May 22, 2006 6:49 AM PDT

Counting the cost of counterfeiting

As the head of Microsoft's antipiracy program, Michala Alexander has one of the more unenviable posts in the software giant's U.K. operations.

Despite successfully shutting down a prolific trader in unlicensed software last week, Alexander admits that the odds are stacked against her. Microsoft estimates it loses around $467 million (250 million pounds) annually due to counterfeit and unlicensed software.

But it's not only the sheer amount of fake and unlicensed products that makes Alexander's job a tough one; Microsoft's antipiracy team and its enforcers at the Business Software Alliance are seen by many as the sharp end of the software giant's draconian--and some say outdated--approach to licensing.

Following the successful settlement with illegal-software trader William Ling, ZDNet UK sat down with Alexander to discuss some of the challenges in a role she has filled for nine months, and to hear what Microsoft's antipiracy team can do to improve relations with customers.

Q: How much of Microsoft's counterfeit and licensing problem is of its own making? Some argue that if you had fairer and clearer licensing practices, less people would get it wrong or choose to subvert them.
Alexander: There will always be people who don't think they should pay Microsoft. Even if we dropped prices, people would still counterfeit the software. Kiwi shoe polish is still counterfeited and isn't exactly expensive--it is all down to the size of the brand. So I wouldn't say it's the licensing, I think it's just because people want what they can get for the cheapest price.

Gavin Becket, Bristol city council's IT strategy manager, said at an OASIS conference last year that there is a genuine fear that companies who announce they are moving to open source will face a software audit from MS. Any truth in that?
Alexander: Absolutely not. Software asset management is another part of the business. My job is all about prepurchase and where to buy and how to buy--it is about educating channel partners.

What is the most counterfeited software?
Well, at the moment it would probably be Windows XP, then Windows 2003, but we are also seeing some Windows 2000 and even some of the 64-bit versions. There are also applications such as Visio and Project that get targeted. The pirates follow a strategy on the whole--they maximize their sales of the previous OS to be released, so at the moment we are seeing an increase in XP and Office 2003 as we move towards Vista.

You launched the Windows Genuine Advantage (WGA) scheme in April that gives users access to more tools if they sign up to the service and register their copy of Windows, but blocks some downloads to customers who don't. Hackers managed to bypass the scheme soon after its launch. Have you closed the loophole now?
Alexander: There are always new hacks coming along, but the WGA is a voluntary service. You can turn off the pop-ups, and people can opt out of it. They still get all the core downloads, but what they don't get is stuff such as Windows Defender. They still get all the security patches--we don't penalize customers for not joining.

Do you think that some of the issue is that your licensing model is just a bit outdated? Google has got people used to the idea that they can get stuff free in turn for reading advertising--is that a model that Microsoft is considering?
Alexander: We are definitely looking at it. We are always trying to stay three or four years ahead of the market. It is certainly something that is discussed.

ZDNet UK recently highlighted the issue of how difficult it is to buy a naked PC--a machine without an OS installed--and how Microsoft, and you in particular, were trying to persuade resellers that such machines encouraged piracy and should not be sold. Do you still stand by that view?
Alexander: I think a lot of people would struggle to want to buy a PC without an OS. Naked PCs are not anything I am really interested in, in the first instance anyway.

You have been in this job for about nine months now. What would you like to achieve in terms of changing people's attitudes to counterfeiting and unlicensed software?
Alexander: I think it's about making it personal. We want to make people realize what the impact of buying and selling counterfeit software is. Obviously it is a difficult area to work in, but people like to pick on us no matter what we do. Everyone is always going to pick on the market leader.

Andrew Donoghue of ZDNet UK reported from London.

See more CNET content tagged:
antipiracy, asset management, Microsoft Windows Genuine Advantage, Microsoft Corp., Microsoft Windows


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2 sides of the coin
First, I hate to MS bash, it is so cliché any more the only people who still find it amusing are Slashdroids.

With that said, MS is doing all kinds of stuff to stop piracy, but they don't seem to be bothered by "double taxing"?

By this I mean many people don't like the crapafied OEM installs that come with a typical HP or Dell PC and the "restore disk" that comes with them, so they buy "clean" retail or OEM versions of the OS. Even though they have an OEM license, they must still pay for a full retail version of the OS for $300.

Second, If I have a full version of Windows XP pro SP2 and I buy a new machine to replace the one I am using, I can't take the copy of Windows with me because it is tied to the hardware.

I should be able to unregistered it from one PC so that I may move it to the next PC.

Since almost all corporations buy PC's with at least XP home on them anyway, MS should be charging a fraction of what they charge today for corporate licenses.

There is a refund program, but I know of few people who have actually used it.

I also don't believe you can use a XP RTM license with a XP SP2 install disk, but you should be able to.

Since MS loses little sleep over all the unnecessary licenses people end up buying, why should I lose any sleep over piracy?

Also, if MS were to stop 100% of piracy today, people would have an actual reason to embrace an alternative desktop.

Uptake of Linux on the desktop actually seems slower in poor counries than it does in the US doe to heavy piracy in those nations.
Posted by Dachi (797 comments )
Reply Link Flag
But lowering the prices would help!!
I agree there are a lot of people out there who will just try to get stuff as cheaply as possible, but I think there are a significant number of people such as myself who think M$ software is overpriced - by about 200%.
Posted by robbtuck (132 comments )
Reply Link Flag
It certainly would be nice
I know that XP is a vast improvement over windows 95 (which cost $100) but I do think the price is high. Today, you can buy a computer that is 100 times better than what you could get in '95 and for about 1/3 the cost. The OEM version of windows is a good price, but you can only get that if you buy your computer from a major manufacturer, and it is included in the price for the PC. If you wish to BUILD your own PC and purchase the OS seperately, you pay an arm and a leg. I used to build my own PC's, but can't afford to do that anymore because the OS costs too much... way too much. I wish microsoft would give us a similar price scheme it gives to computer makers rather than marking it up 200%.
Posted by Seaspray0 (9714 comments )
Link Flag
Good product idea for MS
In the event anyone is listening, I think the killer app that will keep MS strong for a few years to come would basicially be an end user friendly version of Norton Ghost.

This would apeal to people like me who admin 3 or 4 family PC's and get sick of constantly making house calls to remove infections and spyware.

Many people like me get frustrated and _this_ is where Linux is making inroads on the desktop. Sometimes moving them to Linux is easier than making constant house calls becasue the PC is spitting porn popups and ads as soon as it boots or is running at a snails speed.

With a simple disk imaging solution I could just do a clean install, install the things they need, and clone it. If they ever run into problems they can back up their digital photos and re-image the drive on their own without needing hours of my time.

A security blanket like this may also allow users to be able to embrace technology rather than fear it.

PS. Be lucky I don't have the money to fund all the ideas I think of for other people :)
Posted by Dachi (797 comments )
Reply Link Flag
we could all use more understanding when reading the side of the serial box
Ya! more marshmellows in yellow and green. Okay, here there is something about just how this ghosting compares to my operating systems ability to move a registry. Oh, and their for twenty nine ninety five the kind folks at "Que" have thrown me a butcher bone wrapped in white paper.
Posted by Stalin Hornsby (60 comments )
Link Flag
just make a deal
why can't people buy the OS in a 5 license package like OSX??? It would make perfect sense. Sell the single OS, a multi-pc OS, and the site deals. They totally left out the so called "casual" pirates, many of whom have already paid for the OS (maybe even more than one copy of it!) but want to run it on another computer.

I saw apple's site listing their OS (of course, it only runs on a mac...) at a reasonable price, and then a 5 pc license for $200. I think this would be an excellent approach for Microsoft to take, as it would likely eliminate the "casual" piracy. Make it easy for families to use it on their home computers, and easy for the people who tinker around to be legit.

I'm all for stopping the counterfeit operations and education, but they also need to show a real incentive beyond a "genuine advantage" program like they're doing. That incentive should be a fair pricing on a small 3-5 pc license like Apple is doing.

With all the versions of Vista coming out, WHY couldn't they make this an option for, say the "ultimate" versions???

Why alienate customers instead of profiting more from them?
Posted by amungusoid (4 comments )
Reply Link Flag
Good points
I have always thought the same thing about Apple's 5 user OSX license.

I have 3 computers in my home (2 mine, one GF) plus I take responsibility for my dads machine.

We don't eat on dirt floors, but there is no way I am going to spend $1200 for extra versions of Windows when 3 of the machines were under $400 new.

Compare to Apple who sells 5 user licenses for $199.00.
Posted by Dachi (797 comments )
Link Flag
I bird in the bush is not a bird in your hands!
Why do they think that they have losses of millions? They have no losses at all!

Poeple like free stuff. Would you try the free samples in the supermarket if you would have to pay for them?

People get pirated copies because they can get it for free. If they couldn't get it for free, they would start looking for smoething else that is free. Linux, Open Office...

Actually m$ and other greedy companies that fear sofware piracy should think at it as a free way for them to get more users. Users of the pirated versions get to know the software, too and at some point - where they can no more risk using illegal software - they will pay for it. Without the so called piracy they would stick to Linux 'till they die.

So I whish that m$ will be 100% successful with its anti-piracy program. In my oppinion that success will not pay them all those millions of dollars, but it will guide millions to the wonderful world of free software. Free as in free beer.
Posted by throbi (5 comments )
Reply Link Flag
piracy also affects smaller firms
Another aspect to the software piracy issue is that it's not only the bigger producers who are affected by overseas piracy. Small firms like in the gaming industry work on projects for bigger firms on contract. The smaller firms create more innovation, but have fewer opportunities than Microsoft to stress how IP theft affects their business - <a class="jive-link-external" href="" target="_newWindow"></a>
Posted by marileev (292 comments )
Reply Link Flag
what price is fair
When you get XP in a $299 Dell PC, its market value must be about $25 after decucting teh costs of other components. Why does MS think that it is fair to charge $200 at retail, or why it shoudl value its losses at the $200 level? Sell it on line at $25 ( no shipping, no physical media, no retailer's 100% markup) to all of us and there would be no need for pirates.
Posted by gggg sssss (2285 comments )
Reply Link Flag
A good resource to educate;-)
<a class="jive-link-external" href="" target="_newWindow"></a>
Posted by jwmoreland (48 comments )
Reply Link Flag
reffer madness
Hey reefer madness is there somewhere as well.
Posted by gggg sssss (2285 comments )
Link Flag

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