No, Microsoft shouldn't just ignore piracy in China and India

Posted by: Bruce Einhorn on July 27, 2007

In this BusinessWeek story that was one of the most widely stories on BW today, Henry Chesbrough argues that Microsoft should just learn to stop worrying and love software piracy. He says that Bill Gates et. al. should be happy that so many Chinese and Indians want to use Windows, albeit for free. Forcing authorities to crack down on counterfeiting, Chesbrough argues, just encourages people to give up on Windows altogether and use Linux instead. Not good if you’re Microsoft.

Sorry, but I disagree. Sure, there was a time when it sort of made sense for Microsoft not to make a big deal out of software piracy in the world’s two biggest countries. Few people really could afford legit Windows, after all, and Microsoft could indeed take solace in the idea that at some point, those Windows users would make the switch from fake to real software. But that point is now. After years of suffering in China and India, Microsoft can actually start making some money on its popular OS. The middle classes in China and India have grown a lot in the past few years and both countries have made good progress in fighting counterfeit software. I’m not sure what the stat is in India but China’s fake piracy usage has gone from 92% down to 82% in three years. Bad, but moving in the right direction. And contrary to what Chesbrough suggests, the fact that fewer people are using counterfeit software does not mean that Chinese and Indians are embracing Linux as an alternative. Consider this report from Gartner analyst Diptarup Chakraborti from early this year. Writing about the Indian PC market, the Garnter analyst says that Microsoft rules the Indian PC and that almost no one uses open source: “Linux is still a non-starter.”

Reader Comments

Fair trade

July 28, 2007 8:35 AM

The problem with Microsoft is that it does nothing except fighting piracy in China. Microsoft has been trying to be a policeman in China all the time, at least in the public view. It is a company supposed to do business with advance technology. Microsoft should or shouldn't ignore piracy in China and India is not a good topic for Microsoft at all. Microsoft should tell people what its China branch is doing in China as a business. Microsoft has a big PR problem at least in China. Can Microsoft overcome it negative image and become an important company in China? We have to wait and see. As more and more people choose to use Linux, Microsoft has a lot of work to do to attract computer users back.

Geoff Nairn

July 30, 2007 2:03 PM

Should China's growing middle class be expected to pay "western" prices for Windows? I think Bill Gates long ago stopped trying to draw price elasticity curves for emerging markets. He needs to get a strong foothold in a country like China no matter how much it costs in short-term profits. In the west, Microsoft is seen as a company whose great future lies mainly in the past - witness its static 5-yr share price. It is losing the desktop aps war to Google, Skype, Firefox and other free offerings; it may take five years or 15, but the Windows operating system business will one day get ring-fenced or sold off to keep regulators happy; its server business faces tough competition from Linux and growing scrutiny by anti-trust bodies. That leaves Microsoft Office -- one of its most profitable products -- and its oft-overlooked range of business software as the big money-making opportunities for the future. China has a lot of small businesses and few of them run Microsoft business software today. Similarly, China has a helluva lot of consumers who bring the scale to make some of Microsoft's consumer plays actually work -- largely unnoticed, Microsoft took a stake in a Chinese TV manufacturer last month.
But none of these opportunities will happen without widespread adoption of Windows in China. If the Chinese government asked him to give it away for free, he'd probably say yes.

maychic.com/tom

September 11, 2007 7:31 PM

In the future many people and companies will abandon Windows and switch to using Linux and also Firefox web browser because they are better and there is nothing anyone can do about it because people just want quality products. Since I began using Firefox, I have had peace of mind and no more Explorer problems and headaches

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Bloomberg Businessweek’s team of Asia reporters brings you the latest insights on business, politics, technology and culture from some of the world’s biggest and fastest-growing economies.

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