Software piracy Microsoft's big threat

Microsoft's Michael Rawding says software piracy is a key threat.

By Nic Hopkins
CNN.com Writer

HONG KONG, China (CNN) -- Piracy poses the single biggest threat to the Asian revenue streams of Microsoft, the software giant's regional head has warned.

Microsoft's Tokyo-based Asia President Michael Rawding says illegal copying of software is the greatest impediment to the industry's continued growth, especially in markets where it has yet to mature.

"Piracy is clearly our number one competitor, and not only Microsoft's number one competitor but also a big impediment to the growth of the local software industry," he told CNN on Wednesday during a visit to Hong Kong.

But rather than lower the price of packaged software to lure retail customers away from cheaper copies, Microsoft is pushing towards a business model where it leases access to software that is hosted on a remote server.

Remote software

The provision of remote software services forms a key pillar of Microsoft's recently unveiled .NET strategy.

"Piracy does get impacted by the shift from packaged software towards services, and, to the extent that customers are comfortable in more of a monthly service charge mentality, there may be an opportunity to use that to drive the rate of piracy down in the region," says Rawding.

"We fundamentally disagree that a lower price strategy will necessarily have an impact on piracy and there are many examples to support that."

"Sony in China tried a lower price strategy on their videos and it was very, very unsuccessful. If there is the purchasing capability to buy a computer, then there exists the capability to buy software."

Asia piracy hotspot

In markets such as China, software piracy is rampant. Last year China's Ministry of Information Industry issued a list of rules on how to manage domestic and imported software.

At the same time, the ministry said it would set up a software registration and record system to try to monitor where piracy occurs and to help stamp it out.

Last year, Microsoft took a Chinese company to court for software piracy with the hope of encouraging others to respect intellectual property laws.

It accused Beijing-based Yadu Technology Group of using pirated products, including Microsoft Office and Windows, on its office computers.

Rawding says the issue with tackling piracy focuses on the need to embed the software with the right appeal to consumers.

"In a market like China the hardware industry is quite large and the software industry, relatively speaking is quite small," he says.

"Right now it's an economic disincentive for an entrepreneur to go into the software industry, and as a result the Chinese customers really don't benefit from that. Our focus is to work with the Chinese government to try to grow the domestic software industry."

"If that happens Chinese customers will be better served, the industry will grow as a whole, and it will serve our business objectives as well."

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