Manufacturing companies in Brazil, Russia, India and China (BRIC) that choose to use illegal software steal more than $1.6 billion from their in-market competitors using genuine software.

Microsoft has released the findings of study that looks into the financial impact illegal software has on the competitive landscape within developing countries.

As part of a study to examine the broader economic impact of software piracy, analysts from Keystone Strategy evaluated the competitive advantage enjoyed by companies that practice widespread piracy. In China, for example, manufacturers that “play fair” with legal, licensed software suffer a competitive disadvantage of about $837 million compared with companies that illegally slash costs and use pirated software. This harm translates into the opportunity for pirating firms to increase profits or reinvest in their businesses. For example, pirating firms can reinvest the $837 million to construct 66 major manufacturing plants, buy 12,700 molding machines for a plastics manufacturer or hire 217,000 additional employees.

Manufacturing accounts for 16 per cent of Russia’s gross domestic product. Russian manufacturers who play fair are disadvantaged more than $575 million over the five-year software lifespan.

The new research also reveals the following insights on piracy’s impact around the world:

• Piracy creates more than $2.9 billion of competitive disadvantage per year across manufacturers in Latin America, Central and Eastern Europe and Asia-Pacific regions.
• In specific countries, Keystone determined how much pirated software harms manufacturers playing by the rules as follows: Brazil ($186 million), Russia ($115 million), India ($505 million), and China ($837 million).
• Over a five-year software life cycle, manufacturing companies in BRIC countries will lose more than $8.2 billion to their cheating competitors.
• There are more than 4.1 million PCs legally licensed by manufacturing firms that play by the rules in China. The competitive disadvantage to these firms amounts to about $837 million annually, or $4.18 billion over the typical five-year software life cycle.
• Indian manufacturers experience $505 million per year in competitive harm. Their pirating competitors could use this money to hire more than 215,000 new employees.

“This research quantifies the harm unfair competition causes in emerging markets,” said David Finn, associate general counsel for worldwide anti-piracy and anti-counterfeiting at Microsoft.