With time ticking away, engineers at Attachmate Corp. have been wringing Year 2000 bugs from the company's expensive corporate communications software since December, 1996. Now Attachmate says it's "comfortable" with its products' Y2K-readiness and is dispatching technicians to help whip clients' systems into shape. There is still a group of black-sheep customers, however, for whom Attachmate refuses to lift one mouse-clicking finger: Those who have illegally copied, or "pirated" its software.

Attachmate's policy, which is standard across the software industry, is so obvious that it almost sounds too simple to repeat. But it bears notice -- considering the worldwide pervasiveness of software theft, which totaled $11.4 billion in 1997, according to the most recent study by the Business Software Alliance and the Software Publishers Assn. In China, for instance, 96% of software is thought to be pirated, and the number hovers above 25% in the U.S. Worldwide, 4 in 10 business applications were pirated in 1997. Yet software makers are only just beginning to acknowledge the possibility of a stage-two time bomb, affecting companies or individuals who -- because their software is stolen -- can't afford to buy legit Y2K-compliant replacements, or simply choose not to.

The software industry has a message for these stranded pirates: Don't come crying to us. "It's the concept of 'Oh my goodness, not only do I have this problem but I can't call anyone to get help,'" observes Ellen Canaday, Attachmate's vice-president for worldwide contracts. Or, as Yoav Etiel, senior marketing vice-president at Bentley Systems, sums up: "It's like someone who steals your car and calls you to come fix a flat tire."

"MISSION-CRITICAL" PROGRAMS. There are no current estimates of pirated software's financial impact on overall millennium repair costs. But the presumed effect is serious enough that industry experts suggest that the piracy problem could prove an unexpected roadblock to beating Y2K, particularly in high-piracy sectors of the global economy. Those include the U.S. small-business market, plus Asia (piracy rate 52%) and Eastern Europe (77%). "Those guys could be in real trouble" if [pirated, noncompliant software] has permeated the organization, says Loren Hillberg, vice-president and general counsel at Macromedia Inc., publisher of multimedia software tools. "A company could be literally brought to its knees."

That's especially true when considering the breadth of software currently being pirated. While the bulk of it is standard PC fare -- Microsoft Flight Simulator, for example -- counterfeit versions of "mission-critical" applications such as accounting ledgers, inventory-control systems, and design packages also make the rounds. Perhaps less affected, but still vulnerable, are companies that "under-license" by buying one copy of a software package and loading it on multiple computers.

What's at stake here? For many companies, it will be the bottom line, as they grapple with the increased costs of outright software replacement, rather than lower-cost upgrades. For example, buying a fresh copy of customized accounting software may cost $1,000, but only $150 for those using previously licensed versions.

Those extra costs may take their toll on domestic outfits that live and die by cash flow. "Small businesses don't have the resources," says Pat Riley, senior vice-president at Millennia III, a Y2K-compliance company in Westport, Conn. "These are companies that often live payroll to payroll, and spending $10,000 or $20,000 to fix Y2K can be impossible." What's more, there's no telling what the effects could be in Asia, where financial instability is already cutting into Y2K budgets. "If they're going to correct the problem, it could cost them quite a bit more money," Riley says. "They're just not addressing the problem at all."

NO PASSWORD, NO PATCHES. Software makers are trying not to gloat over the situation, but Y2K is turning out to be one of their most effective antipiracy tools. "If it takes the Y2K problem to get people's attention, maybe it has a silver lining," says Bob Kruger, enforcement vice-president at the industry-group BSA. As he see it, fears of the Y2K bug hitting unstable and illegal software should easily flush out thousands of jittery users, drawing them into full-price compliance.

At Bentley Systems, a leading developer of engineering software priced in the $5,000 range, Etiel says the millennial mess "highlights why it's good to establish a relationship with the software developer." Indeed, two-thirds of Bentley's 300,000 licensed software users already pay $500 per year for a service that ships out frequent software upgrades, updates, and advice on how to use them. With a password, those subscribers have instant access to Y2K software patches posted on Bentley's Web site.

That's entree software pirates will not have, of course. Nor can they expect to slyly penetrate any number of the customers-only sites that have become preferred conduits for Y2K patches. Macromedia, for instance, requires customers to key in a registration number and password before releasing upgrades. Such barriers don't mean, however, that pirated, Y2K-compliant software and patches won't hit the market. "If you can get new releases in pirated form, you can get Y2K-compliant sofware in pirated form," concedes Kruger. "There's no magic in that."

Kruger argues that danger still lies ahead for companies that boot up pirated, Y2K-compliant software. The threat comes mainly from compatibility snafus -- in the way pieces of software interact with one another. With full company support, he says, customers are kept abreast of potential adverse reactions among different products and manufacturers. There's one more danger: Companies that use pirated software can't sue the manufacturer if something goes awry. As the clock ticks toward midnight on Dec. 31, 1999, that may be the scariest reality of all.

By Dennis Berman, Staff Reporter, Business Week Online
dennis_berman@businessweek.com

To: TECHNOLOGY