeing piracy creep into the corporate world when we remind ourselves that just like Soylent Green, companies are made from people. Most of them are made from not very many people, either.
In the United States, for example, around 90% of business is small business. Here I'm going with 2010 Census Bureau stats, according to their definition of small business,which I think is any firm under 500 employeess. Half a thousand employees seems like a big company to me, but what do I know. In any case, this includes firms with no employees, the kind of "mom and pop" operations that consist only of the people who own it. When it comes to piracy, the key issue is how personally involved with the company the people in it are, which is more likely to be the case when the number of people in the company is small.
Take some people I know through an ex-girlfriend. A husband and wife that have their own business together, and they work out of their home. One time, while we were out for dinner, I heard the wife casually talking about using cracked software for personal reasons, including products like Rosetta Stone, and, of course, the gold standard of pirated software, Photoshop. Since they work at home, and presumably the computers they have are used for both business and personal use, what are the odds that they only use cracked software for personal use?
Here's the kicker though, and the reason I chose them as an example. The company they have is an internet technology start up that is working hard to develop a proprietary software application. They have million dollar dreams of selling their software and generating market share, driving up the valuation of their company, and cashing out by selling out to a bigger company. So far as I can tell, the irony of expecting others to buy the software they make while simultaneously stealing other people's software is completely lost on them.
Partly these people are just blissfully ignorant of their hypocrisy. But there's more to it than that. There's a fairly common rationale that many people mistakenly believe, which is that somewhere out there was a line that you can cross where your company is making money and has all its ducks in a row, and everything will be smooth and easy from that point on. In the meantime, what's the harm if you have to cut a few corners to get things up and running? The companies that provide the software will ultimately benefit, you see, because even though we're using pirated copies now, when we "make it," we'll then buy all the copies legitimately. It's a win for everyone!
Having run an IT startup with a thermonuclear burn rate during a dot com bubble in Tokyo in 1999, I know that image is just wrong. Most companies don't have tons of resources and feel constrained at every corner by legal fees, taxes, employee salaries and so on. A business is like a baby that never grows up. You have to constantly take care of it, and it seems like it's always needing more from you. And you'll do anything to keep it going, because if it's your company, then it's also your life. Which could well be part of the reason some people are ferociously defensive of any disparaging remarks about businesses.
Anyone who thinks that a company ever crosses a line where it is effectively "done," and all you have to do is kick back and collect profits while the employees handle the day to day operations is hanging onto a dream that is as unlikely as any lottery. If you don't believe me, you should talk to what's left of Enron, or Bear Stearns.
A Nudge From The Invisible Hand
It's not just that people who are already prone to personal use of pirated software are taking that into the workplace. It can go the other way too, as the pressure of doing business can add a little nudge toward using pirated software that may not have existed for a person otherwise.
Like this photographer I know. She uses a Mac, just in case you were forgetting that Mac users are just as prone to software piracy as Windows users. Some of her clients are designers who want to include her photography in their multimedia projects. Sometimes they send her examples or concept prototypes in file formats that are native to applications that she doesn't use, such as InDesign or Illustrator. Often, all she really needs to do is just be able to open the format and convert it into something she can see, like a simple JPEG image. Since she isn't really using those applications, she's just trying to extract out the information she needs, it doesn't seem like such a big crime to have cracked copies on hand. That's another one of many conveniently logical reasons for owning pirated software.
She could, of course, go back to the client and ask for them to send the information in another file format. But then she's introducing a tiny but perceptible layer of complication into the interaction between her and the client. It's a minor thing, but it puts her at a disadvantage to any other photographer who can say they are free from the hassles of dealing with file formats. It's the kind of minor "white lie" of dealing with people that everyone does, similar to how everyone exaggerates on their resume. So long as other people are willing to do it, you need to as well, or you run the risk of losing out to them.
Wait, you might be thinking, how does that help Adobe if the photographer is not paying for her copy of InDesign? Surely that's just a lost sale.
It's not that simple. It's not enough to consider what would happen if this photographer were to choose not to use pirated software, because that individual decision would only have an individual impact. Instead, consider if copy protection for software was so effective that no one had pirated software. Then, it's the designer who is sending the files in InDesign format that might have a problem. If enough people on the receiving end couldn't just accept any and every file format, then there would conceivably be a market shift toward products that are more universally accepted. If InDesign turned out not to be that market standard, designers might be less inclined to learn and purchase it, and that could be a loss for Adobe.
If you're sitting there thinking "give me a break, that's such a remote hypothetical situation, there's no way you could know whether or not Adobe would lose business that way," you're exactly right. I don't know, and nobody else does, and probably nobody ever will. That's precisely my point. With software piracy in the mix, we'll never know what choices small businesses and the people in them would really be making in a market based entirely on genuinely legitimate software purchases. The only fact we can say for sure is that since a cracked copy of whatever you need, be it InDesign or whatever else, is available to any company that needs it, uncountable minor transactions are occurring all the time that help keep business trucking along.
Most companies are small, personal operations with very unclear borders on where the people end and the company begins. As such, they are prone to a lot of the same concerns and perceptions that influence people's reasons for using cracked software. And possibly some additional concerns as well. My photographer friend probably wouldn't bother having a copy of InDesign on her Mac were in not for the need to offer her clients a smooth and hassle free service.
With one in four people using cracked software, and 90% of business on a scale that is small enough to be intertwined with personal use, then we are already in the neighbourhood of piracy rates among consumers and businesses being comparable.
Taking it up a notch, piracy happens in medium-sized companies. Take this one guy, working as a video editor at a sizable production company that develops graphics for television. One time the guy was tasked with a project that involved compositing an image that had a really poor quality green screen. If you don't know about green screens and compositing, don't worry about it. It's just a video editing thing where you combine two images to make one. All you need to know here is that there are different software applications that can do it, some more efficiently than others.
The company had a copy of Adobe Premiere, which can do lots of different video editing things, including green screen compositing. But, in this particular case, the job could be done faster and easier with a different application that specialized in just handling exactly this kind of task. Who doesn't want to work less? The guy downloads a pirated copy, gets the job done fast and it looks great. The trick is that while there is a difference in between the software applications in terms of efficiency of process, the results are the same. There's no way of looking at the end result and knowing that it wasn't done in Premiere. The director, or anyone else, for that matter, didn't care to ask about the production process anyway.
Anytime an employee can get something done faster and be ready for new work a little sooner, the company is better off. The company reaps the benefit of the pirated software that was used, and if you asked a representative of the company if they used any illegally obtained applications, they would have said no. If it was ever discovered that pirated software was used, the company could hang the video editor out to dry, saying that he had acted on his own. All the benefits of piracy, and none of the risk.
And this is the defining property of the use of pirated software in the world of medium to large businesses: plausible deniability. As the distance from employee in front of the computer to the manager in the corner office grows, so does the protective buffer of a lack of awareness that protects the company from liability.
The SWAT Team That Never Comes
The laughing general might consider the implication of using cracked software worth no more than dismissive laughter. But for those who might actually attempt to consider the possibility of piracy in the workplace, they will solemnly tell you about they way business "really" works. You see, it's not that companies don't use pirated software because they are afraid of being caught breaking the law. No one seriously thinks that at any time, the anti-piracy SWAT teams are going to repel in through the windows.
As mentioned before, it's just embarrassing in the business world to be seen with cracked software. It's bad for business, and the invisible hand of market economics will spank anyone who does anything embarrassing enough to make other companies not want to work with them.
But really, how often and under what circumstances does this exposure happen? I'll probably get people emailing me examples of when it could happen, or even has happened. But I don't think I'm going to be convinced by scattered anecdotes. I'm going to make a bold, unsubstantiated, and probably unprovable either way anyway, claim that more than 99% of the pirated software being used in the business world goes completely unnoticed. The remaining less than 1% probably only gets discovered more or less by accident at the end of a long string of circumstances. Because the reality is that no one is asking.
And again, consider that as large, nebulous groupings of people, there are all sorts of ways in companies for the right hand to do something that the left hand doesn't care to ask about.
At a translation company at which I briefly worked, they often contracted out translation projects to independent translators working out of their own homes. Did the company ever ask the contracted translator if their copy of MS Office was legal? No, of course not. That's not their problem. Are they even ethically obligated to?
Maybe, when you consider that using pirated software helps the independent translator keep costs down, which in turn makes him or her fit in the budget of the company doing the outsourcing. This benefits the company while deferring any risk to the translator. This kind of thing can happen any time when a company outsources to any kind of consultant or independent contractor. But whatever you might think of the ethics, the practical reality is that pirated software can be a part of the picture, helping a company along without even being on the premises. If the mythical anti-piracy SWAT teams kicked in the doors of the translation company, they wouldn't find a thing.
All this isn't to say that big companies definitely use pirated software as a matter of course. My contention is that piracy comes to the larger business world through different routes than in personal computing, but that in the end, the percentage of piracy in the workplace is probably about the same. I can't prove it's the same, but since essentially what I'm saying is that it's people who bring piracy into the workplace, I feel confident enough to propose that the amount of piracy they inject into the workplace is the same they use outside of the workplace.
At that same translation company I just mentioned, probably all the copies of Windows were legal, because they came preloaded on the computers and while I was there was no need to upgrade. However, I think about half of all the copies of Office were pirated, because not every computer came with Office, or had a recent enough version. They definitely had pirated copies of TRADOS, a translation software that worked in conjunction with Office. But they had one or two legal copies floating around as well, and so if some kind of anti-piracy investigation were to happen, it would be very tough to prove that the number of legal copies wasn't sufficient to satisfy all the needs of the number of projects the company was working on at any one time.
Don't Tell The Boss
More importantly, critical even, there was no order from the boss to acquire and distribute pirated copies, either. The decision comes about more organically.
For example, three projects requiring TRADOS come in, and there are only two legal copies in the office. One employee has to wait to use the machine that has TRADOS installed, or wait for the license to transfer to his computer, or whatever. But then he's got to wait around, and he wants to go home on time like everyone else. It's work that would get done with the legal copies eventually anyway, so what's the harm in using a pirated copy so that he can go home on time? And everyone knows that the IT guy has a copy on hand...
And speaking of licenses, that reminds me of another vector for pirated software to creep into the workplace. Another company I worked at used SoftImage to create graphics for television. In a production company that works for television, the deadline is everything because the client television show has an air date that will not change. At the time, SoftImage licensed it's software so that one bought the right to use it for a certain amount of time. One time, as a project deadline approached, the license ran out, and because of some bureaucratic hang ups, it would not be possible to get the new licenses before the deadline. It would be off only by a matter of a couple days while the paperwork got processed, but it was enough to miss the deadline.
You can see where this is going. I remember the boss, who had come downstairs worried that we would miss the deadline, looking confused as we were still working on the project. I can't remember his exact words, but he asked about the status of the licenses, to which the head animator on our team just replied something vague like "It's under control." The boss didn't need to know more. Maybe he knew he shouldn't know more. He just left, we got the project done on time, the licenses eventually came in, and everyone was happy.
It's All About People
That company, like at all companies, was simply doing what it took to try and minimize operational costs to maximize profits. Isn't that what companies are supposed to do? Do we really believe that no company... no, it's simply naive to talk about companies as if they weren't complicated entities made up of subgroups and individuals with various motivations. The real question is, do we really believe that people in companies wouldn't ever have cause or motivation to blur the lines a little bit?
Saying that, however, does not pass blame onto people and absolve companies of any responsibility. However you want to visualize companies as entities, in the kinds of cases I describe, they reap the benefits of piracy, and that makes them culpable. The fact that they can make a scapegoat of the people who bear the brunt of risk is hardly a hallmark of high moral ground.
That's why I think that Windows is even more free for business than it is for people. The way that software piracy skulks around in the corners, filling in gaps and meeting needs that proprietary software can't fill in time or at cost, means that a company doesn't even have to know it's there to get the benefits. Any exposure can most likely be traced to some poor sap who can get hung out to dry. All of the benefit, and none of the risk.
Whether you're the type to be cynical about corporate motives, or a hardcore capitalist, the one thing we can all agree on is that the only objective a company has is to make money. You may think that's a good or bad thing, but either way, it is not in the corporate interest to question its own profitability, only to address a lack of profitability, or seek out even more. There isn't room in the stressful business environment to say "Hey, we made some money this year, let's do some investigation and see if there's any reason our expenses should be higher than they were. Maybe we'll find some costs that ordinarily we'd never have to pay because no one is going to ask." Even the most upright and well intentioned company generally just doesn't have the time to go there.
What is essentially the same about personal versus corporate use of pirated software is the results for the developers of proprietary software. It benefits them as well by preventing business clients from having to confront licensing restrictions, purchase delays, feature limitations, and lots of other issues that might make a company wonder if the customer service they were paying for was really worth the cost.
The cumulative financial stakes are higher in the business world, though, so in one sense piracy might have more impact in the workplace even though it's presence is often felt more indirectly.
So Free It's Invisible
What I mean is that any one actual usage of pirated software in any one company is an isolated event. Like the National Guardsman who used pirated software to just fill in one gap for a period of time while waiting for the legal copies. That's a rather insignificant amount of pirated software being used. But, if it were the case that pirated software were not available, small incidents like that might raise questions about the logistics of how licenses are handled. One outcome could be that Microsoft and the US Military streamline their processes and work out the snags in the bureaucracy.
Another outcome could be the US military considering saving millions of dollars and avoiding such hassles by using legally free software. It's not certain by any means what the outcome could be, but the risk is there for proprietary software to lose a customer. Could you imagine the fuss if Microsoft lost that contract?
That said, the situation is very unlikely to change. Just like with consumer level software piracy, proprietary software gets a little boost from pirated software in that the easy availability of pirated software creates circumstances in which it's unnecessary to really evaluate the merits and costs of the software being sold. But there's an additional layer of complication in that, companies, as entities, are indirectly related to piracy in such a way that they don't even see it as an issue.
So much so, that to even suggest the existence of software piracy in the business world will have most business people respond with angry defensiveness.
And can you blame them? Who wants to take the heat for a crime they didn't even know they were committing?