Counting the cost of counterfeiting

Microsoft antipiracy exec says the company would rather educate than punish users of pirated software.

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at the Business Software Alliance are seen by many as the sharp end of the software giant's draconian--and some say outdated--approach to licensing.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.

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